“Investors understand the benefit of going to markets outside the core, one for more affordable product types and also [because] not everybody wants to live in the core of Seattle… I think [demand in Northgate] is going to continue to escalate,” said Dylan Simon, executive vice president with Colliers International’s Seattle multifamily team.
While much of the fanfare around investment and development opportunities have in recent months been focused around Seattle’s urban core, peripheral neighborhoods are becoming more enticing prospects for clients, investors and tenants alike.
Seattle’s Northgate neighborhood-an area roughly seven miles to the North of Seattle’s Downtown core-is one neighborhood in the city that is set to experience large-scale changes over the next several years. There is a new light rail station slated for 2021, and on March 8th, 2018, Simon Property Group announced its preliminary plans to redevelop Northgate Mall, which has long been recognized as the commercial and retail hub for North Seattle.
Simon Property Group’s plans to overhaul the historic 55-acre site-which is home to the Northgate Mall, a complex that opened in 1950 as the country’s first regional shopping center, according to the project’s web site-have been a long time in the works, and will hope to capitalize on the imminent light rail station coming to the neighborhood in three years’ time. “We are looking more broadly at the entire site and the long-range vision of a mixed-use development at Northgate than was contemplated by the current Development Agreement created almost 20 years ago for the property,” Simon Property Group said. “With the dynamic market changes occurring and the rail station becoming a reality, this [development] provides a great opportunity,” the company added.
The company is “looking to retain significant existing retail in its approach” to redeveloping the mall, but is still planning to cut the retail space (which currently totals approximately 1 million square feet) to between 500,000 and 700,000 square feet. The redevelopment also calls for a significant amount of Class A office space-between 500,000 and 750,000 square feet-and several hundred units of housing and a hotel, which the company hopes will revitalize the neighborhood and help it compete with surrounding office markets in the region. “We see the office space as alternative to South Lake Union and the Eastside office nodes,” the company said. “The addition of more hospitality to support this area, and of course several hundred units of housing, is what we think [will] really strengthen Northgate’s future.” Specifically, the company envisions retail being located on the ground floor of high-density, mixed-use residential class A office space and hospitality.
The company anticipates that the Northgate Mall redevelopment project will be a multi-year process. “This would be a several-year transformation of the property. We anticipate a process with the City of Seattle that could take up to several months.”
As part of the project plans, Simon Property Group is also aiming to incorporate open space elements into the plans to further ingratiate the redevelopment opportunity with the surrounding neighborhood context. “Equally as important, we are looking at creating an abundant green and public space that is easily accessible and usable for the broader neighborhood,” the company added. “Furthermore, it will allow residents to navigate from the new light rail station, through Northgate, in a new and interesting way.”
The project plans aren’t yet undergoing the city’s design review process, since preliminary paperwork was only recently filed two weeks ago. Before more detailed project plans are submitted-there is currently no information regarding the exact number of residential units proposed or a precise amount of commercial or retail square footage-an Early Design Guidance meeting and environmental review will be held for the project, according to Bryan Stevens, customer service manager and media relations with the Seattle Department of Construction and Inspections. “Given the suggested scale of the redevelopment, it could take 12-18 months to obtain the land use approvals for this permit application. Construction is expected to be completed in phases over several years,” he said. “Since the project site is over 5 acres in size, the owner can apply for a major phased development permit, which allows for an extended permit life as the various phases of construction are completed,” Stevens added.
According to Dylan Simon, the Northgate Mall redevelopment project will bring much-needed employment opportunities to the up-and-coming neighborhood. “Northgate is amenitized, and it has great freeway access and the Northgate Mall, but it hasn’t really been considered a destination market, because there aren’t large employment centers for white collar work,” he said. “Simon Property Group’s redevelopment is going to put office space there and will have the proverbial live-work-play trifecta that so many people are looking for in their investment strategy. I think the development will shine a light on the opportunity to be in an urban-suburban location.” Simon also highlighted the imminent light Rail station as a factor that will change investor demand in the neighborhood.
The Northgate Link Light Rail Extension, open for service in 2021, is a $1.9 billion project that will span 4.3 miles and include the addition of three stations in Northgate, Roosevelt and the U-District neighborhoods, according to Sound Transit’s web site. With the new rail service-whereby the three neighborhoods will be served with frequent bus connections, a park-and-ride and pedestrian and bike paths-riders will be able to get from Northgate to downtown Seattle in 14 minutes and to the SeaTac airport in just under one hour.
The Northgate neighborhood is currently served by a park-and-ride that includes 492 parking spaces. According to Damian Sevilla, vice president with Kidder Mathews‘ retail sales and leasing team who worked on the leasing of Thornton Place, a mixed-use apartment and retail complex adjacent to the Northgate Mall, the light rail will serve as a positive evolution of the current transportation system. “I did one deal in the Thornton Place a few years back with the idea that there was going to be a huge pipeline of [pedestrian] traffic coming in from the light rail,” he said. “The light rail is going to be a positive move for any of the retailers that are going to be in Northgate and the immediate surrounding areas,” he said.
In spite of the positive direction in which Northgate Mall is headed due to Simon Property Group’s in-the-works redevelopment, Sevilla does not think that Northgate will adversely impact the trajectory of the University Village shopping center, which sits roughly four miles to the south. “I don’t think [Northgate Mall] will affect the numbers of U-Village, because it’s an established, higher-end lifestyle center. [But] I think it will definitely improve some of the sales numbers for the Northgate area.”
According to Sevilla, the flexibility that the new light rail extension will bring to Northgate could mirror other transit-oriented trends that occurred throughout certain neighborhoods in the city in recent years. “I’ve seen Columbia City and Othello and Beacon Hill-some of these areas along the light rail that otherwise were not typically known as vibrant areas-become really active for single-family homes. And therefore a lot of the other retailers have followed suit [to those areas].”
While parking and traffic remain to be logistical challenges in Downtown Seattle, Sevilla also thinks that the new light rail Station will help to alleviate some of these hurdles in Northgate-and will subsequently create a domino effect that will impact the multifamily market in the years to come. “Any of the neighborhoods that have immediate access to the light rail has increased vibrancy, salability, not just on the retail side, but also on the multifamily side as well,” he said. “With rents increasing so much in the downtown core, we’ve seen this expansion to the suburbs, especially along the public transportation lines,” Sevilla added.
In conjunction with this transition-which indicates that activity is shifting further north of the downtown core-much of the activity on the multifamily side has, historically been concentrated in Seattle’s downtown core, according to Simon of Colliers. “If the core of Seattle is West Seattle, Capitol Hill, Ballard, Fremont… I very much see Northgate a first-ring market. [But] there hasn’t been a large quantity of development delivered in the neighborhood, since investors and developers have focused on the core markets, where 75 to 80 percent of all new apartment development has been.”
According to Simon, Northgate has seen a shortage of activity on the multifamily side in recent years, which makes it difficult to determine how the residential market in Northgate will be impacted by the new developments occurring in the neighborhood. “There’s a shortage of investment opportunities in Northgate; there aren’t a lot of apartment buildings to sell there, [so] it’s hard to know the demand for apartment product in Northgate…there hasn’t been a lot of turnover,” he said.
On December 20th, 2017, Simon closed on the sale of the 102-unit Citywalk Apartments-which is five blocks from the Northgate Mall-for $26.9 million or approximately $263,700 per unit, on behalf of Colliers’ Multifamily team. Citywalk was only the second investment-grade apartment to come to market in the neighborhood over the last decade.
The changes occurring in Northgate have the potential to enact more widespread shifts throughout the region over the longer term as well, to both the north and the south. “It’s going to take more than 2 to 3 years for this to take shape…on the 5 to 7 year trajectory, what [I think] we’re going to see is [that] Northgate will push opportunities further north,” Simon said. “[And] I think it’s going to vastly affect Shoreline…people will be able to live there and commute to Northgate and the U-District without having to go all the way to the downtown core,” he said.
As a consequence of Northgate becoming more appealing for both investors and tenants-due to the planned transit expansion and the mall redevelopment-prices will continue to rise, according to Dylan Simon. “What’s going to happen, [inevitably] is that real estate will get more expensive in Northgate… I think that as investor confidence increases in Northgate [with the light rail], people will view the neighborhood as a really amenitized stop where there’s an urban lifestyle and a job center,” he said.
And while the potential reverberations from Northgate’s evolution and reimagining might not be felt for a number of years-considering that the impacts of the light rail and Simon Property Group’s undertaking at the Mall remain to be seen-things will continue to happen fast from an investment standpoint. “Imagine if you had bought a building in Northgate last year versus the difference in price that you would have to pay this year…predicting when and where these things will happen is incredibly valuable to the investment community,” Simon said.
And the widespread changes occurring in Northgate are not unique to the neighborhood itself, but rather might serve as an indication of what’s to come throughout the region in the coming years, according to Simon. “Our region will grow in the next ten years with the light rail and transit centers…I think Northgate will be a good bellwether for what’s going to happen [in the region] as we bring the rail out.”
For the full story, go to the The Registry Puget Sound Real Estate.
©2018 Mighty Dot Media, Inc. All rights reserved.