Seattle area awaits high-tech makeover
By Elizabeth Hayes
Bloomberg News Service
SEATTLE — Microsoft Corp. co-founder Paul Allen is bent on transforming an industrial area in Seattle into a hub of high-tech offices, apartments and shops even as the technology boom he helped create in the region loses steam.
Vulcan Northwest, Allen's Seattle-based management company, plans to buy eight parcels of city land next year to bring its holdings to almost 50 acres in the South Lake Union neighborhood, Vulcan spokesman Michael Nank said.
Vulcan has been fighting fears of gentrification in the neighborhood of brick warehouses and artists' lofts. Now, Seattle's office vacancy rate has jumped to 13.8 percent, the highest since 1993, as computer-related companies such as Amazon.com Inc., RealNetworks Inc. and Internap Network Services Corp. put space up for sublease.
"A project of any significant scale, whether it's biotech, office or mixed use — even with someone with deep pockets like Paul Allen — is not going to get funding unless they have a significant amount preleased," said Michael Dash, senior vice president at broker Colliers International.
Allen, the third wealthiest American according to Forbes Magazine, wouldn't comment for this article. His real estate company is taking the view that the rise in the Seattle area's office vacancy rate, from 2.3 percent early last year, is a short- term problem that won't derail South Lake Union's revival.
"All our projects are two, three, five, 10 years out," Nank said. "There's nothing right now we're necessarily concerned about financing."
Allen co-founded Microsoft with Bill Gates and brought it to Bellevue, Wash.,, from Albuquerque, N.M., in 1979, putting the Seattle region on the technology map. The 1990s boom was fueled by companies that make software for or were promoted by Microsoft, including RealNetworks.
Allen, who left Microsoft in 1983, has started technology companies such as Interval Research Corp. and gotten involved with sports franchises such as the Seattle Seahawks and Portland Trailblazers. His real estate developments include an 11-story tower adjacent to a historic train station that houses Vulcan's headquarters and the Experience Music Project, often described as resembling a smashed guitar.
The billionaire's involvement in South Lake Union began with his support of a proposed park called the Seattle Commons. He donated $21 million to backers of the park. When voters turned down the proposal, 11 acres reverted to Allen's ownership.
South Lake Union retains an industrial feel. There are brick warehouses that once housed printers and laundries, streets still lined with old railroad tracks, wholesale florists, photo labs, artists' lofts and a greasy-spoon restaurant and bar called "The Family Affair." There's no Starbucks and hardly any foot traffic.
Artists' haven
"This is the last downtown neighborhood that's undiscovered," said Web Crowell, a filmmaker with a studio at South Lake Union's alternative arts venue, Consolidated Works. "It's an odd neighborhood. It's dirty. There's not much neighborhood feel. It's still grimy enough that artists can live here."
Vulcan plans a gradual evolution to a mix of uses. The company worked with Consolidated Works, whose building would be demolished to make way for an office complex, to find a new home.
Vulcan redeveloped a building into a biomedical research facility and is seeking approvals for the 500,000-square-foot Terry Avenue Technology Court, and a 300,000-square-foot retail-office development adjacent to 237 residential units, Nank said.
The company also is beginning design work for three more buildings, with apartments, offices or biomedical space and retail.
The city properties, which were acquired 30 years ago for a freeway that was never built, will add 4.5 acres on five different blocks to Vulcan's holdings in the neighborhood.
Mayor Paul Schell said in a statement when the City Council approved the land sales that the area would be allowed "to break out of 30 years of development limbo" and become "a great new center for working, living and playing, right in the center of the city."
Improvements planned
The city plans to use part of its $20.2 million in sales proceeds to improve transportation and parking in the neighborhood and part to create affordable housing. Vulcan agreed to build a 1,000-car underground parking garage, 500 housing units and a cultural center. Vulcan will also provide pedestrian connections from the neighborhood to the lake.
Two other formerly run-down Seattle neighborhoods that have been redeveloped, Pioneer Square and Belltown, are now too expensive for the artists who were once housed there.
"It's inevitable with new development, the character of the neighborhood will change drastically," said Councilwoman Judy Nicastro, who voted against the sale of the city properties to Vulcan. "It can be done tastefully, with pedestrian-friendly streets. Or is it going to be biotech and wealthy condo owners?"
While some arts supporters lament the area's discovery, many are pleased Allen is embracing them.
"Five years from now, it's going to be unrecognizable," said Alex Steffen, executive director of the Fuse Foundation, a supporter of Consolidated Works. "It's the result of one guy, for better or for worse, who has amassed all this property and done some things that are pretty smart, such as making sure there's a cutting-edge arts organization."
