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Brian Miller
Real Estate Editor

September 20, 2018

On the Block: The UW is ready to ground-lease its property above the U District Station

So much is happening in the University District that it can be hard to keep track of all the transit oriented development (TOD) pegged to the light rail service expected to begin in July 2021.

Churches are selling, with their old bricks soon to fall. Parking lot owners want to ground-lease their underutilized asphalt patches. Even the owners of gas stations and dry cleaners are finally starting to clean their sites for sale. Several new high rises are being planned near U District Station; and more building sites are being assembled — both on and off the radar.

But one ethereal property has gotten less attention of late, mainly because it's now floating above the active construction site that is U District Station. (Hoffman Construction Co. is currently building that $160 million station for Sound Transit. LMN is the architect.) The station will be at 43rd and Brooklyn, just south of the Neptune Theatre and east of UW Tower.

Rendering by NBBJ [enlarge]
The UW wants a 12-story building with about 240,000 square feet of office space that it will lease back from the developer.

The University of Washington owns the air rights above the station. This week it put out an request for brokerage and advisory services, published on Tuesday in the DJC, to help select a developer who will ground lease and develop the site.

The UW's Mike McCormick says the next step will be a request for qualifications from developers, possibly next month. A more formal request for proposals will follow early next year.

The project, which the UW currently calls the U District Station Building (or UDSB), has been brewing for over a half-dozen years. At one time, before the U District was upzoned and the air rights were conveyed to the UW, there was a movement to make the space a public plaza.

Instead, the UW is sticking to its post-upzone plan for a 12-story office building that's 160 feet tall, with 240,000 square feet of offices, plus some retail at grade. The site totals 37,000 square feet. Floor plates would range from 30,000 to 20,000 square feet.

The UW will lease back the offices from the developer and consolidate other leases from elsewhere in the U District. Duration and terms for the ground lease have yet to be determined, says McCormick; that's part of what a consultant will help decide.

Presentation materials from the UW's Capital Planning & Development team say that, “Savings will come mainly from improvements in space efficiency and the value of the ground lease. By consolidating current university leases in the external market and leveraging the value of the air rights, the university can create a funding stream that will support the cost of development with no impact on debt capacity.”

Map by Sasaki Associates [enlarge]
The U District Station Building and light rail station would anchor what the UW envisions as a kind of 43rd Street corridor or entryway to the main campus.

The UW estimates a total project cost of $125 million.

Spectrum Development Solutions, Trammell Crow and NBBJ consulted with the UW on the project. NBBJ prepared preliminary renderings of the tower, but McCormick says no architect has been selected.

The UW's preferred timeline is to select a developer from a short list by next March. Ideally, construction would begin in the summer of 2020 and conclude in early 2022, after the station opens.

The building isn't technically part of the university's long-range plan to expand what it calls West Campus by adding about 3 million square feet by 2028. West Campus is actually farther south, mostly between Campus Parkway and Portage Bay.

Instead, the UDSB and light rail station would anchor what the UW envisions as a kind of 43rd street corridor or entryway to the main campus. The UDSB site is one of about a half-dozen significant properties that the UW owns near U District Station. Others include University Bookstore and its parking lot on 15th; UW Tower's garage on 12th; another garage on 11th; a parking lot on Roosevelt; the old 4545 Building, at 4545 15th; and the UW Alumni Building, on the corner at 1413 N.E. 45th St. All are slated for redevelopment of some kind.

McCormick spoke at a NAIOP breakfast yesterday on the topic of new transit-oriented development in the U District, and said, “We believe we need to get some more adults in the area.” Meaning office workers, hotel guests, tourists, bar and restaurant patrons, and others outside the student-age demo that now dominates the hood. Adult-level spending could support a healthier mix of retail and commercial tenants — not just vape shops, T-shirt shops and bubble tea parlors. (You know something’s amiss on the Ave when even American Apparel has folded.)

Others at the NAIOP breakfast also spoke of how light rail might change the U District's reputation as low-income student ghetto, though none dared use that term. But all agreed that change is coming.

Jake McKinstry of Spectrum said of the U District, “You look at what it is today, that's not what it is tomorrow.” Of the upzone, he added, “The height is really kind of a game changer.”

Mark Crawford of the U District Partnership described “a community that's both very excited and very fearful.” Both he and Richard Loo, of Bellwether Housing, expressed concerns about gentrification and displacement.

At the same time, said Crawford, we can't be gripped “by this poignant memory” of what the Ave used to be. Nostalgia for American Apparel, McDonald's, Pagliacci or even Miller-Pollard won't bring those stores back.

The click-and-deliver model perfected by Amazon can't be reversed — no matter what your opinion of University Village as park-and-shop destination. The old saw that U Village killed the Ave ignores broader socioeconomic trends.

And here let's mention that the Ave itself has yet to be upzoned; the city council is expected to consider a new 75-foot height limit early next year. From more density, more economic diversity in the U District? That's what most at the NAIOP breakfast are banking on.

The UW's overall Campus Master Plan, by Sasaki Associates, could add about 6 million square feet in four quadrants: central (the old main campus), east, west and south. The environmental impact statement was recently published, and the plan is expected to be approved by the city council and UW Board of Regents next year.

But the UW's properties along 43rd/45th are a separate category, outside its Major Institution Master Plan. Future uses, sizes and phasing haven't been determined, says McCormick. “We're not exactly sure what comes next,” after the UDSB.

The market will likely drive those decisions. But for now, he says, “This really is ground zero for the transit-oriented development around U District Station.”

For the thousands of future daily transit riders exiting U District Station, the new corridor will form “one of the first impressions people have of the University of Washington,” he says. How many of those riders have lives and jobs entirely separate from the UW remains to be seen.

Got a tip? Contact DJC real estate editor Brian Miller at brian.miller@djc.com or call him at (206) 219-6517.

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