June 29, 2006
Home buyers find downtown Tacoma less taxing
By STACY KOVATS
It’s no secret that the Northwest condominium market remains hot despite rising interest rates and prices. Not surprisingly, areas closest to major economic centers have experienced most of this rapid growth.
The median condo price in King County increased by an average of 17.9 percent from the same period last year, according to Northwest Multiple Listing Service’s May 2006 sales report. Downtown Seattle saw the largest price jump over the past year -- a whopping 20 percent.
Many home buyers seeking urban living options are being priced out of the competitive Seattle market. For those unwilling to compromise accessible transportation, nightlife, and shops and services, Tacoma is emerging as an affordable alternative.
Long seen as Seattle’s overlooked southern sibling, Tacoma is attracting a flood of attention from developers, businesses and home buyers. To a certain extent, this recent interest is due to the designation of a large portion of Tacoma as a federal Renewal Community.
Within greater Tacoma, the Renewal Community is encompassed by a 10-neighborhood region in the heart of downtown. The area includes the business district, midtown, hillside and dome district neighborhoods, to name a few.
The Renewal Community designation, awarded by a competitive process through the U.S. Department of Housing and Urban Development, has allowed the city to offer a number of federal tax incentives since 2002 in order to attract development. Tacoma is one of only 28 Renewal Communities across the country.
For businesses in the Renewal Community, incentives include several tax deductions as well as zero percent capital gains and a wage credit for employees that live and work in the designated area. The incentives have, in part, attracted a number of businesses to downtown.
In addition to the growing business community, nearly 1,000 condos and apartments have been completed in downtown since 2000. A recent study by local real estate consulting firm McCament & Rogers documented 774 residential units under construction in 13 different projects, with an additional 930 units in the planning or design phase.
Big tax reduction
For buyers of these new homes, the multifamily tax exemption allows them to pay taxes only on their land for the first 10 years, omitting the additional value of property improvements. This can translate into huge savings -- approximately $50,000 in taxes alone over 10 years on a $300,000 condo.
JJ McCament, principal of McCament & Rogers, said the tax abatement incentive has attracted many home owners to the downtown core and developers are responding with a wide range of projects.
Marcato, a mixed-use development under construction in the midtown neighborhood, is the largest residential project under way. When complete, Marcato will include approximately seven buildings comprised of 500 to 600 residential units with retail space. Plans include a grocery store and movie theater, along with several community green spaces.
Damon Thomas, Tacoma native and Marcato sales manager, said many empty nesters and investors are showing interest in the condos in addition to first-time home buyers.
Construction of the first phase, a 93-unit building, will wrap up this fall with residents moving in as early as this summer. Development manager Vision Tacoma is refining plans for future phases of the project, with construction on the second building slated to begin in early 2007.
While Marcato embodies the urban village spirit, Blaine Johnson of New Urban Properties is developing a more traditional condo with ground floor retail called The Roberson on Ledger Square in Tacoma’s lively Theater District.
The Roberson’s eight stories will include a bistro, retail space and eight live/work lofts on the ground floor and three stories of parking, capped off with 47 condos. The project is scheduled to be available in May of 2007.
Johnson named the building after renowned Tacoma developer Fred Roberson due to his commitment to downtown Tacoma and its revitalization, a vision that Johnson shares. A longtime Tacoma resident, Johnson said the city is poised to meet the region’s demand for urban living.
Even a hotel-condo project
Tacoma joins Seattle and other metropolitan areas contributing to the hotel-condominium trend. For example, the Foss Waterway Development Authority is working with Robert Thurston, owner of Seattle’s renowned Inn at the Market, to develop a waterfront hotel-condo on Site 4 of the Thea Foss Waterway.
The project, in the design phase, will include a boutique hotel, approximately 40 condos and a day spa. Construction is slated to begin in 2007, with completion expected in early 2008. Residents will enjoy access to hotel amenities in addition to views of Mt. Rainier and Commencement Bay.
Don Meyer, executive director of the Foss Waterway Development Authority, is a staunch supporter of the downtown redevelopment. He said Tacoma’s transformation is more than just physical changes to the city’s skyline; the city’s spirit is being transformed as well through the growth of both the business and residential community.
While Site 4 has yet to break ground, the second wave of McCarver Village home owners is expected to move in this month. Phase two of the project offers 32 two- and three-bedroom townhomes in the hillside neighborhood overlooking downtown.
Completed in 2004, phase one of the project included 27 loft units and townhomes. McCarver Village has garnered interest from a diverse group of buyers, according to owner Tom O’Connor. He said much of the interest is due to the project’s central location, just steps from the growing roster of downtown restaurants, shops and services.
O’Connor said the changes in Tacoma are the leading edge of the city’s revitalization, and are comparable to Seattle’s Belltown neighborhood or Portland’s Pearl District.
Numerous other projects in various stages of design and construction are taking shape throughout downtown. Projects range from high-rise luxury to mixed-income developments, live/work lofts to landmark building conversions.
Skeptics have voiced concern about Tacoma’s ability to attract enough residents to fill the homes under construction, but for those living and working downtown, the doubts are unwarranted. The resounding opinion is that Tacoma is on the leading edge of its revitalization and the market will continue to bustle.
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