November 17, 2023

For downtown to thrive, Matt Griffin says developers must ‘mark to market'

Photo via JLL [enlarge]

Griffin learned the importance of marking to market during the construction of the 1201 Third Ave. office tower, which debuted in 1988 in an oversaturated market, amidst the savings and loan crisis.

After more than 50 years developing property in the city, including most recently the Seattle Convention Center Summit addition, Matt Griffin knows a thing or two about commercial real estate in Seattle and its ebbs and flows.

Griffin, who recently stepped away from his role as managing partner of Pine Street Group, gave the keynote speech at last month's 10th Annual Runstad Leadership Dinner, hosted by the Runstad Department of Real Estate at University of Washington Seattle.

Griffin took the opportunity to share some reflections and lessons learned from the Summit project. He also shared his thoughts on the past 20 years of development in downtown Seattle, and what the next 20 could bring.

I spoke with Griffin following the event to talk more about his hopes for the future of the city and his impression on what's needed to get there. His hope is that in 20 years Seattle will be defined by “busy active streets filled with happy and healthy people,” enjoying a host of spaces and experiences. How do we get there? Developers and landlords must stop being in denial and be willing to mark to market, Griffin says.

Griffin

“By nature, developers tend to be optimists, otherwise they wouldn't be in the real estate business,” Griffin explains but reflected that in his experience it's often that optimism, and an inability to pivot when faced with the inevitable curveballs of the market, that leads to projects and ultimately downtowns failing.

“It's not an easy thing to ‘devalue' your project and admit you might have made a mistake, especially when it's something you've been working on for years,” Griffin says, “but it's important not to be in denial when things don't pan out as expected. Only then can you make the best decisions moving forward.”

Another way of thinking about Griffin's approach is the “bygones-are-bygones” principle, a concept the developer once taught students. Applying this concept to real estate, at every moment of decision a developer should be concerned with how benefits from this time forward compare with current and future costs rather than prior ones. “Because you have invested heavily in something … doesn't mean you should stick with it if the prospects of winning get very small,” Griffin explains.

The importance of marking to market is a lesson that Griffin learned the hard way during his long and storied career. He points to the late 1980s as the moment when he realized the importance of this concept and of not being in denial.

At that time Griffin was with Wright Runstad & Company (WR&C), heading the development of the 1201 Third Ave. office tower in downtown Seattle. The tower ended up breaking ground at a time when developers had overestimated the demand for office space and subsequently overbuilt. The project also broke ground at the outset of what would become the savings and loan crisis in 1986.

“We had to pivot and mark the project to market to ensure it got finished,” Griffin explains. “When we started construction of 1201 Third Ave. in 1986, I had an agreement with my WR&C partners to take a year off. My wife and I took a bike trip around the world. Of course, we took planes, trains, etc., but we biked 13,500 miles in 33 countries. That many miles on a bike gives lots of time to think about life without having ‘your priors' emphasized every day. I was fortunate to have a cleaner slate than most when we returned to Seattle in the fall of 1987,” Griffin continues, reflecting on how that experience woke him up to what needed to be done to get the project finished.

For someone who talks a lot about denial, Griffin remains admirably and infectiously optimistic about the future of development in downtown Seattle and the city more generally. During his Runstad keynote he reflected on the myriad times the city has faced hardships and economic downturns (the Boeing bust in the ‘70s, overbuilding in the early ‘90s, the 2000 dot.com bust, and the financial crisis of 2008-09) and how it has always bounced back. “Cities always have to reinvent themselves to survive,” he said at the event.

Griffin is also convinced that Seattle is in a really good position to flourish over the next 20 years due to the intellectual capital in the city, its surrounding natural beauty, and recent developments that promise to keep attracting tourists and new residents alike, such as Climate Pledge Arena, the redeveloped waterfront and of course the Summit addition.

Griffin's message for developers living through the current post-pandemic “crisis” and economic downturn is don't panic, but do be realistic.

“We must let go of denial to be able to make the right choices, and the willingness to mark to market is especially important as we try to bring retail back to the streets of downtown. It's getting better and would be even better if more landlords marked to market,” Griffin concludes.