January 25, 2000

Hotel developers target the Eastside

Another 150 hotel rooms are planned for the Eastside with Seattle developer Touchstone Corp., the latest to announce a project -- this one in the Totem Lake area of Kirkland.

Touchstone President Douglas Howe said his company's first hotel will be made up of business suites. The to-be-named hotel will be built at the southwest corner of Northeast 124th Street and 113th Avenue Northeast, just west of an Interstate 405 interchange. Currently on the site is the Kirkland Covenant Church.

Already under construction is Willows Lodge, a luxury hotel of 88 rooms in Woodinville. Last week, developers announced they will build a 171-room Hampton Inn and Suites in downtown Bellevue on the southeast corner of 110th Avenue Northeast and Northeast Eighth Street. In addition, a 300-room Ritz-Carlton and 550-room Marriott are part of the planned Palladium Center in Bellevue, and a 304-room Westin is part of the proposed Lincoln Square development, also in Bellevue.

Jensen/Fey Architecture & Planning of Seattle is designing two new Eastside hotels, including this Hampton Inn and Suites in downtown Bellevue. Touchstone Corp., has hired Jensen/Fey to work on another hotel in Kirkland. At least 1,563 new hotel rooms have been proposed for the Eastside but real estate analysts don't think the construction will lead to an oversupply of rooms.

These projects add up to 1,563 new rooms, but hotel analysts Craig Schafer and Wolfgang Rood don't think the result will be a glut in the market supply.

Schafer, who works for the commercial real estate services company Colliers International, noted that Willows Lodge, Touchstone's proposal and the Hampton Inn and Suites cater to divergent clients. The openings of the hotels will be staggered over several years. And the business climate on the Eastside is one of the hottest in the nation.

"It's a very strong [hotel] market where there hasn't been a strong amount of supply," especially from Bellevue north to Woodinville, said Schafer. He added hotel developers would love to find more sites in the area.

Bellevue-based Wolfgang Rood Hospitality Consulting surveys 240 lodging establishments with a total of 16,002 rooms. Its latest report shows that during the first 11 months of 1999, the Eastside's room occupancy rate dipped 3 points to nearly 72 percent compared to the same period in 1998. At the same time, average daily room rates increased 2.5 percent to $106.65. The company's year-end report is forthcoming.

"My feeling is the Bellevue market is really strong," said Rood. Like Schafer, he thinks that because construction of the hotels will be staggered, the result will not be an oversupply of rooms. Plus, he added, it remains to be seen if all the announced projects will actually get built.

Even though the average room occupancy rate on the Eastside decreased during the first 11 months of 1999, it's still almost 72 percent. That's the third highest in the Northwest behind only downtown Seattle (78 percent occupancy) and downtown Portland (72.5 percent).

As for the Touchstone project, he thinks a location closer to Lake Washington might be better.

Howe noted the area around the hotel site is home to 900,000 square feet of office, which he anticipates will drive demand for business suites.

Jensen/Fey Architecture and Planning of Seattle has begun the preliminary design work on Touchstone's proposal. The project's civil engineer is Triad Associates of Kirkland, according to Howe, who anticipates having the necessary development permits by the end of the year and construction beginning in early 2001. Howe added he is talking to various hoteliers about operating the facility, which he estimated will cost more than $10 million to develop.

Touchstone, a 16-year-old company, is primarily known for its office and retail developments. Last fall it began building Northgate North, a vertical, 324,000-square-foot shopping center at 300 N.E. Northgate Way in Seattle.

Oscar Pong and his son, Paul, are the developers of the Hampton Inn and Suites. Through their companies, Pioneer Development and National Investment Corp., own and operate six hotels in the Puget Sound region. The Pongs did not return a phone call. They reportedly hope to begin construction in April on the $12 million Bellevue project that will take about 14 months to complete.

Seattle developers Philip Sherburne and Tony Puma are building Woodinville's first hotel, the $18.6 million Willows Lodge, at 14580 N.E. 145th St. Also on the property will be the new home to the Herbfarm, a famous restaurant, and a to-be-named Italian restaurant.