January 11, 2024

Selig to convert empty offices at Third & Lenora to more apartments

Images via Martin Selig Real Estate [enlarge]

Looking northwest in Belltown, Third & Lenora is at center.

Third & Lenora, 2031 Third Ave. in Belltown, began life as a curious hybrid. Developed by Martin Selig Real Estate and designed by Perkins&Will, its lower office levels were to be occupied by WeWork, with its upper apartments to be a WeLive residential complex.

Even before WeWork's bankruptcy (it still survives, albeit in a much-reduced form), and the death of WeLive, tenant and developer dissolved their lease agreement in 2019, not long before the pandemic. The 216 luxury apartments were subsequently rebranded as The Modern, and began leasing in 2022. The lower office floors, with about 151,254 square feet, have remained unclaimed.

Thus, Mithun filed an early plan this week to convert 12 office floors to apartments. Design review will likely not be required for the change of use. The new proposal carries a nominal value of $65 million. Chinn Construction will likely do the conversion, as it previously did The Modern.

Jordan Selig says the latter brand will encompass an estimated 160 new units on floors three through 11. “Our plan is to do Seattle's first office conversion,” she says.

Were there, or are there any signed tenants for the offices? “No, nothing,” says Selig.

The goal for starting is “as soon as possible.” She hopes — as other office developers surely hope, too — that the city and/or state may offer new incentives for such office flips, given the need for housing at all price points. One idea would be to drop the Mandatory Housing Affordability fee for such conversions, since the MHA fee has already been paid once for the now unwanted office place.

“It's no easy task to convert,” says Selig. “It's an expensive and complicated undertaking. Some buildings are impossible to convert.” She says that Mithun and her land use attorney say that operable windows will likely not be required. Energy-use code exemptions may be sought for the existing HVAC systems.

[enlarge]

With The Modern’s 216 luxury apartments already leasing, the top two floors consist of amenities.

Built by Lease Crutcher Lewis, the 36-story tower also has unclaimed retail space at the ground floor. There's apparently still an amenity level on the 13th floor; and the top two floors, linked together, are all amenities. County records don't entirely agree with the owner's description. It appears there were a number of permit changes after WeWork departed.

The conversion scheme is both startling and unsurprising, given a current Class A office vacancy rate in the central business district of 21%, per Colliers' latest estimate.

At Third & Lenora, office floor plates average around 18,000 square feet. Says Selig, “There isn't really any dead space. It helps that it's a center core,” meaning the elevators and stairs at the center of the donut. Even so, “It's still gonna be expensive.”

Meanwhile, The Modern is now offering up to six weeks of free rent, plus what it calls a “$7,000 look and lease special.” Representative monthly rents include a 1,157-square-foot two-bedroom on a lower floor that goes for $4,875. On the 33rd floor, a 1,749-square-foot one-bedroom rents for $11,995.

Whether it begins before or after Stream Real Estate's planned office-to-residential conversion of the Class B Queen Anne Plaza, with its 68 possible units, Third & Lenora now signals a tidal change in the market. More such conversions are sure to follow.