December 15, 2005

It's time for housing in downtown Olympia

Potter

Downtown Olympia is at a pivotal time in its history. Both the city government and housing developers have recognized that Olympia is prime for new investment and development within the downtown core. Why? City revitalization, steady job growth, shortages of other investment opportunities and available land, local amenities and the directive of the Growth Management Act.

But as with any new venture, there are obstacles that have to be overcome.

Before we address the obstacles, let's look in more detail why Olympia is ready and what has been done.

Although there has been almost no new housing in downtown Olympia since the 1920s, the city decided that its highest priority was to help create a market for housing to complement the other activities of its downtown.

Housing in downtowns revitalizes cities by cutting down on crime, helping businesses prosper and curtailing urban sprawl.

Photo courtesy Kauri Investments Kauri Investments is proposing about 100 housing units and retail on this parking lot in downtown Olympia.

The early part of this millennium, when other areas in Puget Sound were losing jobs, Olympia had slow, but steady job growth. In the year 2000, the central Puget Sound region began to experience a large decrease in jobs. By 2002, it had lost approximately 90,000 jobs from its peak in late 1999. Savvy real estate and development firms investigate local situations where job growth occurred during that period as indicators of housing needs.

In recent years, with a shortage of investment opportunities and available land within the Seattle area, Kauri Investments has chose to look at real estate in other parts of the Puget Sound region. Of particular interest are the urban centers designated by the Growth Management Act, which was created by the Legislature in 1990. As part of GMA, counties have designated urban centers where future density and growth should be concentrated.

Upon further investigation, Olympia's other desirable attributes became apparent for downtown housing development. Olympia has a compact downtown that abuts Puget Sound and is within a one-hour drive from Seattle. It is the county seat for Thurston County, as well as the state's Capitol.

Olympia is also the southernmost urban center in the Puget Sound region, with a population just over 42,500 people. Olympia is the entertainment center for most of southwest Washington (north of Vancouver and south of Tacoma), as well as Grays Harbor and the Olympic Peninsula. There is an established arts community, along with several regional theaters. It has a plethora of small retail shops, restaurants and nightclubs.

Kauri's Olympia project would be located within walking distance to two water bodies.

Olympia's downtown has an obvious charm that is inviting to those looking for a sense of community, something that many suburban-sprawl cities sorely lack. The downtown boasts beautiful views of the Olympic Mountains and has easy access boat moorages on Puget Sound.

In early 2004, the city issued a request for qualification for a developer to build downtown housing on several city-owned properties. Kauri Investments, a real estate development firm, submitted a proposal to build a mixed-use project with about 100 housing units, a parking garage and retail on a half-block owned by the city.

In July 2004, Kauri was selected to be the developer for the half-block. After much negotiation, a purchase-and-sale agreement was signed in the summer of 2005. There is a contingency period for Kauri to do its due diligence that should be completed about the time this article is published.

There are still many obstacles to overcome. The property sits on tidelands that were filled just after the turn of the last century, requiring the building to be placed on pilings at an additional cost. There are utilities running through the site that will need to be relocated. There also is some environmental contamination that will need to be removed.

The city has impact fees that, at current calculations, will add over $7,000 per unit to a project that will not easily pencil out. Since this would be downtown's first for-sale product with parking in a structure under the building, there will need to be a leap of faith involved in making the decision to move forward. It is vitally important that we solve issues, including impact fees, prior to or as a part of the decision.

We hope to start construction in 2006 with a five-story building over parking that will be successful for Olympia and Kauri Investments. If this project is a success, then others will follow. We believe that downtown Olympia's time has come.

Jim Potter is the chairman of Kauri Investments, a Puget Sound-based developer of moderately priced mixed-use and multifamily communities. He is the 2006 president of the Master Builders Association of King and Snohomish Counties.

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