Hot market for rentals inspires twin towers

Seattle developer Pine Street Group plans to break ground within days on a high-rise apartment complex in the Denny Triangle that would be the biggest new downtown construction project in 3 ½ years.

The two-tower, 24-story Sixth & Lenora Apartments is the latest — and largest — entrant in what has become a race among developers to meet growing demand for in-city rental housing that they expect won't abate soon.

At 654 units, the project would be the city's second-largest market-rate apartment complex, said Mike Scott of research firm Dupre + Scott Apartment Advisors.

Matt Griffin, Pine Street's managing partner, said the apartments will target young people who work for such nearby employers as Amazon.com and the Gates Foundation — "people who want to walk to work. We truly believe this is a place people could live without owning a car."

The project, on a mostly vacant, half-block site on Sixth Avenue between Lenora and Blanchard streets, also would have 18,000 square feet of ground-floor retail space.

Pine Street's complex is a strong vote of confidence in the city's booming apartment market, Scott said.

"A year ago, things were improving, but there still was a lot of concern on the part of investors," he said. "That's dissipated. This [project] is proof of that."

Griffin said his firm and its development partners, pension-fund investors represented by real-estate investment adviser Bentall Kennedy, won't borrow money for the $200 million complex: They'll build it entirely with their funds.

Developers have been rushing in recent months to get new apartment buildings permitted and under construction. The apartment-vacancy rate has dropped while rents have begun increasing, according to Dupre + Scott and other researchers. They also say more consumers are reluctant to buy as home prices continue to drop.

Yet, while apartment demand is rising, supply isn't: A lull in construction during the recession's depths means relatively few new units will be finished this year.

Research firm Apartment Insights Washington anticipates 1,866 units will be delivered in 2011 in King and Snohomish counties, less than one-third as many as in 2009.

Hence the recent development boom. But, while many projects are in the pipeline, Sixth & Lenora would be just the second high-rise to break ground since the rush began.

Pine Street obtained permits to start building two years ago but held off while the economy was soft. Now, however, "we're all starting to see recovery," Griffin said.

Job growth is up, he said, and many younger workers are turning to apartments because they recognize owning a home could interfere with their ability to go where the jobs are.

He said Sixth & Lenora should appeal to them in part because it's in a walkable neighborhood blocks from Westlake Center, downtown's prime transit hub.

Relatively low construction costs also make this a good time to build, he said.

Apartments in the towers, mostly studios and one-bedrooms, will average about 700 square feet. The project isn't scheduled for completion until February 2013, Griffin said, but the units probably would rent for an average of about $1,900 a month in today's market.

Before Sixth & Lenora, the last building project of similar magnitude in greater downtown was Aspira, a 37-story apartment tower at Terry Avenue and Stewart Street that broke ground in November 2007, according to Bryan Stevens of the city's Department of Planning and Development.

Pine Street Group probably is best-known as the developer of Pacific Place, the downtown retail-entertainment complex built in the late 1990s. The firm has focused its development efforts exclusively on the downtown area.

"We often say that if we can't walk to it, it's probably something we can't understand," Griffin said.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com