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Saturday, March 1, 2008

Hope You Like that Hole at Second Ave and Pine St

posted by on March 1 at 15:37 PM

Construction of the luxury 1 Hotel & Residences is on hold until at least late summer while the $200 million downtown Seattle project undergoes a redesign to become more appealing to lenders, its developer says.

The project — first in Seattle to offer “condo-hotel” units — has been stung by slow sales and the national credit crisis, Paul Brenneke said Thursday. “It’s obviously a difficult credit environment out there,” he said, “and we’re trying to position this project in the best possible light.”

This could be a bellwether of a slowdown in downtown’s development. Or it could just be that 1 Hotel & Residences was a poorly marketed, crappy idea all along. I’ve disliked the project since I saw a 17-page ad in an in-flight magazine billing it as the “New Urbanism.” Seriously? A building that contains all the amenities a millionaire wants in one exclusive fortification isn’t New Urbanism. It’s a gated country club that happens to be downtown. Cosmopolitan centers don’t need imposed mechanisms for getting people lunch and massages; that’s what downtowns naturally do.

So the main problem here is a bad model, not the national credit mess. Plenty of other Seattle developments, from luxury towers to squat apartment buildings, are moving right along. However, the luxury condo market is small, and to compete, developers must build residences that are distinctive and exquisite. 1 Hotel & Residences was neither. The developers are smart to pause and rethink the business model. If they can’t create something truly magnificent—and the designs thus far haven’t been—the developers of this project and other luxury high-rise condos downtown should revamp their plans and build smaller units and sell them for less.

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We just walked by there fifteen minutes ago. It's all locked up tight; not a bit of equipment in sight. I was wondering about that. Good thing, too; we need more boarded up vacant lots downtown, for that vibrant new urbanist feel. It's also nice to know that the florist and cafe were chased out of there for no reason.

Posted by Fnarf | March 1, 2008 3:41 PM

Now if they were just rental apartments selling for less ...

Posted by Will in Seattle | March 1, 2008 3:42 PM




Posted by John | March 1, 2008 3:43 PM

No offense, Dominic, but this isn't exactly new news. The decision to put the project on hold for redesign was made before the site work was even finished.

It's kind of weird that they left the jobsite trailer up, though. With a delay this long you'd think they might remove it.

Posted by Hernandez | March 1, 2008 4:00 PM

The units were 692 square feet

How much smaller should they have been?

Posted by unPC | March 1, 2008 4:07 PM

unPC, I didn't say those units should have been smaller, actually--but rather that if luxury units aren't selling, the developers should adjust plans and build smaller units. This city needs (and has a market for) condos and apartments in the 400 square feet to 550 square feet range, and we need three-bedroom units around 1000 square feet.

Posted by Dominic Holden | March 1, 2008 4:15 PM

They'll probably repackage it as another parking Garage. But, of course, a high end boutique Parking Garage.

Posted by Zander | March 1, 2008 4:26 PM

Affordable housing--if you build it, they will come.

Posted by RainMan | March 1, 2008 4:39 PM

Speaking as someone who's not in the market for a luxury condo just now--but would love to be some day--the thing I found off-putting about this project was the whole concept of owning a condo unit that can be "rented" as a hotel room when you wish.

If I can afford a luxury unit, I can afford to spare myself the hassle of making money off it. Not to mention, the idea of letting strangers in when you're not there doesn't exactly spell "H-O-M-E" to me.

This makes me wonder now how the Four Seasons project on First Ave. is selling.

Posted by cressona | March 1, 2008 5:12 PM

cressona is right. the idea of a buying a hotel room you can lease yourself is stupid.

Posted by Bellevue Ave | March 1, 2008 5:16 PM

Getting some money when not in use would seem to be financially smart and ecologically in tune. I would love to own a space in Seattle that I could easily rent during the long winter that I could spend further south or traveling.

Posted by mcg | March 1, 2008 5:24 PM

dominic, good clarification, thank you.

400-550 SF. Pretty small. But, units of that size are found in other desirable cities, all over the world. Yes, the merket here should include those options.

@9, @10:
It doesn't have to be spell "H-O-M-E" when you have several. Acceptable variants are "T-A-X W-R-I-T-E-O-F-F" or "mortgage partly paid thru rentals." Rich folks have 2d homes they lease out all the time. The concept isn't the problem. The problem might be trying it here, as Seattle is not quite on a par with (say) Paris, Vail, East Hampton or Mustique.

Posted by unPC | March 1, 2008 6:06 PM

This is somewhat ironic, actually.

That entire block used to have two nice buildings that had over 200 units of affordable SRO housing in the 1960s. It was demolished to make way for office space or condos I can't remember which. Then the Boeing bust happened. So instead of building anything, they just left it as a vacant lot parking lot for almost 40 years. Now they try to build again, and it stalls and all we have is a big hole in the ground. No chance it will become affordable housing, though, or even "affordable condos." That battle was lost a long time ago.

Posted by Trevor | March 1, 2008 6:30 PM

@12: Granted, you are absolutely correct -- there are as small and smaller apartments in cities around the world.

The problem with going too far with that argument is that you most often find these smaller units in cities like London, Copenhagen, Berlin, Amsterdam, other words, in cities where one would have near-infinite possibilities for extraordinary life experiences and would thus have ample cause not to be cooped up and oppressed by this impossible pigeonholery.

With our poor weather, long hours of winter darkness and somewhat (cough, cough) fewer cultural outlets than regional capitals (that's what we are, BTW) in Europe I fear that the small space concept is not as tight a fit here in good old Reichhauptstadt Seattle.

Posted by Jubilation T. Cornball | March 1, 2008 6:40 PM

Nice post, Dominic. Build it. Who wouldn't pay their fair share to live downtown? More hub bub.

Posted by Lloyd Clydesdale | March 1, 2008 7:06 PM

The margins are much better on luxury units then other types. Its the same reason a car dealer would rather sell you a Lexus then a Toyota. Sure it costs more to make the Lexus but not nearly as much more as your willing to pay for it.

It is starting to look like the luxury market may be getting close to being tapped. At that point you'll see more projects targeting middle and lower income buyers. Probably not right downtown as the cost of land is too high, but on capital hill, beacon hill ,and even possible Bell Town.

But for the foreseeable future if you make less than 40 or 50k a year and you want to live in a nice place downtown your probably SOL.

Posted by Giffy | March 1, 2008 7:09 PM

I would love to have a little studio with a real balcony downtown someday when I'm old, and don't need all the space, and don't want to housekeep. But I don't ever want to be put in anything marketed as "upscale" or "luxury". Seven years at the Four Seasons cured me of that aspiration.

But that's just me.

Posted by catalina vel-duray | March 1, 2008 7:16 PM

i kind of like the hole in the ground.

Posted by kinkos | March 1, 2008 7:28 PM

"The main problem here is a bad model, not the national credit mess."

In this mess, nothing's really selling, though. Low-end stuff is targeted at people who've just had their consequence-free credit shut down. Middlebrow stuff, those folks already have somewhere to live, so they're sitting tight until prices start going back up again, no matter how long that takes. The high-end folks are finding they're not nearly as rich as they thought, so they're sitting tight too.

Plus developers are having a tough time finding lenders for their construction. Housing and commercial lending, nationally and locally, is drying up as banks scramble to identify and cover their losses so far. The Hotel 1 guy was quoted as saying he's not even going to try at this point.

So the national credit mess is still the main problem.

Posted by tomasyalba | March 1, 2008 7:57 PM

Yes. Hey thanks for the great phraseology --

"Near-infinite possibilities for extraordinary life experiences" -- my, that's better than the term all the Seattle ecouban advocates use -- the ever-so-clunky-and-off-putting term, "density."

Very Jacobsian, too.

"Impossible pigeonholery" -- I like the candor, which tells us it's all relative. IOW:

urban: infinite possibilities / pigeonholery = high QOL

suburban: zero possibilities/nice big house and yard = low QOL.

Copmared to the cities you mention Seattle is just a semi suburban place with a bit of almost density in a few parts. We're just not that dense, interesting, walkable, cultured, or close to the economic hubs of the nation. All this also gives us our treasured quirky charm and access to nature, or course.

@16 alas, try 150K. rule of thumb for buying is "three times earnings."

@19: yes credit mess is the big factor here. Raising the ceiling for Fannie Mae conforming loans (ie the floor for jumbo loans) will help a lot -- but not in time for the owner of this site who must endure 12 months or so of unexpected interest payment hemorraging.

Ouch, ouch, ouch!!

Good to keep in mind later, to prevent covetousness upon gazing at developers' healthy profits, when things work out.

Posted by unPC | March 1, 2008 8:37 PM

There's definitely something happening with prices. Just yesterday, I saw a cute little house right by Sharples for only $260k

Posted by catalina vel-duray | March 1, 2008 9:27 PM

Congrats for spelling "bellwether" correctly. Now, if you also happen to know that a bellwether is a sheep, you will have really impressed me.

Posted by Fifty-Two-Eighty | March 1, 2008 10:04 PM

This reminds me of the tech crash a little bit, when leaders of every poorly-managed dotcom that imploded at the first sign of trouble were able to blame the "crash" rather than their own incompetence. Meanwhile, well-managed tech companies plowed right along. Google comes to mind.

Posted by Observer | March 1, 2008 11:19 PM

unPC, youre a stupid motherfucker. theres no possible way to justify that expenditure based on rental rate for the purchase based on the time you may or may not be spending there.

people buy properties that they lease out, but they dont buy them based on the idea that they could at any moment, swoop in and live there themselves.

Posted by Bellevue Ave | March 2, 2008 1:55 AM

B.A. are you postig drunk again? People have properties all over the world that they rent out for parts of the year and use them at other times. No they don't swoop in at any moment but they plan ahead to be in their place when they want. Who said anything about swooping.

I know people that do the part time thing with houseboats and summer homes. If I had a net worth of $10 million, spending $1 million on a condo in Seattle that could give some income and appreciation would be attractive to me. Maybe one in Europe and another in Mexico or better Buenos Aires would suit me fine. Knowing that they were being taken care of and rented out at a high hotel rate would be appealing.

Posted by ouch | March 2, 2008 8:28 AM

As a general rule of thumb, yeah, it's pretty safe to assume that ANYONE posting at 2 AM is drunk.

Posted by Elvis | March 2, 2008 8:54 AM

Elvis - fair enough.

Posted by ouch | March 2, 2008 9:18 AM

yeah, 2 million dollar timeshares are such a smart investment.

Posted by Bellevue Ave | March 2, 2008 12:02 PM

Giant luxury swimming pool, perhaps?

Posted by NapoleonXIV | March 2, 2008 9:52 PM

that design was shit. confused yellow shit.

Posted by max solomon | March 3, 2008 9:30 AM

So why should I care about the problems developers are having suckering rich people out of their money?

Posted by Greg | March 3, 2008 11:43 AM


Paying > $550,000 for a

Why in the hell would anyone EVER buy such a shitty small condo for SOOOO much? What the hell is wrong with people agreeing to that?

Developers need to build 1250 ft 1 bedroom condos, with a large entertainment combo room, a bathroom with a 4 person jacuzzi, and a REAL balcony where you can put 4 chairs and a grill on the deck.

THEN I'll consider letting you assume I'll pay >$400,000.

Anyone paying for anything less and you are an idiot. You are letting corporate greedy developers dictate what type of "amenities" you need, and charging you thru the nose for cookie cutter designs.


Posted by Reality Check | March 3, 2008 12:07 PM

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