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Puget Sound Region Transit-Oriented

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Puget Sound Region Transit-Oriented Puget Sound Region Transit-Oriented Development Market Study An overview of the potential for market-rate and affordable development around light rail transit in the Central Puget Sound Region June 28th, 2012 prepared for: Puget Sound Regional Council Growing Transit Communities Program EXECUTIVE SUMMARY Over the coming decades, the Puget Sound region’s planned investment in rapid transit will have a considerable impact on urban form, mobility and access. As part of the Growing Transit Communities (GTC) partnership, the Puget Sound Regional Council (PSRC) retained Strategic Economics and Gardner Economics to assess the opportunity for affordable and market-rate transit-oriented development (TOD) along existing and potential light rail lines. Guided by Vision 2040 and funded by a grant from the federal Partnership for Sustainable Communities, the GTC consortium is working to shape equitable transit communities with the goal of providing social, economic, and environmental benefits to current and future residents and businesses. This Executive Summary provides a summary of regional level finds from the report, including research around preferences for transit-oriented development and an overview of demographic, employment and market trends and conditions organized by the three regional light rail corridors and Downtown Seattle (Figure E1): the South Corridor, which extends from South Seattle to Tacoma, the North Corridor from North Seattle to Everett, the East Corridor from East Seattle to Redmond and, finally, a distinct geography comprised of the Downtown Seattle study areas. Each of these areas is in different stages of system planning and development. Additional study- and market-area level findings – too detailed for concise summary - are included in Section III of the report, which provides insight into TOD potential at the study and TOD market area level, including a set of market strength indices which provide a quantitative analysis of the potential for residential and commercial TOD in study areas; and a series of market area profiles, which provide an assessment of the TOD potential in each of the region’s twelve TOD market areas. Please see Section III of the full report for these findings. Preferences for Transit Oriented Development Ongoing research over the past decade into the locational preferences and behavior of people and businesses suggests that certain subsets of each group have strong – and potentially unmet – demand for transit-oriented residential and commercial space. These findings, summarized below, are critical to the TOD market assessment included in this study: • Young singles and couples without children1 are most likely to live near transit and be interested in walkability, mixed-use neighborhoods and short commutes. 2 • Research on changing household preferences suggests that the Baby Boomer generation may be interested in downsizing and moving to more amenity- and transit-rich neighborhoods.3 • Proximity to employment centers and downtown districts are among the most important factors in influencing the location of new development along transit.4 • The Government, Knowledge-based and Entertainment industries are more likely to locate near transit and benefit the most from transit-rich locations.5 • The University of Washington’s decision to open an extension in Downtown Tacoma suggests that transit is emerging as a key factor when considering the location and expansion of Educational and Medical campuses throughout the region. 1 Center for Transit-Oriented Development, Hidden in Plain Sight: Capturing the Demand for Housing Near Transit, September 2004, http://www.reconnectingamerica.org/resource-center/books-and-reports/2004/hidden-in-plain-sight-capturing-the-demand-for-housing-near-transit/. 2 Belden Russonello & Stewart, The 2011 Community Preference Survey (Washington D.C.: National Association of Realtors, March 2011), http://www.realtor.org/government_affairs/smart_growth/survey. 3 Myers and Gearin, 2001; Belden Russonello & Steward, 2011. 4 Center for Transit Oriented Development. Rails to Real Estate: Development Patterns Along Three New Transit Lines. 2011. 5 Center for Transit Oriented Development. Transit and Regional Economic Development. 2011. Central Puget Sound Region Transit Oriented Development Market Study EXECUTIVE SUMMARY E-1 Figure E1: Puget Sound Region Study Areas Sources: Strategic Economics, 2012; PSRC, 2012; US Census; ESRI Central Puget Sound Region Transit Oriented Development Market Study EXECUTIVE SUMMARY E-2 Regional Market Conditions Although market conditions vary by corridor and market area, regional market conditions provide the context for local TOD potential. Regional conditions are summarized below. The regional apartment market in the Tri-County area is currently broadly stable and gaining momentum as of early 2012, with vacancy rates below 5 percent and rental rates on the rise,6 particularly in Seattle and east King County. New rental construction is underway and expected to continue in the short-to-mid term. Like much of the country, the Puget Sound Region condominium market was hard- hit by the collapse of the housing market and for the last five years a glut of inventory has kept prices low and inhibited new development. Although the number of sales in recent months has jumped,7 factors such as stricter financing requirements and continued inventory overhang suggest that – outside of the strongest market locations - new condominium development will return in the mid-to-long term. The Puget Sound region is leading the national office market recovery, fueled by growth in the technology industry and businesses such as Microsoft and Amazon. Despite the region’s relative strength, the majority of new construction is still build-to-suit, with speculative construction occurring only in the strongest market locations. Outside of these locations, new office construction is more likely to occur in the mid-to-long term. Although the Puget Sound retail market is also on the road to recovery, brokers report the majority of recent development has been build-to-suit and driven by business expansion. Speculative development is expected to be a longer-term prospect.8 Corridor Market Conditions This section contains an overview of key demographic, commercial, and market-rate and affordable housing trends and conditions at the corridor level. North Corridor Demographic factors suggest the potential for strong residential TOD demand along the North Corridor, particularly among young singles and families without children. The North Corridor is characterized by smaller household sizes and a relatively high share of non-family households and households in the 25 to 44 year age range. Given the high and growing share of rental households in the North Corridor, a significant portion of future TOD demand will likely be for rental housing. Residential demand along the North Corridor varies by location, with a stronger apartment market to the south and condominium market to the north. The North Seattle market area has the strongest rental market along the North Corridor, driven by the presence of the University of Washington – a major regional destination for education, medical care and employment – and the area’s proximity to Downtown Seattle. In contrast to the apartment market, the condominium market is stronger in northern study areas due to their proximity to the Boeing employment cluster in Everett. In the longer term, Downtown Everett’s strong urban form has the potential to support TOD that meets demand for both rental and for- sale housing in proximity to the Boeing employment center, should the SR99 alignment be selected. 6 Kidder Matthews, 3rd Quarter 2011 Real Estate Market Review; King, Pierce and Snohomish Counties. 7 Kakimoto, B. (2012, April 4). March 2012 Seattle Condo Market Update. Retrieved from http://blog.seattlepi.com/seattlecondo/2012/04/08/march-2012-seattle-condo-market- update/ 8 Kidder Matthews, Real Estate Market Preview, 1st Quarter 2012. Central Puget Sound Region Transit Oriented Development Market Study EXECUTIVE SUMMARY E-3 Figure E2: Employment in Transit Supportive Industries Sources: Strategic Economics, 2012; PSRC, 2012; US Census, LEHD Data, 2009; ESRI. Central Puget Sound Region Transit Oriented Development Market Study EXECUTIVE SUMMARY E-4 With the exception of the Boeing plant in Everett, current employment and commercial market conditions in North Corridor cities do not suggest significant future demand for commercial transit-oriented development. Outside of Boeing in Everett, the North Corridor is primarily residential in nature. Future commercial growth is likely to be neighborhood-serving, and therefore driven by demographic change rather than the presence of transit. Limited funding resources and uneven distribution of existing affordable housing along the North Corridor present the potential for gentrification in the mid-to-long-term. Although the North Corridor housing market is not as strong as that of Downtown Seattle or the East Corridor as a whole, there is significant mid-term potential in North Seattle, and longer term potential in southern Snohomish County study areas, as well as study areas near Boeing Field, should the SR99 alignment be selected. This market demand has the potential to displace existing low-cost housing in the longer term, particularly if access to affordable housing funds in Snohomish County continues to be limited. In the mid-term, study areas in North Seattle have the strongest market potential,
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