Snohomish County TOD Market Analysis

Date August 2018 To Snohomish County From Brian Vanneman and Sam Brookham,

Leland Consulting Group Project Snohomish County Light Rail Station Area Planning: Market Analysis DRAFT

EXECUTIVE SUMMARY

This executive summary provides an overview of the Snohomish County Light Rail Station Area Planning Market Analysis, which assesses conditions for residential, commercial, and office development for three proposed light rail station areas in Snohomish County (at I-5 and 164th Street, I-5 and 128th Street, and Airport Road and Highway 99). The executive summary includes a summary of national and regional trends, existing conditions (demographic and market), and three case studies; as well as forecasts and demand for residential, commercial, and office uses, and three preliminary development programs for the station areas.

Station Areas and Market Area The three station areas are shown below. Station areas are defined as a one-half mile radius surrounding each proposed station location. The market area is defined as a five-mile radius surrounding these stations.

Regional Overview: Market Area (left) and Station Areas (right)

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The market area represents the area from which a majority of demand for residential, commercial, and industrial growth will originate, and where most of the competitive development is located. It is an area from which general growth projections—made by the Puget Sound Regional Council (PSRC), US Census, and other organizations—can guide specific projections for the station areas. Resident and business growth projected for the market area are the most likely groups to support retail, occupy office space, and live in the station areas. The market area is approximately defined as a five-mile radius around the station areas—roughly a 15-minute drive time from the stations.

The three proposed stations are located within the Seattle Metropolitan Region – in unincorporated Snohomish County – between the cities of Lynwood, Everett, Mill Creek, and Mukilteo. The area is surrounded by several major activity centers, including:

 Three PSRC-designated Urban Centers: Lynnwood City Center, Downtown Everett, and Bothell Canyon Park;  Paine Field airport, a major employment center; and,  Mill Creek Town Center, a mixed-use area with a range of “main street” retailers and housing.

These activity centers are significant destinations where residents work, shop, recreate, and/or live. The Mill Creek Town Center and Downtown Lynwood may also be competitive with the station areas, since they are established mixed use centers that are served by transit.

Estimated Timeline The following timeline provides a brief overview of the years this market analysis covers, relative to key opening dates for new high-capacity transit service and potential repercussions for transit-oriented development. Given that most developers’ have a near-term focus, the timeline demonstrates that developers’ response to light rail is likely to be measured until 2026 or 2031 (10 and 5 years out from the opening date, respectively). However, near-term development activity in the station areas could increase due to other factors, such as Bus Rapid Transit (BRT), proximity to Paine Field and other activity or jobs centers, and ongoing population and employment growth. Most market analyses cover a time period of 10 years or less; few cover more than 20 years due to the challenges of making reliable projections further into the future.

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Market Analysis Key Takeaways

National and Regional Context and Development Trends The Puget Sound Metropolitan Area is a global metropolis with a diverse and growing industry base of technology, media, manufacturing, and professional services. Some of the firms powering the region’s growth, including Boeing, Microsoft, Amazon, Expedia, UW, Starbucks, and Costco. These firms are positioned within industries that are expected to continue to see robust growth in the future. The region has a reputation as a beautiful scenic area, with abundant views and access to water bodies and mountain chains. It has a growing population base of highly educated residents, and supply constraints that result in a comparatively expensive housing market. Given its growth and amenities, the region is a desirable location for real estate developers, investors, and the people and businesses on which real estate development depends. The strength of the regional market has an important impact on the overall feasibility of new development in the proposed station areas; growth creates demand for real estate development.

Multifamily housing and hotels are currently two of the most favored development types (behind single-family and industrial/distribution), according to the Urban Land Institute. LCG believes that, due to the continuing population growth in the Seattle region, multifamily will continue to be in high demand. Since multifamily development is a key component of TOD, this is positive for the prospects of TOD in Snohomish County’s station areas. Hotel development is judged to be just above fair. LCG’s experience is that hotel development is a specialized form of development, which will continue to work in specific locations, often with an established base of major employers or a major tourism draw, and that new commercial service at Paine Field will help improve hotel prospects.

The Pew Research Center indicates that certain demographic groups – such as young adults, nonwhites and those with less education attainment – have historically been more likely to rent than other groups, and rental rates have increased among these groups over the past decade. However, rental rates have also increased 1 among some groups that have traditionally been less likely to rent, including whites and middle-aged adults.

In fact, although renting is most common among young adults, nearly everyone rents at some point in their lives—whether by choice or by necessity. But rental housing is particularly important for low-income and minority households, about half of whom are renters. As a result, supplying affordable units in a variety of 2 structure types and neighborhoods is a critical housing policy priority.

The retail industry is undergoing a seismic shift and transformation. Big name brick-and-mortar retailers are declaring bankruptcy and closing hundreds of stores as online purchases grow and American buying habits change. Retailers selling products that can easily be ordered and shipped from Amazon or others face a challenging environment and must have a competitive advantage against online competition – whether that is convenience, experience, customer service, or something else. By contrast, retailers offering a special experience, or offer services that cannot be procured online, have the potential to thrive. As such, retailers founded around food and beverage are generally considered the strongest retail subsector.

1 Pew Research Center, “More U.S. households are renting than at any point in 50 years,” 2017, URL 2 From “Renter Demographics” by the Joint Center for Housing Studies of Harvard University, URL

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Office is a more desirable real estate development type than retail, but only marginally. The challenges facing office development are not as daunting as those facing retail, but are significant nonetheless:

 In general, workers today require less office space, as paper files and other physical elements of the workplace are digitized, and office equipment has shrunk in some cases to just a laptop. Some companies now operate out of a home office or coffee shop.  In the past decade, new office development has clustered intensively in downtown locations that are popular with young (and older) workers. This has typically meant stagnating rents in suburban strip/corridor locations.  Corporate executives have remained reluctant to take on significant additional office space since the end of the recession, since they remember the financial pain of that period, and its impact on their ability to expand, hire, and pay rent. Instead, they have often opted to be creative with their current spaces, or with modest expansions.

Existing Conditions: Demographics Demographic, employment and real estate takeaways are as follow:

 Approximately 397,000 people live in the five-mile market area in 149,000 households (2.7 people per household) – about half of all people in Snohomish County. Household counts in the three half-mile station areas range from about 1,300 to 3,500, housing between 3,400 and 8,700 people.  The station areas have experienced significantly higher household growth rates than the wider area and region over the past two decades.  Ash Way/164th currently has the oldest, highest income, and most educated residents relative to the other two. Residents of the Mariner/128th and Airport Road/Highway 99 station areas are typically younger, live in smaller household sizes, and have lower educational attainment and income levels than Ash Way and the wider region. On average, residents of all three station areas tend to be significantly more diverse than the market area, county, and MSA in general. These demographics are typical of residents living in TOD.

Select Household Characteristics, 2018

Ash Way / Mariner / Airport Rd Market Snohomish Seattle 164th 128th / Hwy 99 Area Co. MSA

2018 Population 3,438 8,712 6,506 396,861 805,624 3,888,235 Pop per Sq. Mi. 4,377 11,092 8,284 3,948 367 616 ‘10-‘18 Annual Growth 8.9% 0.9% 1.6% 1.7% 1.5% 1.5% Avg. Household Size 2.62 2.49 2.36 2.65 2.66 2.52 Median HH Income $83,871 $53,263 $59,487 $79,413 $79,165 $79,251 Per Capita Income $34,325 $24,394 $28,481 $37,681 $37,134 $42,329 Median Age 35 31.2 31.6 36.9 38.3 38 Non-white Pop 48.7% 45.4% 45.2% 34.1% 26.0% 32.5% Bachelor’s + 37.0% 17.6% 24.3% 37.5% 33.0% 42.7% Source: ESRI

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Existing Conditions: Employment Market area employment is dominated by manufacturing, big box retail, and health care. In 2015, the manufacturing industry was responsible for almost one-third of all jobs, as well as one-third of new job growth between 2010 and 2015.

The top five fastest growing industries between 2010 and 2015 were:

 Administrative & Support, Waste Management & Remediation Services (8.0 percent annual)  Professional, Scientific and Technical Services (7.7 percent annually)  Healthcare and Social Assistance (6.3 percent annually)  Construction (5.9 percent annually)  Accommodation and Food Services (4.6 percent annually) (joint with Information)

Market Area Employment and Five-Year Growth, 2010-2015

Manufacturing 3.7% Retail Trade 3.0% Health Care and Social Assistance 6.3% Accommodation and Food Services 4.6%

Educational Services 1.7% Construction 5.9% Professional and Technical Services 7.7% Administration & Waste Services 8.0% Finance and Insurance 4.1% Wholesale Trade 0.2% Other Services (ex. Public Admin) -5.4% Information 4.5% Transportation and Warehousing 4.4% Arts, Entertainment, and Recreation 2.4% Public Administration 0.4% Real Estate and Rental and Leasing -1.0% Mgmt. of Companies and Enterprises 3.7% 2010 Utilities 4.0% Agriculture, Forestry, Fishing and Hunting 2.2% 2010-2015 Growth Mining, Quarrying, & Oil & Gas Extraction -11.9%

0 10,000 20,000 30,000 40,000 50,000

Source: LEHD

Existing Conditions: Land Use and Market Strength While the amount of office space required per employee is declining every year, retailers are downsizing at an unprecedented rate in the face of ecommerce. Demand for apartments and a changing commercial market is still strong among millennials and baby boomers. Multifamily housing generally comprises the biggest component of new development within new TOD and mixed-use urban districts. This is also the case in the market area, as the following figure shows. While the market area predominately consists of multifamily, industrial, and retail uses (data excludes institutional (e.g., universities and hospitals) and single-family residential), multifamily residential has been responsible for over 60 percent of new development (and industrial, for 18 percent).

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Development by Land Use*, 5-mile Market Area, All Years Built (left) & Built Since 2010 (right)**

Health Care Specialty Flex Hospitality, Health Care, Specialty, 296,897 Hospitality 321,365 48,000 Office, 444,825 Retail, Office 467,499 Multifamily

Industrial Retail , 1,559,769 Multifamily, 5,423,196

Industrial

Source: Costar and Leland Consulting Group *Does not include institutional or single-family residential land uses **Includes buildings that are currently under construction The strength of the real estate market in any given community is a significant determinant of the type of investment that might be made. It is difficult to catalyze private development in an area with limited or no existing market activity. Conversely, an area with strong market activity may not need the same level of intervention to attract development or encourage desired building types. As such, each station area can be grouped into one of three categories based on existing demographic and real estate market conditions: Limited, Emerging, and Stronger.

Categorizing these areas by market strength helps to structure short- and long-term investments in transit areas by priority – a critical component of the implementation phase.

Based on the development trends and socioeconomic, economic, and real estate characteristics described thus far, the market area can be considered an EMERGING or on the cusp of being considered a STRONG market and may be ideally suited for catalytic investments to enhance local market strength. Market conditions in the greater market area appear to support TOD (rents and vacancy rates for the corridor are relatively strong, albeit significantly lower than more prominent parts of the metro region), and recent development has seen higher rents and fast absorption rates which may be indicative of greater market support.

The following information identifies the strength of the market in each station area and explains the reasoning behind each categorization.

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164th Street/Ash Way: EMERGING Market with some STRONG Elements

 Very high population growth but no employment growth  Strong multifamily sector which has remained tight despite significant recent growth  Inactive office market despite low vacancies and proposed projects  Strong retail market despite lack of new construction

128th Street/Mariner: EMERGING Market

 Lower population growth but higher employment growth  Tight multifamily market but lower average rents; no recent deliveries but developments are under construction  Highest inventory of office development with strong average rents, but also high vacancies  Lowest retail rents but low vacancy and no recent or planned retail construction

Airport Road / Hwy 99: EMERGING Market

 Relatively high population growth but no employment growth  Relatively tight multifamily market with some recent development  Non-existent office market (no inventory)  Strong retail market with highest inventory, good rents and absorption trends, and low vacancy

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Station Area Market Conditions

164th/Ash Way 128th/Mariner Airport Rd/Hwy99 Market Area

Annual Pop Growth 8.9% 0.9% 1.6% 1.7% Annual Emp. Growth -0.1% 2.5% -0.2% 5.6% MFR (units) Average Rents $1.80 $1.51 $1.59 $1.62 Vacancy 3.1% 4.3% 5.1% 4.2% Existing Inventory 1,461 1,857 1,731 40,881 5-yr Growth 1,332 0 280 4,435 Avg. Absorption 259 2 53 934 UC/Planned 0 456 0 1,098 Office (sq. ft.) Average Rents $20.84 $26.85 $29.90 $25.71 Vacancy 0.4% 12.9% 0.0% 7.8% Existing Inventory 181,886 370,713 14,678 9,062,156 5-yr Growth 0% 0% 0% 2.7% Avg. Absorption 14,962 704 120 79,219 UC/Planned 105,000 0 0 978,161 Retail (sq. ft.) Average Rents $29.19 $19.21 $26.74 $18.93 Vacancy 1.2% 1.1% 2.8% 4.9% Existing Inventory 270,215 242,684 408,814 18,649,457 5-yr Growth 0% 0% 4% 1.7% Avg. Absorption 1,384 845 4,354 55,031 UC/Planned 0 0 8,500 70,450 Source: ESRI, LEHD, Costar

Forecasted Growth The Puget Sound Regional Council provides small-area forecasts for households, population, and employment through 2040. A summary of these forecasts is provided below. These forecasts provide a foundation for Leland 3 Consulting Group’s demand analyses for employment, retail, and residential uses.

3 Where applicable, we use the average of these and other rates (such as five-year historic trends) to ground forecasts in reality. In our experience, historic growth trends are often just as predictive as those produced by metropolitan planning agencies, for forecasting future development demand.

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Estimated Market Area Growth, 2018-2038

Est. 2018 Est. 2028 Est. 2038 20-year Annual Total Total Total Growth Growth (%) Households 152,703 171,227 184,391 31,688 0.95% Employment 169,885 177,632 203,967 34,082 0.92% Finance, Insurance, Real Estate, Services 56,238 63,310 76,562 20,325 1.55% Retail/Food Services 28,943 31,991 37,441 8,498 1.30% Education 9,276 10,086 11,434 2,157 1.05% Construction/Resources 10,667 10,345 11,278 611 0.28% Government 5,755 6,319 6,538 782 0.64% Other 35,391 32,025 36,813 1,422 0.20% Manufacturing/WTU 23,616 23,557 23,901 286 0.06% WTU: Warehousing, Transportation, and Utilities. Source: PSRC Market-Area Demand These demand analyses consider a 20-year planning horizon. The station areas in question have an estimated opening year of 2036 – two years prior to the end of this 20-year horizon. As such, these forecasts are more valuable as an indication of how the land use may change in the market area, rather than as a tool to estimate each station area’s absorption of new development.

With that said, these projections also apply to land use surrounding the three new BRT lines set to open within the next decade. Typical transit-oriented development will likely concentrate near these stations and at the LRT stations currently under construction (including the Lynwood City Center, etc.).

The total development square footage that we expect the station areas to capture within the larger market area is provided and explained in the Conclusions and Recommendations section.

For residential, we project 20-year market area demand for 38,000 units, or 1,900 units per year. We anticipate increased multifamily development due in part to new high-capacity transit service and significant momentum from elsewhere in the Puget Sound region. As such, we expect more than 40 percent of new units to be rental apartments (including multiplexes), almost 40 percent to be single-family detached, and about 20 percent to be attached housing (townhomes, condominiums, etc.).

For office, we project 20-year market area demand for an additional 1.33 million square feet of office space, or 66,500 square feet per year throughout the entire market area. Employment growth in the industries of professional and business services, healthcare and social assistance, and manufacturing can expect to drive most of the demand for new office development. Considering about 445,000 square feet has been built in the market area since 2010 (approximately 63,500 square feet per year), and net absorption has averaged about 120,000 square feet per year during this period, we consider our future demand projection a conservative estimate, and that construction will at the very least keep pace with recent trends. Demand for new office is likely to increase as a result of new commercial service at Paine Field, although office development is unlikely to be overtake residential as the primary use in the station areas.

For retail, we project total 20-year market area demand for an additional 853,000 square feet of retail, or almost 43,000 per year. If new households are likely to spend significantly more than current households, then an

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Snohomish County TOD Market Analysis aggressive forecast may be possible. However, with ecommerce achieving an increasingly greater share of the retail market and existing stores transition to accommodate modern needs, demand for new brick and mortar retail is unlikely to be high. Further, the market area is currently experiencing significant sales leakage, indicating that a significant chunk of new demand is leaving the market area as people shop in more established centers. This is likely to continue.

For industrial we project demand for an additional 3.28 million square feet of new industrial/flex development over the next 20 years in the market area, or 164,000 square feet per year, with manufacturing comprising over half of total demand. Most of the remaining demand for new industrial falls within the industries of wholesale trade, transportation and warehousing, and construction.

Major office, flex, and industrial development is likely to continue near existing clusters, such as Paine Field and Bothell Canyon Park, and other areas where smaller-scale industrial development exists, such as Lynnwood and Mukilteo.

Station Area Land Supply & TOD Readiness The following maps show improvement value to land (I:L) value ratios for the two primary proposed station areas and their surroundings. An I:L ratio is a general measure of land utilization and suggests the likelihood of redevelopment. A very low ratio (<0.5) is indicative of a property with high potential for redevelopment as the parcel is likely to be vacant or have few existing buildings (or buildings in a state of disrepair). A high ratio (2+) is indicative of a property area with low potential for redevelopment, typically because it is occupied by well- maintained and/or high-value buildings. These valuable buildings are less likely to be sold, and if sold, more likely to be purchased by others looking to retain them in their current general use. I:L values are only a general indicator of redevelopment potential. Many factors affect the likelihood that properties will redevelop, including the property’s owners and their goals, life stage of the property owners, whether the property is owner- occupied or an income property, duration of leases, stability of businesses on-site, and environmental or other liabilities that could be triggered by a sale, among others.

Low I:L ratios are far more prevalent in the 164th/Ash Way station area than the 128th/Mariner station area. However, much of the vacant land to the west of Ash Way is wetland and is therefore not considered buildable. At the Ash Way station area, there appear to be developable and redevelopable parcels north and south of 164th Street on the west side of the interstate, and some smaller parcels on the east, north of 164th. One large property with low I:L value, and compelling TOD redevelopment potential, is the current Ash Way Park and Ride. At the Mariner station area, the parcels on the west side of the interstate with the lowest I:L values are the two mobile home parks; redevelopment of the properties is possible but may introduce questions about how to retain affordable housing for existing residents. A number of properties north and south of 128th Street, between 4th and 8th Avenues, may be redevelopable, with I:L value ranging from below 0.5 to 1.5. The parcels with low improvement-to-land ratios on the east are currently being built on and will soon be apartments. Only a few vacant tracts remain.

With that said, the construction of the light rail alignment will require the acquisition of many parcels, which are likely to be subsequently divided into smaller parcels and sold. These newly vacant parcels are likely to present prime development opportunities. However, discussion of these parcels is redundant until such time that plans are finalized and/or construction begins.

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Improvement to Land Ratios, 164th/Ash Way (left) and 128th/Mariner (right)

Source: TIGER, Google, Snohomish County, Leland Consulting Group

Transit Orientation The following graphic provides a summary of how each half-mile radius station area scored against the five “Transit Orientation” criteria: People (the station area’s population), Place (the number of retail, commercial, and community destinations that are accessible within easy walking distance as measured by WalkScore), Physical Form (the area’s transportation connectivity, which is a proxy for pedestrian accessibility), Performance (current transit service), and Market Strength (relative to rents, vacancy, absorption, etc.). The 128th station area is the most ‘well-rounded’ but does not have the same market strength or performance of 1264th, while is clearly heavily influenced by the Ash Way Park and Ride (limiting density, connectivity, and mobility). Airport Road, meanwhile, is the least “transit-oriented” station area in its existing state.

Transit Orientation, Proposed Station Areas

Source: Leland Consulting Group

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Case Studies Three TOD case studies were chosen that displayed similar characteristics to the proposed station areas in Snohomish County. The case studies are Contra Costa Centre in the San Francisco Bay Area; and Orenco Station and Clackamas Town Center in the Portland, Oregon region. All three are light rail stations areas located in the suburbs of a major metropolitan area and near or adjacent to interstates.

Key takeaways include:

 Great TOD places can take many years to fully develop and mature. It has been about 20 years since the first projects at Orenco Station broke ground, and the first mid-rise (five-plus story) buildings were built in the last few years.  While initial phases may be modest or lower-density, they can set the stage for projects that are more ambitious—in terms of mix of uses, design, tenants, density, or other features.  The highest quality places are often located on perpendicular streets and/or set back from the main arterial.  Light rail service does not necessarily mean that new development will occur. The preexisting land use pattern has a significant role in how development does or does not occur. Where large format retail exists, developing TOD can be particularly challenging, due to the relatively high value of the existing commercial uses; the institutional predisposition of most commercial property owners towards a continuation of that business model; long-term leases, covenants, and commitments; and, often, the incompatibility of higher- quality “urban” mixed-use development with dated commercial development.  Station areas that have experienced significant development activity tend to have residents that are better educated and have higher incomes. White collar professionals appear to be a key demographic for TOD and can afford market-rate TOD.  For land uses within station areas, multifamily residential is the prominent use across all three case studies. Retail is significant, although most retail development was preexisting prior to the opening of light rail service.  Multifamily residential and – to a lesser extent – office land uses tend to be the most favorable for TOD.  TOD districts can be accomplished in many phases.

Conclusions and Recommendations  The expected 2036 opening date for the two/three light-rail stations means a relatively high level of uncertainty. The further we look into the future, the realm of possibility becomes ever greater (see “Cone of Plausibility,” right4). As such, the data and projections presented throughout this report are likely to become significantly less accurate in the late 2020s and 2030s. In fact, one or more updated market studies and station area planning refinements are

4 From the American Alliance of Museums, URL

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recommended over the next two decades in order to better determine future uses in the proposed station areas the LRT opening day gets closer. At that time the planned BRT stations will be operational, and planners will have a better sense of how high-capacity transit systems are likely to impact development patterns in southern Snohomish County.  Demand is greatest for residential uses given the clustering of retail, office, and industrial elsewhere in the region. The market is strongest for residential uses, with high population growth rates, rent growth, and low vacancies. Residential will likely continue to be the predominant building type in the area.  Future land uses are likely to cluster near other similar or complementary land uses. Uses that are perceived to be non-complimentary or incompatible, such as residential and industrial, are less likely to develop on adjacent parcels. Residential developers will generally try to avoid being proximate to industrial development, due to a perceived disamenity impact and achievable price reduction; industrial developers will generally try to avoid being proximate to residential development since residents may attempt to limit nuisances such as freight traffic, noise, light, and effluents.  The properties with the greatest likelihood of redevelopment tend to be low value properties near high value properties, because this pairing suggests the location of a valuable amenity (e.g., transit station, waterfront, attractive single-family housing neighborhood, pedestrian-oriented commercial center) that the lower-value properties could capitalize on.  Building form follows parking and achieving the right volume and type of parking is critical to new development. The market is unlikely to support structured parking on private development in the near term, which is significantly more expensive than surface and/or tuck-under parking and therefore requires much higher rents. If and when the market improves, structured parked development types may be feasible – perhaps when the light rail stations are built. However, lower parking requirements and creative parking solutions – such as shared parking – can mitigate these challenges in the short term.  The station areas have the potential to leverage multimodal connections by connecting with existing bus service, the new BRT lines, and existing and future trails.  New infrastructure is likely to be built on a project-by-project basis as required by the county. However, increasing connectivity and improving the right-of-way in each station area – the 164th/Ash Way station area in particular – will help improve the pedestrian environment and encourage alternate means of transportation.  In order for the County to achieve significant mixed-use, mid-rise TOD, they will have to get aggressive and invest in pedestrian- and TOD-appropriate infrastructure. They will also need to target land acquisition, both with South Transit and on their own, look to enter into public-private partnerships, actively attract investment and institutions, and work with Community Transit to build a transit-oriented development in the near term.

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General Opportunities and Constraints The following table outlines opportunities and strength, and weaknesses and constraints for all three station areas.

Opportunities/Strengths Constraints/ Weaknesses

 Growing prominence as global market, which is  Lack of affordable housing – an issue that could key to driving continued domestic and foreign have a negative impact on future growth. investment.  High general business and living costs, which  High levels of economic growth due to increased could become a headwind to future growth if wealth in the market, in spite of the high cost of solutions cannot be developed. living and doing business.  High construction costs and cost of labor means  Availability of a highly educated workforce and a rents must be high. significant density of talent, allowing for the spin-  Land supply is limited, requiring costly and off and creation of new companies. sometimes prohibitive redevelopment of existing  Introduction of commercial flight service to Paine properties. Field.  Development Prospects, 2018  High quality of life with attractive outdoor activity  Current land use and transportation patterns will  Puget Sound attractive to Millennials be difficult to change.  Shared use parking  Timing: 20-year horizon will reduce developer  Nexus/multimodal hub (BRT, trail systems, bike interest in the near term infrastructure) provides opportunities for shared  Prospective development will face challenging use parking, dense mixed-use development, and competition from other established centers with high activity centers. superior market metrics.  Development activity shows existing developer  There are regionally significant differentiators, interest/suitability such as the County as implementing agency,  Strong employment base is positive for funding, and focus. commercial and residential demand, and  Potentially prohibitive transportation, zoning, proximity to Paine Field provides immediate and parking standards opportunities for growth, especially with new  Lack of experienced local TOD developers commercial service starting in the next two years.  Distance from major office concentration

The following graphic shows a typical developer’s project timeline. It shows that the desired time from property acquisition to ground breaking is ideally less than three years. Most developers’ financial feasibility, go/no-go analysis is based on either a five- or 10-year discounted cash flow model, meaning that for most developers, an event in 2036 (such as the initiation of light rail service) is outside of their financial analysis time frame. Increased revenue in year 11 (due to the higher demand caused by residents looking to live near transit, for example) will not affect their financial analysis, or go no-go decision. The use of a seven percent or higher discount rate also means that revenues that may or may not materialize 11 or more years out have little to no impact.

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Developer’s Project Timeline

Source: Urban Land Institute, 2003 The following figure shows the results from a survey which reveals the technologies Americans think will disrupt traditional industries between 2016 and 2036 (when light rail service will begin).

The results show that a large majority of people (69 percent) believe that physical money will disappear, two- thirds (66 percent) believe that food deliveries via drone will be commonplace and virtual reality will be routinely used for doctors' appointments. About half the respondents believe it likely that communication devices will be commonly embedded in our bodies. The prediction seen as the least likely is that robots will outnumber human beings, with only 26 percent considering this likely. The results of this survey demonstrate the likelihood that the world in which light rail opens is likely to be quite different from the one we inhabit today.

Future Scenarios, Next 20 Years

Source: Imperial College London's Tech Foresight research team URL

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Preliminary Development Program The following table provides approximate development program for each of the primary station areas. The demand projections presented in the table are based on a 20-year projection, with 2038 falling just two years after the light rail is due to open. A developer’s project timeline from acquisition to opening is ideally less than three years, which means only one-quarter of the 20-year timeline might be directly impacted by the light rail. With that said, new construction may be limited in the station areas within the next 10 to 15 years, only to see an increased rate of development in years 15 through 20. For an extended 30- and 40-year timeline, we assume these projections will be conservative.

LRT is likely to both increase demand for residents (and secondarily, businesses) to locate within a half-mile of the LRT stop and reduce parking demand, thereby enhancing development feasibility.5 6 But this will only partially have taken effect at the end of the study period. Developers may make investments in anticipation of LRT, but this assumes consumers value the transportation and placemaking improvements and prospective developers have similar values and see a benefit from the parking reductions. These benefits would not accrue until 2036.

5 In their 2008 report titled “Transit and Employment,” Reconnecting America note that locations near transit have become increasingly attractive to employers – largely because of the strong association between walkability and transit orientation – and highlights the potential to increase the transit commute (Reconnecting America, 2008, “Transit and Employment”).

6 The Federal Transit Administration’s report “TOD in the United States” noted that “TOD continues to attract interest as a tool for promoting smart growth, leveraging economic development, and catering to shifting market demands and lifestyle preferences.” They further elaborate: “developer interest in TOD stems in large part from the fact that the market for transit- oriented living, working, and shopping continues to expand, particularly in big cities that are increasingly choked with traffic… Traffic congestion, in particular, is prompting more and more Americans to pay a premium for housing near rail stations, even if it means living in smaller houses on smaller lots... Besides worsening traffic congestion, the market for TOD is being driven by shifting demographics and receptive public policies… Nationwide, the share of “non-traditional” households— single parents, childless couples, divorced or never-married people, or two or more unrelated adults—rose from 69.8% in 1980 to 76.5% in 2000” (Valley Metro, 2004 “TCRP Report 102”).

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Development Summary Table, 20-Year Estimated Station Area Absorption Capacity

Product Type Demand Demand Notes (Low) (High)

Residential Absorption of residential uses will be steady and incremental, with increased (units) rates of absorption likely with new transit service. Ownership 100 200 Some townhomes may be built, but condominiums are more likely as the Attached market for condos improves.

Rental 600 800 Apartments may be garden walkups or mid-rise (single or mixed-use). High Apartments rises are unlikely given the market and need for structured parking.

Single-Family 0 83 Single-family detached housing is not recommended for the station areas, but Detached some small infill units may occur in existing neighborhoods.

Non-Residential Absorption of all non-residential development will be staggered as larger (square feet) centers are built and tenanted. Retail 38,000 113,500 General merchandise, grocery, and drinking and dining establishments are the recommended retail industries. Some opportunities may arise for lifestyle- or entertainment-oriented retail, such as a cinema.

Office 33,500 66,250 Traditional office sectors such as financial activities and professional services will likely absorb most new office development. Job growth in health care and social assistance will drive demand for new office, although it will compete with other notable developments in the area. The opening of Paine Field for commercial flights in the near future is likely to improve the two northernmost station area’s attraction to potential office users.

The Eastside suburban markets, such as Redmond, Bellevue, and Kirkland, are not comparable to this part of Snohomish County. However, in the long term, and with Paine Field commercial service and the Boeing job cluster, southern Snohomish County could see major office development. These areas could arguably be like Contra Costa County TOD where significant office has happened, with a more aggressive figure of 300,000 square feet achievable.

Industrial 10,000 16,500 Industrial development is not recommended in the station areas. However, some “craft industrial,” which combines elements of retail and industrial space and may include small production facilities, distilleries, breweries, and makerspace, may be feasible. Some high-tech industrial such as advanced manufacturing and R&D may be possible.

Institutional/ As As There are many examples of the University of Washington, community colleges, Healthcare Needed Needed and other institutions locating in TOD/Town Centers. Bothell, for example, has UW and some healthcare institutions.

Source: Leland Consulting Group

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164th/Ash Way Station Area Current and projected future conditions:

 Light Rail. While the location of the future light rail alignment and station are unknown at this time, the best guess is that light rail will be on the west side of I-5, with a station somewhere near 164th Street. LCG believes that a west-side alignment and station is superior to an east-side alignment, for reasons explained below.  Transit Orientation. As shown at right, the 164th/Ash Way station area scores relatively well in terms of market strength and existing transit performance (service). Strong market metrics include apartment and retail rents, and household incomes that far exceed those of the other station areas and the market area as a whole and suggest that there is additional market demand for living and shopping in the area.  Transit. The station area is currently served by numerous Community Transit (commuter and local), and Sound Transit buses, which connect riders to downtown Seattle, Everett, Mill Creek, Lynwood, and other locations. The Ash Way Park and Ride is an approximately 10+ acre surface parking lot and transit center, with 1,019 parking spaces. The park and ride is owned by WSDOT, and largely managed by Community Transit, with some support from Sound Transit. A 2.3-acre wetland/stormwater management facility is located south of the park and ride and bordering on 164th Street. Parking is free here and the lot reportedly fills up early, by about 7am. Community Transit’s Swift Orange BRT line—which opens in 2023 and will connect Edmonds Community College to the McCollum Park and Ride via Lynnwood, the West Alderwood Mall, the Ash Way Park and Ride, and Mill Creek—will increase the connectivity in the region. Link light rail will serve Lynnwood City Center in 2024.  Multifamily development. A significant share of multifamily development (30 percent of market-area growth over the last five years) and household growth has occurred within the station area this decade. Multifamily development near the center of the station area includes the Urban Center Apartments (income affordable/rent-restricted, 395 units), Tivalli (market rate, 383 units, and Newberry Square Apartments (market rate, 123 units). Other relatively recent multifamily projects located a bit further from the center of the station area are Avalon Alderwood (¼ mile west of Newberry Square), and The Meadows at Martha Lake and Altia Apartments (east of I-5). th  Commercial development. Commercial development in the station area is primarily oriented towards 164 Street and is largely auto-oriented, single story development and large parking fields. Commercial uses include Walmart, Fred Meyer, numerous restaurants, and “in-line” tenants such as coffeeshops and banks. Commercial offerings appear to be oriented towards a one- to three-mile neighborhood market area, as opposed to larger regional retail destinations such as Alderwood Mall. Newberry Square, a mixed-use project that includes both commercial and multifamily residential uses, provides a more pedestrian- and transit-oriented model of commercial development. It includes a coffee shop, restaurants, convenience store, healthcare, professional offices; some nicely designed public spaces, on-street parking, and overall parking ratios that are likely lower than other nearby commercial developments.  The Swamp Creek wetland area, about ¼ mile west of I-5, is a dominant feature in the station area. While we assume this creek area is undevelopable, it has the potential to become much more of a community open space amenity for the area, even if some of the area remains exclusively as wetland/habitat area. On the east side of I-5, Martha Lake and Marth Lake Park are also natural/open space amenities. This

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Snohomish County park is likely the most attractive and well-maintained public open space in the station area.  Road network. Interstate 5 is obviously the area’s primary auto route, carrying in excess of 150,000 trips per day. For TOD, the interstate’s presence creates both benefits (visibility and accessibility, particularly for commercial uses) and challenges (east-west separation for non-auto travel, noise and “disamenity” for freeway-adjacent mixed-use development). 164th Street is the area’s primary east-west corridor, and only current route across I-5. It features sidewalks and bike lanes along most of its length. However, with a cross section that ranges from five lanes (at the west) to eight lanes (south of the Ash Way park and ride), it is not currently pedestrian friendly. Ash Way is one of the few streets that is relatively long and has a pedestrian- friendly cross section (one travel lane each way, with center turn lane, bike lanes, sidewalks, and some limited on-street parking). Elsewhere in the study area, the road network is not well-connected, meaning that routes for pedestrians and bicyclists will be circuitous and require legs on arterials such as 164th Street.  East of I-5 and along 164th Street, low-density commercial uses dominate. These uses (Walmart, Starbucks, and many others) appear to be relatively heathy for the near and medium-term and will be very difficult to displace and redevelop with TOD, even if that were desired. Without a clear starting point, creating a TOD district on the east side of I-5 will be more challenging than the west side.

TOD Opportunities:

 West side of I-5. Due to the existing park and ride, alignment to the south, and existing commercial, mixed- use, and multifamily developments on the west side of I-5, LCG recommends locating the light rail alignment and station on the west side of I-5, likely as close as possible to the freeway.  Build on existing assets. There are numerous assets in this station on which to build, which form a TOD “nucleus:” the Newberry Square, recent multifamily projects, Ash Way, and Ash Way park and ride.  Start now. The County and its partners can look to kick start TOD now and in the near future, well in advance of light rail. This is due to abundant existing transit service, planned Swift BRT service, a reasonably strong market, and the existing TOD nucleus surrounding the Ash Way park and ride.  Evaluate and implement the appropriate Tools and Approaches, discussed further below.  Refine the vision for the area. In particular, it will be important for the County and stakeholders to identify how the uses and experiences in this station area may be different from other “competing” activity centers, such as central Lynwood, Mill Creek, Alderwood Mall, etc.  Capitalize on BRT. The introduction of Swift BRT could provide a major opportunity to improve the experience of 164th Street for pedestrians, bicyclists, and transit riders, through improved stops/stations, wider sidewalks, north-south crossings, median refuges, landscaping, signage, street furniture, street lighting, and other features. Aurora Way in Shoreline is one example of a corridor redesign. Improving the 164th and Ash Way intersection is a major opportunity, since it could facilitate the extension of TOD development from the north to south sides of 164th Street. Stakeholders should also make sure that residents, businesses, and developers know that improved transit connections to ECC, Lynwood, Mill Creek, Boeing, and Bothell/UW, are coming soon.  Ash Way stormwater management facility. The 2.3-acre site just south of the park and ride is a potential redevelopment opportunity. In order to redevelop this property, additional mitigation would need to take place at another site, likely nearby and in the Swamp Creek watershed. LCG views this as a potential redevelopment opportunity because it is publicly owned, located near the current center of the station area, and has excellent visibility from 164th Street—and therefore could accommodate larger scale commercial uses such as a grocery store. Further study would be needed to understand future potential uses for this wetland.

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 The Ash Way Park and Ride presents a compelling, and very challenging, TOD development opportunity. At 10+ acres, it could accommodate hundreds of new housing units, ground floor commercial space, structured park-and-ride parking, and other uses. This would build on and advance existing TOD momentum in the area, create a pedestrian- and transit-oriented community gathering space, and create a catalyst development that could spur the redevelopment of other nearby properties. As the current site owner, WSDOT would be a key party to this redevelopment; as would Community Transit, Sound Transit, those who currently park in the lot, and the surrounding community. Redevelopment would likely require WSDOT to sell this property, or transfer long-term use rights via easements, air rights/development rights. A public agency could maintain ownership of the +/- 1,000 future parking spaces. LCG views this as challenging in part because of the number of stakeholder agencies, and the cost of structuring 1,000 parking spaces.  Capitalize on natural amenities, particularly Swamp Creek. Residents and businesses that locate in mixed- use TOD projects place a very high value on open spaces. They will accept more compact private dwelling units and offices partially in exchange for high-quality public open spaces. Apart from Swamp Creek’s value as a wetland/habitat, LCG’s view is that it could also have greater value for nearby residents, through the addition of paths, trails, creek crossings, parks, etc. This should be a regional amenity.  Other properties. Evaluate the potential for the redevelopment of rural/underutilized properties near the Ash Way park and ride. There are properties near the park and ride that could become part of future TOD; however, they are currently used as a mix of residential and low-density suburban/rural commercial. Some properties may be wetlands and therefore undevelopable.  Improve Connectivity. Improved east-west and north-south connections would improve the area’s TOD potential. New pedestrian and/or multimodal bridges across I-5 would be beneficial. Of course, such improvements are costly. They could be implemented concurrently with the build out of Link light rail.

128th/Mariner Station Area Current and projected future conditions:

 Light rail. Sound Transit’s alignment and station-location planning process is still underway, and therefore the location of the future light rail alignment and station are unknown. LCG believes that the station could be located on 128th Street between 4th and 8th Avenues; or on 4th Avenue, south of 128th Street. LCG’s view is that 128th Street location would be slightly stronger from a TOD point-of-view, because it is better- connected to surrounding neighborhoods, and is adjacent to more commercial properties that could be redeveloped. In either case, the station and alignment should probably be west of I-5, as the light rail turn west, towards Boeing, in this vicinity.

 Impacted properties. Because the light rail line will curve to the west here, it is likely to impact numerous properties, and require more property acquisitions than around Ash Way. This will present planning and financial challenges for Sound Transit and for some property owners. From a TOD point of view, it means that Sound Transit may end up owning properties that could be sold and redeveloped as TOD. LCG understands that Sound Transit’s policy preference is that properties that are sold and redeveloped as TOD should include a significant affordable housing component. Light rail may be (high) above- grade in the station area. This could actually discourage shorter rides; and will have significant site- planning implications. Stakeholders should work with sound Transit to understand how light rail will look and move throughout the area.

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 Transit Orientation. As shown at right, the Mariner station area’s strengths differ from those at Ash Way. Mariner has more people and better connectivity/physical form, and a slightly higher walk score (places). By contrast, it has a weaker market and transit performance that is not quite as good by LCG’s measures. In terms of market, household incomes, growth rates, education, multifamily and office rents are lower than at Ash Way, though average retail rents are higher.

 Transit. The station area is currently served by ten Community Transit Lines and one Everett Transit line; it is not served by Sound Transit. Several Community Transit lines provide service into Downtown Seattle. Compared to Ash Way, it is a bit further from the Lynwood center, where light rail service will begin in 2024. The Mariner Park and Ride is owned by WSDOT and provides 644 free parking spaces. It is an irregularly shaped lot, and the core area is about 5 acres in size. Community Transit’s Swift Green Line BRT will begin operating in early 2019 along 128th Street and serves Boeing/Paine Field to the northwest and Canyon Park/Bothell to the southeast. Headways are 10 minutes on weekdays and all boarding an alighting takes place in about 10 seconds at stops. The Green Line will provide an important link, given the large employment base at Paine Field and soon-to-commence commercial aviation service, as well as Canyon Park employment base at the southern terminus. The Green Line will make 128th a more desirable location for housing, particularly for Paine Field-area employees.

 Commercial Development. 128th Street is lined with a variety of functional an unremarkable commercial development, including an Albertson’s grocery store, numerous restaurants, banks and other supporting in- line tenants, and several motels. The Mariner branch of the Sno-Isle Libraries is located near Albertson’s. This development appears to be reasonably healthy today; however, retail and commercial are expected to struggle in coming decades, and some of this commercial space could be redeveloped with higher-density, mixed-use TOD over time. Some industrial development south of 128th Street, could also be displaced and redeveloped during light rail construction and operation.

 Multifamily Development. Numerous wood-frame, generally two- and three-story apartment communities are located in the ¼- and ½-mile rings from a potential station location. These generally have a higher improvement-to-land value ratio, and therefore are more likely to remain in place, and be renovated and rehabbed, throughout the 20-year planning horizon of this analysis.

 Paine Field Commercial Service. Alaska Airlines, Southwest Airlines and United are all expecting to begin commercial service our 1of Paine Field in Everett beginning in 2019. This—together with the Green Line— could have a positive impact on demand for housing and lodging, and potentially other uses.

TOD Opportunities:

 West side of I-5. Due to the existing park and ride, alignment to the south, superior connectivity, and light rail route towards Paine Field, LCG recommends locating the light rail alignment and station on the west side of I-5, along 128th Street or 4th Avenue.  Start now but be patient. The County and its partners should look to kick-start TOD now and in the near future by building off of the Swift BRT Green line. However, the market is not as strong as at Ash Way, and there is little if any undeveloped land.  Capitalize on BRT. The introduction of Swift BRT could provide a major opportunity to improve the experience of 128th Street for pedestrians, bicyclists, and transit riders, through improved stops/stations,

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wider sidewalks, north-south crossings, median refuges, landscaping, signage, street furniture, street lighting, and other features.  Workforce and Mixed-income TOD. LCG believes there is an opportunity to work with Housing Authority of Snohomish County (HASCO), and/or other workforce and affordable housing developers, to build a high- quality housing project proximate to the Green Line. As stated, this should be an attractive residential location for some Paine Field employees. Such a project could establish an initial, first phase of TOD place making in this area.  Park and Ride. The Mariner Park and Ride, like the Ash Way Park and Ride, could be a TOD redevelopment opportunity. However, due to its smaller size, and the fact that it could be located some distance from the light rail station, it may be a less transformational redevelopment site.  Redevelopment following light rail. Long-term (concurrent or after the construction of Link light rail), Sound Transit is likely to acquire numerous properties, and then look to sell them for the purposes of building TOD. The County should work with Sound Transit in this endeavor.  New office development is unlikely in the near and medium term given that average annual absorption has been at 700 square feet, and there is a total of 47,000 square feet of vacant leasable space in the area.  Due to the area being largely built out with little vacant buildable land, the best opportunity for new development will occur during and after the construction of the light rail. Parcels will have to be acquired and split, creating new vacant land on which to build. In the meantime, infill development and incremental improvements are more likely.

Airport Road & Hwy 99 Station Area  Given the size of the right-of-way, street and land use patters, and presence of existing big-box commercial and industrial development, residential development is likely to continue developing on the periphery of the station area rather than close to the center. This has resulted in a difficult pedestrian environment with little sense of place.  Some new development has occurred in the last five years, but this represents only six percent of total multifamily growth in the five-mile market area.  The opening of the SWIFT Blue BRT line will likely increase interest in this station area, and existing low- density commercial sites – particularly large parcels – may attract larger redevelopment (such as the car lots opposite Axis Apartments, the only new multifamily development in the area). With that said, office development remains unlikely here given the proximity to Paine Field, where almost all new development has clustered.  Retail is challenging, despite significant new development over the past five years. However, Airport Road & Highway 99 station area are potential locations where larger-scale retail may occur.  Both the planned SWIFT Green BRT line, which connects Bothell Canyon Park to Boeing at Paine Field and opens in 2019, and the SWIFT Blue BRT line, which currently connects Shoreline to Everett via Highway 99 via Airport Road, are likely to have a significantly greater impact than the planned LRT line over the next two decades. Commercial service commencing at Paine Field is likely to increase office prospects.

Tools and Approaches The primary approaches to encouraging TOD are shown below. Note that list represents the approaches used by cities, redevelopment agencies, and transit agencies nationally; some of these approaches may not be allowed by Washington state law or local ordinances or may simply be difficult to implement.

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 Infrastructure and Public Facility Investment: Prioritizing enhanced transit, street, sidewalk, multimodal trail, water, sewer, park, school, parking, and government building projects to support development.

 Entitlement and Process Assistance: Streamlining development approvals and providing appropriate entitlements more quickly at less cost to the project.

 Site Assembly and Assumption of Extraordinary Costs. Cities, redevelopment agencies, and other public agencies may acquire and “assemble” multiple contiguous sites, in order to bring to market a site that is larger or more logically shaped for development.

 Site Assembly and Land Write Down: Acquiring land and reselling at its redevelopment value or providing financial assistance to a developer where land costs are greater than supportable residual land value for the desired use.

 Financing Tools that Reduce Cost of Capital: Facilitating tax-exempt bonds where allowable (e.g., industrial revenue bonds, periodic disaster bonds, housing bonds, 501(c)(3)) and government loan funds that may be available for public or in some cases private costs;

 Tax Abatements, Impact Fee Abatements, and Sharing: In many states, public agencies may enable private developers to retain or receive back a portion of taxes (property, sales, or other) generated by the project, for use to assist the economics of the project.

 Impact fee abatement, waivers, or reinvestment is another approach to reinvesting project-generated public revenues near the project site.

 Securing funds from Grant Programs. One example is the Community Development Block Grant Program (CDBG).

 Tax Credits that Reduce Capital Requirements: Assisting developers in obtaining tax credits for projects, including new market tax credits (NMTC), housing (LIHTC; by coordinating with allocating body), and historic, and possibly others enabled in Montana;

 Facilitation of Improvement Districts and Special Assessment Districts. Municipalities may help in forming a variety of special districts to enable infrastructure development, real estate development, or district management.  Public Development Authorities. PDAs are public corporations created by a city or county to perform a particular public purpose or public function. PDAs do not have the power of eminent domain or the authority to levy taxes. A PDA may borrow funds or issue tax-exempt bonds. Despite broad authority to undertake various projects, PDA financing is generally project specific. To facilitate access to the financial markets, PDA project financings are often backed by a city or county guarantee, typically in the form of a contingent loan agreement

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INTRODUCTION

Snohomish County is planning for the extension of light rail through the unincorporated Southwest Urban Growth Area by the mid-2030s. The extension of light rail will serve county designated urban centers located at I-5 and 128th Street and I-5 and 164th Street. Another light rail station at the Airport Road and SR 99 urban center could be constructed if funding becomes available. All of these locations will be served by Community Transit’s Swift Bus Rapid Transit (BRT).

The County is beginning a planning process to develop and adopt a subarea plan for an “urban core” of unincorporated Snohomish County between the Cities of Everett, Lynnwood, Mill Creek, and Mukilteo. This planning area includes the three future light rail stations as well as 10 current and future Swift BRT stations. The Subarea plan addresses land use, transportation Figure 1. ST3 Existing and Planned Route Map (motorized and non-motorized), public services, parks, housing, and economic development. It is anticipated that the urban core subarea plan will become part of the 2023 update to the Snohomish County Comprehensive Plan.

To continue the process of developing east/west corridors and to begin the subarea planning process, it is necessary to identify the future light rail station locations and develop concepts for land use and transportation in the immediate area of these station locations. Snohomish County is looking for the consultant team to develop a scope of work to develop alternatives for light rail station locations and adjacent land uses at the two potential light rail stations at Ash Way (164th/I-5) and Mariner (128th/I-5) with the potential of expanding the scope to a third station area at Airport Road/SR 99.

The goal of this station area study is to select preferred alternatives for each of the areas that can help inform Sound Transit’s planning process, continue the development of east/west corridor access, begin the subarea planning process, and help guide other future infrastructure planning, comprehensive planning, and land use regulation.

Report Purpose This market analysis establishes the type and amount of development that is likely to be supportable in the broader planning area over the next 20 years. The analysis includes a summary of existing development patterns, area wide market demand (both residential and non-residential), relationship to other employment/population centers in Snohomish County (especially downtown Everett, Paine Field, Mill Creek Town Center, and the Lynnwood City Center), opportunities and constraints to development in the station areas, a review of the development patterns seen at similar light rail station areas, and an assessment of the ability of current land use plan and zoning to achieve the optimal results.

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As light rail is not expected to open until 2036, 20-year demand forecasts in this report are not necessarily intended to describe the land use that may occur after 2036, but instead provide an indication of how the surrounding land use might change over the next 20 years. Further, the region will soon be served by multiply bus rapid transit (BRT) lines, which often have a similar impact on land use as light rail. Maintaining a focus on both the upcoming BRT service and future light rail will help ensure that recommendations are made at the end of the analysis to help these areas develop appropriately for high-capacity transit.

Contents National and Regional Context ...... 26 Existing Conditions ...... 36 Forecasted Growth ...... 43 Real Estate Market ...... 47 Station Area Land Supply/TOD Readiness ...... 79 Case Studies ...... 88 Encouraging TOD: Tools and Approaches ...... 97 Conclusion ...... 100

Transit Oriented Development (TOD) What is TOD? According to the Center for Transit Oriented Development (CTOD), TOD is a type of community development that typically includes (1) a mixture of housing, office, retail and/or other commercial development and amenities, (2) integrated into a walkable neighborhood and (3) is located close to quality public transportation.

Some of the benefits of TOD include:

 Reduced household driving and thus lowered regional congestion, air pollution and greenhouse gas emissions,  Walkable communities that accommodate more healthy and active lifestyles,  Increased transit ridership and fare revenue,  Potential for added value created through increased and/or sustained property values where transit investments have occurred,  Improved access to jobs and economic opportunity for all,  Expanded housing choice to meet increasing demand in a more efficient and sustainable development pattern; and  Expanded mobility choices that reduce dependence on the automobile, reduce transportation costs and free up household income for other purposes.

TOD Potential. The basic framework for assessing “TOD potential” used in this market analysis is as follows. Market dynamics/market strength (real estate “demand” factors), combined with each station area’s “transit orientation” (existing character and qualities) and existing supply of buildings and land (real estate “supply” factors), result in an estimate of TOD potential. Each of these terms (e.g., “transit orientation”) is described below in its own section.

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Source: Transit-Oriented Development Strategic Plan, Metro (Portland); Leland Consulting Group. The Five “P’s” described above are: (1) people, or activity, (2) place or proximity, (3) physical form, (4) performance, or access to open space and recreation, and (5) pedestrian and bicycle infrastructure.

Measure Summary and Metrics People  Population and Employees  Number of destinations that can be easily accessed. (Walk Score). Place  Special destinations and amenities.  Connectivity. Physical Form  Street intersections per square mile.  Pedestrian and bicycle facility density.  Transit service quality. Performance  Number of trains/buses per day.  Population and employment growth. Potential (Market Strength)  Rents and sale prices PSF.  Vacancy Source: Transit-Oriented Development Strategic Plan, Metro (Portland); Leland Consulting Group.

The market analysis explores each of these variables within the context of the BRT corridor to identify possible locations for TOD, then characterizes the scale and character of the development that is possible at those locations.

NATIONAL AND REGIONAL CONTEXT

Overview of Region The three proposed stations are located within the Seattle Metropolitan Region – in unincorporated Snohomish County – between the cities of Lynwood, Everett, Mill Creek, and Mukilteo. The area is surrounded by several high activity centers, including:

 Three Puget Sound Regional Council designated Urban Centers: Lynnwood City Center, Downtown Everett, and Bothell Canyon Park;  Paine Field airport, a highly significant employment center; and  Mill Creek Town Center, a regionally significant mixed-use lifestyle center.

These activity centers are significant destinations where residents work, shop, recreate, and/or live. The market area, as defined in the following map, represents the area from which most people will support the retail market, lease/utilize office space, and live in the station areas (defined as half-mile radius around each station location). The market area for residential and office developments is approximately defined as a 5-mile radius

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Snohomish County TOD Market Analysis around the three station areas. The market area includes all aforementioned activity centers, except downtown Everett, which is a different market and has a more urban character than the station areas.

Figure 2. Market Area and Urban Centers

Source: TIGER, OSM, Leland Consulting Group

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These high-activity centers are clearly shown in the following map, which shows residential, employment, and retail locations by the number of employees in each census block. The market area includes three distinct non- retail employment clusters: Paine Field, Lynnwood, and Bothell Canyon Park. Retail is more scattered, but a distinct clustering is located in Lynnwood.

Figure 3. Residential, Employment, and Retail Locations by Number of People, 2015

Source: LEHD and Leland Consulting Group

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The following map shows the preliminary locations of the three light rail stations. Each “station area” is defined as a half-mile radius around the proposed station locations. Throughout this report we will summarize the existing conditions and identify opportunities and constraints in each of these station areas and analyze each station area’s capacity for transit-oriented development.

Figure 4. Preliminary Half-Mile Station Areas

Source: TIGER, OSM, Leland Consulting Group

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Development Context and Market Trends Seattle and the Pacific Northwest. The Puget Sound Metropolitan Area is a global metropolis with a diverse industry base of technology, media, manufacturing, and professional services. It has a growing population base of highly educated residents but has supply constraints resulting in a hot housing market. The region is a desirable location for real estate developers, investors, and the people and businesses on which real estate development depends.

This section includes excerpts from the Urban Land Institute’s Emerging Trends in Real Estate report for 2018, an annual publication that assesses the state of real estate markets both nationally and locally. National and regional trends have an impact on land use in the stations areas: they set the stage for the types of investments that are desirable for real estate developers and investors.

Emerging Trends identifies Seattle as the top-ranked market in the country for real estate investment and development, out of the 78 markets surveyed. Metro markets ranged just below Seattle include Austin, Salt Lake City, Raleigh/Durham, and Dallas/Fort Worth.

Emerging Trends cites the following strengths of Seattle and other Pacific metro markets:

 High quality of life with attractive outdoor activities.  Attractive to millennials.  Growing prominence as global markets, which is key to driving continued domestic and foreign investment.  High levels of economic growth due to increased wealth in the market, in spite of the high cost of living and doing business.  Availability of a highly educated workforce and a significant density of talent, allowing for the spin-off and creation of new companies.

However, challenges include:

 Lack of affordable housing – an issue that could have a negative impact on future growth.  High general business and living costs, which could become a headwind to future growth if solutions cannot be developed.  High construction costs and cost of labor.  Development Prospects, 2018

Development and Land Use Types. Emerging Trends also provides guidance about the types of development that are likely to be most desirable in the coming years. While this is a national outlook, the guidance is usually relevant locally. The figure at left shows Urban Land Institute’s (ULI) a high- level summary of national development prospects for 2018 and in coming years. Several notable features are described below.

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Desirable Development Types. Industrial and distribution are favored development types, largely because of the acceleration of online retailing, and the need for distribution points for these goods. Single family housing has picked back up significantly; for many years following the great recession, single family housing was much slower. Multifamily housing is also seen as having fair to good development prospects. LCG believes that, due to the continuing population growth in the Seattle region, multifamily will be in high demand. Since multifamily development is a key component of TOD, this is positive for the prospects of TOD in Snohomish County’s station areas. Hotel development is judged to be just above fair. LCG’s experience is that hotel development is a specialized form of development, which will continue to work in specific locations, often with an established base of major employers or a major tourism draw.

Retail Trends The goods-based consumer retail industry is undergoing a seismic shift and transformation. Big name retailers are declaring bankruptcy and closing hundreds of stores as online purchases grow and American buying habits change. Last year even saw a record number of store closings. This is having a trickle-down effect on communities, as some see their brick-and-mortar retail bases slowly eroding, with impacts felt in shopping centers and along traditional Main Streets.

Planners in some cities and counties are taking proactive approaches to the shifting retail landscape. They're commissioning studies of the marketplace and developing new strategies to maintain and foster better retail environments. Also, many retail-only zoning classifications are being modified to allow a variety of new uses in ground-floor, street-fronting spaces. The idea is to liven up the street with some pedestrian activity without 7 relying on retail, with new uses ranging from offices to fitness facilities.

The following table summarizes some of the key growing and declining retail types. This information is based on research conducted by commercial real estate company Cushman & Wakefield and reflects changing preferences. Online shopping is having a significant impact on “commodity retail.” Retailers selling products that can easily be ordered and shipped from Amazon or others face a challenging environment and must have a competitive advantage against online competition – whether that is convenience, experience, customer service, or something else. Commodity retailer categories include electronics, office supplies, and of course video stores.

By contrast, retailers offering a special experience, or offer services that cannot be procured online, have the potential to thrive. A prime example is dining—as one retail guru has said, “you can’t eat the internet;” and you certainly cannot dine with family and friends on the internet. Therefore, food and beverage establishments have become a larger and larger part of the retail experience, on both main streets and larger shopping centers. Another growing “retail” sector is healthcare. Small, neighborhood-scale providers are moving into both main street and retail center locations.

7 https://www.planning.org/planning/2018/jul/retailrealities/

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Table 1. Retail Trends: Growing and Declining Retail

Growing Declining

 Retail that offers a  Sporting clubs  Commodity retail  Office Supplies special experience  Fitness/Health Clubs  Food: Casual  Bookstores  Food!  Marijuana dining, weaker fast  Toy Stores  “Fast Casual,” i.e. dispensaries food chains  Video stores Little Big Burger  Auto repair  Mid-priced apparel  Bank Branches  Food Halls, artisanal  Convenience stores and shoes; markets  Car dealerships children’s  Trucks to Bricks  Home improvement  Dollar Stores  Grocery: Ranging and home  Pet supplies from discount, to furnishings  Electronics organic, to small  Apparel: Fast format, and ethnic fashion, off-  Medical users, incl. price, active ZoomCare sportswear

Source: Cushman & Wakefield, Leland Consulting Group. The Rise of Ecommerce

Between 2001 and 2015, total online retail sales grew at a 21.8 percent annual growth rate and accounted for 22 percent of total retail sales growth. During the same period, brick and mortar stores grew at only 3.7 percent annually, decreasing their share of the total retail market from 98 percent to 89 percent. While still only a small total market share, estimates indicate that up to 20 percent of total US sales will be attributed to ecommerce by 2019.

The rise of online retail has also had a major impact on the way retailers are doing business. As more people turn to the internet to do their shopping, traditional brick and mortar stores are altering their store formats and incorporating an online platform into their business concepts. Omnichannel retail strategies, where a retailer operates through both physical locations and online sales, have been a necessity in today’s market.

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The list of top online retailers reinforces this point as many also have a significant brick and mortar presence. Of the top 25 companies with the highest online retail sales in 2016, 18 were more traditional brick-and-mortar retailers. These include companies such as Walmart, Best Buy, Macy’s Inc., Nordstrom Inc., Target Corp., Gap Inc. and Neiman Marcus.8 That said, Amazon remains king among online retailers, with almost six times the sales volume of the second ranked retailer – Walmart.

Office Trends ULI members rank office as a more desirable real estate development type than retail, but still between fair and poor. The challenges facing office development are not as daunting as those facing retail, but are significant nonetheless:

 In general, workers today require less office space, as paper files and other physical elements of the workplace are digitized, and office equipment has shrunk in some cases to just a laptop. Some companies now operate out of a home office or coffee shop.  In the last decade, new office development has clustered intensively in downtown locations that are popular with young (and older) workers. This has typically meant stagnating rents in suburban strip/corridor locations.  Corporate executives have remained reluctant to take on significant additional office space since the end of the recession, since they remember the financial pain of that period, and its impact on their ability to expand, hire, and pay rent. Instead, they have often opted to be creative with their current spaces, or with modest expansions.

Location Preferences. While people once followed the jobs, corporations and professional firms are now following people back to the city. These companies have increasingly seen prospective employees choosing to live, work, and play in more interesting – often urban – locations, and now they have realized that attracting these employees requires them to be in these places too. As such, authenticity of place has become a sought- after commodity. Companies and workers now look for the genuine, the idiosyncratic, the unique and, most importantly, a personality of place that matches their own. In fact, a recent Newmark study identified a significant rent premium for office properties with transit access, dining operations, and open floor plates of around 50 percent higher than those with obsolescent characteristics.

For cities, this means the opportunity lies in attracting more investment and focusing on placemaking to make themselves the place where the best and brightest live, work and shop. This might require updating office and industrial areas to reflect the way we now do business and work day-to-day. And, as the finance, utility and even government sectors continue to consolidate, cities will need to backfill their buildings with new tenants to keep downtown an interesting and lively place.

For colleges and universities, the opportunity is drawing employers closer to their campuses in a way that will boost research funding, create jobs for graduates and consulting for faculty, and raise their overall visibility in the community. Institutions that do this creatively will also be able to tap new sources of financing for campus expansion. Investments in student housing will further boost the local experience.

8 https://wwd.com/business-news/financial/amazon-walmart-top-ecommerce-retailers-10383750/

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Workplace Trends. General trends impacting the office workspace include a steady decline in the amount of square feet per employee, the increase in standardized work spaces and non-dedicated (shared) office space with more amenities, more tolerance for telecommuting and collaborative work spaces, and a greater emphasis on higher space utilization, innovation, and productivity. Within the private sector, “creative” office environments are becoming ever more popular. Real estate investors are wondering whether the office sector is next in line for a painful shakeup, as tenants continue to use office space more efficiently.

The impact of tenants’ push for greater space efficiency has created winners and losers within the office market. Fitting more employees into less space has enabled office tenants to sign smaller leases or afford higher-end space. This is a particularly compelling tradeoff in the current market, as tenants are increasingly relying on amenity-rich office environments to help recruit the highly skilled workers who are now in short supply.

There are several examples of large companies moving to new space use models in their office environment. For example, P&G allows many workers to work anywhere and has been moving to standardized non-dedicated space, increasing their office work station utilization rate from 60 to 90 percent, and HP is targeting 120 to 150 square feet per employment and 85 percent utilization with standardization and highly shared space.

Housing Trends The nation has seen shrinking household sizes over the last several decades, with more single-person and childless households. Adding households faster than population growth suggest that more units are being added to accommodate smaller family sizes, more childless households, and more single-person households.

Figure 5. Households by Type (percent), United States, 1970 to 2012

Source: U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement The Great Recession had a profound and lasting effect on the housing market, and while the recovery is now well underway, the renter-to-owner ratio remains high. For many people, financial barriers such as rising student debts, access to credit, and cumbersome down payments have forced them to rent. For many others, the choice to rent is simply a choice. Indeed, it is well established that the two most populous generations—the baby boomers (born 1946-1964) and millennials (born 1980-1994)—are currently the primary drivers of demand for residential units in walkable, urban locations that offer flexibility and a range of amenities.

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As baby boomers reach retirement age and see the last of their children leave home, they are increasingly attracted to smaller move-down or “lock-and-leave” housing which requires less maintenance and affords more flexibility. As such, age-restricted and senior multifamily housing has risen near the top of the list for best investment choices (per ULI’s “Emerging Trends in Real Estate 2018”)

For millennials, the situation is more nuanced and difficult to forecast. The common rhetoric for many years was that millennials desire urban living and will continue to reside in urban cities because of financial conditions and choice. However, while demand for urban rental apartments has remained high among millennials, they are increasingly forming households and having children, looking at select suburbs and secondary markets because of the quality of life and lower cost. Indeed, 70 percent of millennials expect to be homeowners by 2020, despite the fact that only 26 percent own today (per ULI’s “Gen Y and Housing”). With that said, generational trends associated the next emerging generation – Gen Z (ages 21 and below) – is relatively unknown.

Other reports have recently documented important trends in housing. Findings include:

 Cost of housing, neighborhood safety, proximity to work, K-12 school quality, and community character, 9 ambience, and visual appeal were the top five critical community features for survey respondents.  Urban setting, proximity to shopping, dining and entertainment, walkability, and availability of mass transit 10 are also important—but not critical—features in a community. 11  The more walkable the community, the more satisfied residents are with their quality of life.  Access to public transportation is much more important to those earning under $50,000 per year, while 12 walkability is also more important to those with lower incomes. 13  Sixty percent of residents would spend at least a little more for a house in a walkable community.  Four-in-ten people prefer a walkable community and short commute. Millennials, in particular, are swayed 14 by a shorter commute.

Talk of generational shifts, however, sometimes misses the point. Ultimately, people are waiting longer to make significant life choices, such as buying a home or having children, and quality of place has emerged as a primary desire for almost all prospective residents across all demographic groups.

9 Urban Land Institute (ULI), Gen Y and Housing: What They Want and Where They Want it, 2015 10 Ibid.

11 National Association of Realtors (NAR), National Community and Transportation Preference Survey, 2017

12 Ibid. 13 Ibid. 14 Ibid.

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EXISTING CONDITIONS

This section provides an overview of existing demographic and employment conditions.

Demographics

Household and Population Characteristics In 2017, the five-mile market area was home to about 397,000 people living in 149,000 households (2.7 people per household) – approximately half of all people in Snohomish County. Household counts in the three half-mile station areas range from about 1,300 to 3,500, housing between 3,400 and 8,700 people. The market area contains about one-third of the people living in Snohomish County.

The three station areas have added households at a significantly higher rate than the wider area and region over the past two decades, although the population growth in Mariner/128th proposed station area slowed considerably after 2010.

Table 2. Population Summary, 2000-2018

Ash Mariner/ Airport Rd Market Snohomish Seattle Way/ 128th / Hwy 99 Area Co. MSA 164th 2000 Population 876 6,535 3,799 290,918 606,024 3,043,878 2010 Population 1,738 8,141 5,736 346,632 713,335 3,439,809 2018 Population 3,438 8,712 6,506 396,861 805,624 3,888,235 2000-2010 Annual Growth 7.1% 2.2% 4.2% 1.8% 1.6% 1.2% 2010-2018 Annual Growth 8.9% 0.9% 1.6% 1.7% 1.5% 1.5% Source: ESRI Selected household characteristics are provided in the following table. Households in the market area tend to be highly educated, high-income, and older.

With regard to the three station areas, Ash Way/164th contains the oldest, highest income, and most educated residents relative to the other two. Residents of the Mariner/128th and Airport Road/Highway 99 station areas are typically younger, live in smaller household sizes, and have lower educational attainment and income levels than Ash Way and the wider region. On average, residents of all three station areas tend to be significantly more diverse than the market area, county, and MSA in general.

Table 3. Select Housing Characteristics, 2018

Ash Mariner/ Airport Rd Market Snohomish Seattle Way/ 128th / Hwy 99 Area Co. MSA 164th Avg. Household Size 2.62 2.49 2.36 2.65 2.66 2.52 Median HH Income $83,871 $53,263 $59,487 $79,413 $79,165 $79,251 Per Capita Income $34,325 $24,394 $28,481 $37,681 $37,134 $42,329 Median Age 35.0 31.2 31.6 36.9 38.3 38.0 Non-white Pop 48.7% 45.4% 45.2% 34.1% 26.0% 32.5% Bachelor’s + 37.0% 17.6% 24.3% 37.5% 33.0% 42.7% Source: ESRI

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As the following chart shows, households in the Ash Way and Airport Road station areas are predominately renter- occupied, whereas Mariner and the market area, county, and MSA are predominately owner-occupied. The higher proportion of renters in the Ash Way and Airport Road station areas is likely reflective of the higher proportion of younger, lesser educated, and lower-income households.

The Pew Research Center indicates that certain demographic groups – such as young adults, nonwhites and those with less education attainment – have historically been more likely to rent than other groups, and rental rates have increased among these groups over the past decade. However, rental rates have also increased 15 among some groups that have traditionally been less likely to rent, including whites and middle-aged adults.

In fact, although renting is most common among young adults, nearly everyone rents at some point in their lives—whether by choice or by necessity. But rental housing is particularly important for low-income and minority households, about half of whom are renters. As a result, supplying affordable units in a variety of 16 structure types and neighborhoods is a critical housing policy priority.

Figure 6. Tenure, 2018

64% 64% 60% 61% 60% 56%

39% 38% 35% 36% 31% 31%

6% 5% 4% 4% 5% 1%

Ash Way / 164th Mariner / 128th Airport Rd/Hwy99 Market Area Snohomish Co. Seattle MSA

Owner Occupied Housing Units Renter Occupied Housing UnitsVacant Housing Units

Source: ESRI The following figure shows the proportion of households by size per comparison area. The Ash Way and Airport Road station areas have the highest proportions of single-person households, consistent with the fact that these areas have the highest proportion of renter-occupied households. Conversely, the Mariner station area has the lowest proportion of single-person households.

15 Pew Research Center, “More U.S. households are renting than at any point in 50 years,” 2017, URL 16 From “Renter Demographics” by the Joint Center for Housing Studies of Harvard University, URL

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Figure 7. Households by Size, 2010

40% 1 Person 2 Person 3 Person 4+ Person

35%

30%

25%

20%

15%

10%

5%

0% Ash Way / 164th Mariner / 128th Airport Rd/Hwy99 Market Area Snohomish Co. Seattle MSA

Source: ESRI

Employment Total job counts for 2010 and 2015 and annual employment growth are shown in the following figure. Employment in the Market Area predominantly consists of jobs in manufacturing, retail, and healthcare and social assistance. These three industries accounted for over half of all jobs in 2015, with manufacturing alone accounting for over one-third. These three industries also experienced high annual growth rates of three or more percent between 2010 and 2015, suggesting continued dominance going forward.

The top five fastest growing industries between 2010 and 2015 were:

 Administrative & Support, Waste Management & Remediation Services (8.0% annual)  Professional, Scientific and Technical Services (7.7% annually)  Healthcare and Social Assistance (6.3% annually)  Construction (5.9% annually)  Accommodation and Food Services (4.6% annually) (joint with Information)

The only industries to lose jobs in the five-year period between 2010 and 2015 were:

 Mining, Quarrying, and Oil and Gas Extraction (-11.9% annually)  Other Services (-5.4% annually)  Real Estate and Rental and Leasing (-1.0% annually)

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Figure 8. Market Area Employment by Industry, 2010 & 2015

Manufacturing 3.7% Retail Trade 3.0% Health Care and Social Assistance 6.3% Accommodation and Food Services 4.6% Educational Services 1.7% Construction 5.9% Professional and Technical Services 7.7% Administration & Waste Services 8.0% Finance and Insurance 4.1% Wholesale Trade 0.2% Other Services (ex. Public Admin) -5.4% Information 4.5% Transportation and Warehousing 4.4% Arts, Entertainment, and Recreation 2.4% Public Administration 0.4% Real Estate and Rental and Leasing -1.0%

Mgmt. of Companies and Enterprises 3.7% 2010 Utilities 4.0% Agriculture, Forestry, Fishing and Hunting 2.2% 2010-2015 Growth Mining, Quarrying, & Oil & Gas Extraction -11.9%

0 10,000 20,000 30,000 40,000 50,000

Source: LEHD and Leland Consulting Group

Figure 9. Inflow/Outflow, Five-mile Market Area, 2015

As of 2015, about 31 percent of those that lived in the market area also worked there. This was a significant increase from 29 percent in 2005 and 28 percent in 2010.

About 35 percent of those employed in the market area in 2015 also lived there. This has been relatively considered throughout the last five years (35 percent in 2005 and 33 percent in 2010).

The number of jobs in the market area increased at a significantly higher growth rate than the number Source: LEHD of employed residents between 2010 and 2015 (3.8 percent versus 3.3 percent annual growth).

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The following map shows the home location for employees of the market area. Most of those employed in the market area commute from Snohomish County and northern King County.

Figure 10. Commuters to the Market Area

Source: LEHD 2015 and Leland Consulting Group

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The following map shows the jobs held by residents of the market area. Many residents are also employed within the market area, but some commute to Seattle, Bellevue, and Redmond.

Figure 11. Commuters From the Market Area

Source: LEHD 2015 and Leland Consulting Group

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Over the course of 10 years between 2005 and 2015, the workforce in the market area aged significantly, with the proportion of workers over the age of 54 increasing from 14 to 24 percent. In fact, almost all employment growth occurred in this age cohort.

Some causation may be due to the fact the proportion of workers earning more than $40,000 per year also increased significantly – from 44 percent in 2005 to 57 percent in 2015. While there was employment growth for employees earning less than $40,000 annually, higher-earners absorbed the most growth during this time.

While growth in high-earning jobs is positive for real estate characteristics such as rents, an ageing workforce indicates that retirement may be around the corner for many workers. Housing which is appropriate for retirees may therefore need to be a primary focus.

Table 4. Proportion of Employees by Age and Annual Income, Market Area, 2005-2015

Workers by Age 2005 2010 2015 < 30 25% 22% 20% 30-54 61% 59% 56% 55 + 14% 19% 24% Workers by Annual Income 2005 2010 2015 <$15k 23% 19% 17% $15k-$40k 33% 29% 26% >$40k 44% 52% 57% Source: LEHD 2015 and Leland Consulting Group Figure 12. Change in Number of Employees by Annual Income (left) and Age (right), Market Area, 2005-2015

<$15k $15k-$40k >$40k < 29 30-54 55 + 21,494 12,038 10,473

14,233 7,964

4,461 3,798

3,015 1,800

-2,041 -1,575 -1,808

2005-2010 2010-2015 2005-2010 2010-2015 Source: LEHD 2015 and Leland Consulting Group Most recent employment data from the United States Department of Labor (Bureau of Labor Services) provides county-wide employment data in greater detail for 2017. The following chart shows county-wide employment for industry subsectors (four-digit NAICS) that employ more than 3,000 people in Snohomish County. The dominance of Boeing and Paine Field is clear here, with more than 39,000 people employed in Aerospace

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Product and Parts Manufacturing, more than double the second-largest industry sector: Restaurants and Other Eating Places.

Figure 13. Industry Subsectors, 3,000+ Jobs (private), Snohomish County, 2017

Automobile dealers 3,031 Offices of other health practitioners 3,122 Electronic instrument manufacturing 3,507 Wired and wireless telecommunications carriers 3,830 Insurance carriers 3,865 Offices of physicians 4,305 Building finishing contractors 4,616 Building equipment contractors 4,710 Building foundation and exterior contractors 4,928 Employment services 4,963 Services to buildings and dwellings 4,964 General merchandise stores 5,152 Grocery stores 6,010 Individual and family services 6,355 Restaurants and other eating places 19,813 Aerospace product and parts manufacturing 39,216

Source: United States Department of Labor FORECASTED GROWTH

Population growth is a key indicator and driver of demand for both residential and commercial development, and therefore, population forecasts are critical in estimating future demand. The projected growth – or lack thereof – of population, households and employment help to inform future growth rates which are used in the demand analyses presented later in this report.

The following table shows PSRC’s small-area projections for Forecast Analysis Zones (FAZs)17 for employment and households in the five-mile market area. These FAZ projections are from PSRC’s Land Use Vision (LUV) dataset. With LUV, PSRC projects how counties, cities and smaller places could grow in the future. The land use and growth assumptions in LUV – developed with assistance from local planners – support PSRC’s long-range planning and modeling work. LUV has population, households and jobs data. It reflects VISION 2040's Regional Growth Strategy, local policies, and each county’s adopted growth targets. As such, the projections are somewhat skewed toward local needs and desires and do not necessarily reflect true market conditions.

17 FAZs are the units of the geographic boundary system used by the PSRC to model and report its small area Forecasts of Population, Households, and Employment. They are built up from traffic analysis zones (TAZs), with each FAZ containing between 1 to 20 TAZs. FAZ boundaries generally, with few exceptions, also line up with census tract boundaries, with each FAZ containing between 1 to 9 census tracts.

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Table 5. PSRC FAZ Projections, 2018 to 2038

Est. 2018 Est. 2028 Est. 2038 20-year Annual Total Total Total Growth Growth (%) Households 152,703 171,227 184,391 31,688 0.95% Employment 169,885 177,632 203,967 34,082 0.92% Finance, Insurance, Real Estate, Services 56,238 63,310 76,562 20,325 1.55% Retail/Food Services 28,943 31,991 37,441 8,498 1.30% Education 9,276 10,086 11,434 2,157 1.05% Construction/Resources 10,667 10,345 11,278 611 0.28% Government 5,755 6,319 6,538 782 0.64% Other 35,391 32,025 36,813 1,422 0.20% Manufacturing/WTU 23,616 23,557 23,901 286 0.06% Source: Puget Sound Regional Council Residential Small-area household projections from PSRC are shown in the following map. New household growth is largely expected in Lynnwood and Everett, with small pockets of dense growth also found elsewhere, such as near Bothell’s Canyon Park and along Highway 99.

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Figure 14. Forecasted Household Growth, 2016 to 2040

Source: Puget Sound Regional Council

In addition to PSRC’s small-area forecasts, residential projections through 2040 are provided by the State Office of Financial Management at the county level.

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The following chart shows projected population growth by age through the next 20 years for Snohomish County. The County’s population is projected to grow by about 30 percent over 20 years, or 1.27 percent annually. This growth is driven larger by the highly significant growth in Snohomish County’s senior population (65+), which is projected to double over the next 20 years (103 percent). No other age group is projected to experience population growth greater than 27 percent above existing 2018 population numbers. This is likely to drive demand for senior-oriented housing, such as small-lot single family, assisted living facilities, and a range of other multifamily developments.

Figure 15. Projected Population by Age, Snohomish County

65+

50-64

35-49

15-34

0-14

0 50,000 100,000 150,000 200,000 250,000

2018 2028 2038

Source: State of Washington Office of Financial Management, 2017 GMA Projections

Employment For employment forecasts, the State Employment Security Department provides 10-year projections for each industry. The State projects roughly 14,000 new jobs in Snohomish County between 2015 and 2025 (169,800 total by 2025), or about 10,000 new jobs from today’s estimates through 2025 (if a steady growth rate occurred).

The State projects the industries of Healthcare and Social Assistance, Professional and Technical Services, Construction, and Administration and Waste Services to capture over half of employment. These industries, as well as Educational Services, are also generally the fastest growing industries. Manufacturing is the only industry projected to decline across the county through 2025.

While these county-wide estimates from the State of Washington roughly align with PSRC’s small-area employment forecasts for the market area, growth rates tend to differ at the individual industry level. Specifically, the State projects manufacturing to decline significantly through 2025, while PSRC forecasts little-to- no growth, which is perhaps indicative of the area’s manufacturing strength. Most other industries at the county level are projected to add employment at a slightly higher rate than the small-area forecasts for the market area, perhaps indicative that other regional urban centers – such as Bothell Canyon Park, the City of Everett (particularly downtown), and Lynnwood – have the competitive advantage when it comes to office-based employment. It is therefore important to use best judgement and apply the most applicable growth rates to forecast future demand.

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Figure 16. Projected Employment, Snohomish County, 2015-2025

Mining & Natural Resources 4.1% Est. 2015 Employment

Utilities 0.0% Est. 2025 Employment Mgmt. of Companies & Enterprises 2.5% Real Estate & Rental & Leasing 0.9% 14,000 Total Public Administration 1.5% New Jobs Arts, Entertainment, & Recreation 1.8% Transportation & Warehousing 1.9%

Other Services (ex. Public Admin) 0.9%

Information 1.6% Wholesale Trade 0.9% Finance & Insurance 0.6% Administration & Waste Services 3.1% Educational Services 3.3% Professional and Technical Services 3.1% Construction 3.2% Accommodation & Food Services 1.6% Health Care & Social Assistance 2.1% Retail Trade 0.7% Manufacturing -1.4% 0 10,000 20,000 30,000 40,000 50,000 60,000

Source: State of Washington Employment Department

REAL ESTATE MARKET

This real estate market section covers the residential market, which includes both single-family and multifamily, the retail market, and the market for “employment” space, which includes both industrial and office. Market conditions – such as the development pipeline, building vacancies, rents, and other market trends – are critical in establishing the market’s strength and subsequent level of suitability for new development (or financial feasibility).

The following figure shows commercial and multifamily real estate development by total square footage within the market area. On the left, all development (except institutional and single-family) built across all years is shown. The land use mix is relatively evenly spread across many development types. However, more recent development has been mostly multifamily residential (predominately apartments), which is consistent with national trends. With growing demand among millennials and baby boomers for apartments and a changing commercial market – where office space use is declining every year and retailers are closing at an unprecedented rate in face of ecommerce – multifamily has generally become the go-to development type. This appears to be applicable to the five-mile market area.

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Figure 17. Development by Land Use*, 5-mile Market Area, All Years Built (left) & Built Since 2010 (right)**

Health Care Health Care Specialty Flex Specialty Hospitality Hospitality

Office

Retail Office Multifamily

Industrial Retail Multifamily

Industrial

Source: Costar and Leland Consulting Group *Does not include institutional or single-family residential land uses **Includes buildings that are currently under construction Figure 18. Development Activity Per Decade by Land Use*

14,000,000 Multi-Family 12,000,000 Office General Retail 10,000,000 Health Care Hospitality 8,000,000 Industrial

6,000,000 Flex Specialty 4,000,000

2,000,000

- Pre-1950 1950 1960 1970 1980 1990 2000 2010

Source: Costar and Leland Consulting Group *Does not include institutional or single-family residential land uses

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One of the main challenges for new construction post-recession has been rapidly increasing construction costs. Rents in major metropolitan areas have generally increased at a similar pace, but in smaller cities and more rural areas rents are typically not high enough for new construction to be feasible.

The following figure shows commercial and multifamily rent growth and single-family values indexed to 2010 numbers. Only growth in multifamily and industrial rents and single-family home prices have kept pace with construction cost growth (which is likely to be a conservative estimate).

With the retail industry currently in a state of flux and disruption, rents are unlikely to increase significantly – especially for traditional auto-oriented big box retail construction. With that said, many retail tenants are now more willing to pay more for high-quality space and prime locations.

Figure 19. Construction Cost, Rent Growth and Single-Family Home Price Growth*, 2010 to 2018 Q2

170

160

150

SFR 140 MFR 130 Industrial 120 Office

110 Retail

100 Construction Cost

90

80 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: RSMeans, Costar, Zillow, Leland Consulting Group *Construction Costs for the Everett area, rents are for the market area, and single-family data is for the County

Station Area Land Uses The following maps show current land uses in the three station areas.

 Future land uses are likely to cluster near other similar or complementary land uses.  Uses that are perceived to be non-complementary or incompatible, such as residential and industrial, are less likely to develop on adjacent parcels. Residential developers will generally try to avoid being proximate to industrial development, due to a perceived disamenity impact and achievable price reduction; industrial developers will generally try to avoid being proximate to residential development since residents may attempt to limit nuisances such as freight traffic, noise, light, and effluents.

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Figure 20. Half-Mile Station Area Land Use, 164th, 128th, and Airport Road Station Areas (counterclockwise)

Source: Snohomish County, TIGER, Open Street Map, Leland Consulting Group

164th/Ash Way The interstate serves as a clear divider between different land uses. Existing land uses are mostly single-family and multifamily residential and undeveloped land west of the interstate. On the east of the interstate, there is warehousing, retail and more residential land uses. Most of the station area’s multifamily development is located on the west side, nearest the proposed station. The Park and Ride occupies more than 10 acres of land.

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128th/Mariner Existing residential land use is predominantly multifamily, with some pockets of single family. However, industrial and commercial uses are far more prevalent than at 164th, and there is very little vacant/undeveloped land available.

Airport Road/Highway 99 Commercial uses line the Highway 99 corridor, with multifamily behind to the southeast and single-family residential behind to the northwest.

Residential Market Much like the rest of the nation, multifamily development has dominated the residential market since the recession – especially in more urban markets – with permit activity surpassing pre-recession levels in 2014. Meanwhile, permit activity for single-family units has remained significantly lower. Initial multifamily permit activity was likely due to pent-up demand as a direct result of the lack of building during the recession. Continued growth, however, demonstrates continued demand for multifamily housing.

Figure 21. Permits Issued for Single- and Multifamily Units in the Puget Sound Metropolitan Region

20,000

16,000

12,000

8,000

4,000 MFR Units SFR Units 0

994

1991 2011

1997 2017

1990 1992 1993 1995 1996 1998 1999 2001 2010 2012 2013 2015 2016

1 2014

2007

2000 2002 2003 2005 2006 2008 2009 2004 Source: SOCDS (HUD, from US Census) In the station areas, residential permit activity since 2010 has been predominantly for multifamily development. Of the 2,128 permits issued for new residential units in the two main station areas (Mariner and Ash Way), about 1,912 (90 percent) were for multifamily residential (including apartments and assisted living). Only 69 permits were issued for single-family units, 75 for townhome units, and 72 for duplex units.

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Figure 22. Permits Issued for Residential Units in Station Areas, 2010-2017

800 MFR SFR 700

600

500

400

300

200

100

0 2010 2011 2012 2013 2014 2015 2016 2017

Source: Snohomish County In fact, these two station areas have captured a significant portion of new multifamily residential permits since 2013 in unincorporated Snohomish County (over one-third of all multifamily residential units). Depending on the buildable land remaining in the station areas, the opening of high-capacity transit lines and stations in these areas over the next two decades could arguably increase this capture rate even further.

Table 6. Historical Station Area Capture Rates of New Residential Development in Unincorporated Snohomish County, 2010-2017 2010 2011 2012 2013 2014 2015 2016 2017 Total Unincorporated Snohomish Co. Single-family 1,110 1,190 1,328 1,325 1,431 1,637 1,578 1,584 11,183 Multifamily 196 392 1,200 1,312 522 649 665 641 5,577 Total 1,306 1,582 2,528 2,637 1,953 2,286 2,243 2,225 16,760 Station areas Single-family 45 9 26 6 3 3 0 52 144 Multifamily 128 0 686 750 0 124 0 296 1,984 Total 173 9 712 756 3 127 0 348 2,128 Station Area Capture Rates Single-family 4% 1% 2% 0% 0% 0% 0% 3% 1% Multifamily 65% 0% 57% 57% 0% 19% 0% 46% 36% Total 13% 1% 28% 29% 0% 6% 0% 16% 13% Source: SOCDS (HUD, from US Census), Snohomish County, Leland Consulting Group Rental Market Summary Boeing, the largest non-government employer in the metro, has a large presence in the region and therefore has a significant effect on apartment demand. Elevated demand post-recession led to tightening vacancies, and developers responded with new construction increasing the multifamily inventory by over 14 percent from 2010

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Snohomish County TOD Market Analysis to 2017. The following map shows the sheer number of multifamily apartments in the region, as well as the clustering of new development in certain locations, such as Bothell, Everett, and along the I-5 corridor near the two proposed stations.

Figure 23. Multifamily Development Activity

Source: Costar and Leland Consulting Group

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The strength of the multifamily market in the Puget Sound region has been well-documented, and Snohomish County appears no different. Construction activity shown in the previous map is underlined by the following chart, which shows multifamily rents and vacancy trends over the past decade. Vacancies over the past decade have consistently declined, increasing only slightly as new deliveries came online. As of 2018 (Q2), the vacancy dipped below five percent for the first time in the past decade (although 2015 saw vacancies at five percent). This is significant, as a vacancy rate below five percent suggests additional demand for multifamily development. Given the rapid rent growth and the fact that vacancies have been consistently decreasing, we would assume this to be true.

Tight vacancies and the strength of the Puget Sound regional market in general resulted in robust rent growth, which has shown no sign of slowing.

Figure 24. Market Area Multifamily Rent and Vacancy Trends (Market-Rate), 2009-2018

$1.80 8%

$1.70

$1.60 7%

$1.50 $1.40 6% $1.30

$1.20 5%

$1.10 Vacancy Rate (%)

Avg. Rent Per Square Foot $1.00 Rent Per Sq. Ft. 4% $0.90 Vacancy (%)

$0.80 3% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Costar This assumption of pent-up demand is supported by net positive absorption of multifamily units over the past two decades. Absorption is the amount of space or units leased within a market or submarket over a given period of time (usually one year). Absorption considers both construction of new space and demolition or removal from the market of existing space. It represents the demand over a specified period, contrasted with supply.

When supply is less than demand, vacancy decreases, and absorption is positive. When supply is greater than demand, vacancy increases, and absorption is negative. A negative absorption can reflect changes in the marketplace, such as a sudden lack of jobs due to a company closing.

Absorption has been positive since 2012 – averaging about 850 units annually – despite the addition of 31 multifamily projects increasing multifamily supply by 14 percent from 2008 inventory, indicating a strong, tightening market with a decreasing vacancy rate.

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Figure 25. Market Area Multifamily Net Absorption and Deliveries (units), 2009-2018

1,800 Net Absorption Units 1,600 Deliveries Units 1,400 1,200 1,000 800 600 400 200 0 -200 -400 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Costar

Owner-Occupied Market Summary Owner-occupied housing units typically include detached single-family homes, townhouses, and condominiums. Neither detached houses nor townhomes are not usually dense enough to be considered transit-oriented development types. However, both – especially townhomes – can be an adequate stepping stone to true TOD by increasing the range of housing options available in a community. This – with good design – can sometimes help increase density and improve walkability in local markets that may not have the economics suitable for high-density development, such as apartments.

The following map shows where new owner-occupied housing units (townhomes and condominiums) have been built in the market area over the last three years. Unincorporated Snohomish County appears be a popular location for new attached housing. In particular, along I-405 – northwest of Bothell Canyon Park – has seen the highest concentration of new attached housing built in the last three years, and there has been a lot of building activity in the subdivisions in the area west of I-5 between the two proposed light rail stations.

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Figure 26. Density of Townhomes and Condos Built Since 2016

Source: Redfin and Leland Consulting Group Of these attached, owner-occupied housing units (townhomes and condos), about 60 percent have been townhomes – the vast majority of which tend to be priced between $350,000 and $550,000. For condos, the

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Table 7. Characteristics of New (since 2016) Townhouse and Condo Development

Price (Nearest $100k) Total Sales Avg. Price PSF Avg. Unit Size Avg. Days on Avg. Lot Size Market Condos $300,000 20 $234 1,188 200 996 $400,000 28 $239 1,840 368 3,476 $500,000 181 $231 2,186 452 3,557 $600,000 123 $243 2,497 413 3,710 $700,000 54 $278 2,487 314 3,935 $800,000 11 $339 2,549 132 4,470 $900,000 NA $278 3,080 NA NA $1,000,000 3 $317 3,146 281 6,257 $1,100,000 4 $358 3,103 180 6,301 $1,200,000 1 $367 3,172 155 5,148 $1,500,000 1 $305 4,800 127 6,900 Condo Total 426 $245 2,266 392 3,618 Townhouses $300,000 65 $205 1,565 563 3,043 $400,000 306 $236 1,766 387 3,043 $500,000 214 $259 1,933 250 2,896 $600,000 79 $267 2,226 126 2,067 $700,000 6 $360 1,928 107 4,508 $800,000 1 $278 2,886 29 3,818 Townhouse Total 671 $245 1,858 326 2,912 All Attached 1,097 $245 2,025 352 3,218 Source: Redfin

Planned and Proposed Residential Projects Only one residential development is planned or proposed within the station areas.

 Helm, a 200-unit apartment building is proposed within the 128th Station Area on the northeast side of I-5 and 128th. Other developments are already under construction and will deliver in either 2018 or 2019. These include:  Puget Park (right), a 256-unit development located just north of the Swedish Medical Center near 128th.  The Parc Collection, a 27-unit luxury single-family th residential development located just outside the 128 station area east of Martha Lake.

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Housing Development Prototypes Most housing can be categorized within a set of “prototypes” that are shown below. The prototypes increase in scale and density moving from left to right. Parking is a key factor that affects housing density and financial feasibility. Typical types of parking are surface, tuck under, structured, and below-grade structured. Surface parking is the least expensive and below-grade structured parking is the most expensive. Structured parking can add tens of thousands of dollars of construction cost per housing unit, and thus, higher-density housing requires significantly higher rents (or sales) per square foot in order to be financially feasible. Construction materials also change as housing density increases. Townhomes, garden apartments, and Urban Garden Apartments are typically entirely wood-frame buildings; while wrap and mid-rise/podium structures require concrete construction for parking areas; in addition, steel is sometimes used instead of wood for the apartment areas. The construction complexity and specialization required for these building types also increases cost.

Due to the housing rents documented in Newberg and the recent multifamily development, townhomes and garden apartments appear to be the most financially feasible housing development types in the near and mid- term. Single family homes will also be feasible. Urban garden apartments (which include tuck under parking and sometimes ground-floor retail) may be feasible in the mid- and long-terms. Wrap and mid-rise projects are only likely to be feasible after significant “place-making” improvements have been made, and/or the market changes. Affordable and/or mixed-income projects can sometimes achieve higher densities than market-rate projects since they have access to additional public funding sources.

Figure 27. Housing Development Prototypes Housing

Name Townhomes Garden Apartments Urban Garden Apts. Wrap Mid-Rise / Podium

7 6 5 5 4 4 4

3 3 3 3

2 2 2 2 2

1 1 1 1 1

Parking Surface / tuck under Surface Surface / tuck under Structure Structure Structure Wood frame Wood frame Wood over concrete Wood with concrete Wood over concrete

Residential Demand These demand analyses consider a 20-year planning horizon. The station areas in question have an estimated opening year of 2036 – two years prior to this 20-year horizon. As such, these forecasts are more valuable as an indication of how the land use may change in the market area, rather than as a tool to estimate each station area’s absorption of new development.

With that said, these projections are also applicable for the three new BRT lines set to open within the next decade. Typical transit-oriented development will likely concentrate near these stations and at the LRT stations currently under construction (including the Lynwood City Center, etc.).

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Figure 28. 20-Year Market Area Residential Demand by Income

Units 38,000 total units 8,000

7,000

6,000 Rental Owner

5,000 3,226 5,313 3,916

4,000 1,822 3,000

359 2,732 2,000 379 626 3,226 2,732 2,732 2,611 1,000 2,032 2,277 1,518 1,461 683 0 304 Income up to $15K $15-25K $25-35K $35-50K $50-75K $75-100K $100-150K $150 -200K $200K+ Source: Leland Consulting Group

Station Area Absorption Each station area has tremendous potential to capture a significant amount of new multifamily development in the form of transit-oriented development. However, given the lower market-rate rents than elsewhere in the region, new construction is far more likely to occur on greenfield sites; that is to say sites with no existing development. These sites are already attracting development interest and other buildable sites will no longer be available, meaning only redevelopment will be possible. Later in this report we explore the utilization of station area parcels to identify parcels with high redevelopment potential. The 164th Street Station Area has significantly more opportunity for greenfield development than the 128th Street Station Area, which is largely built out with low-density uses.

Further, the capture rate and total rate of absorption will likely change significantly upon the opening of the light-rail stations. However, over the next 18 years there will be other high-capacity transit lines and stations opening, which may attract more traditional transit-oriented development that the proposed light rail station areas, which currently have few characteristics that would attract redevelopment.

Overall, the two primary station areas may capture between 15 and 23 percent of total market area demand, broken down as follows:

 30 to 40 percent for multifamily residential rental (1,200 to 1,600 units) – this is in keeping with historical capture rates, and even though buildable vacant land will soon be in short supply, the combination of improving market conditions and new BRT service should help keep the station areas active for multifamily development.  Less than five percent of single-family detached units (under 165 units) – again, this is in keeping with historical capture rates, and we do not expect single-family units to be built on a larger scale that private infill development, especially since existing zoning only permits single-family in some small areas.  10 to 20 percent of ownership attached units (200 to 400 units) – while most multifamily development will be renter-occupied, some owner-occupied higher density housing is likely to occur within the station areas,

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particularly as condominiums start to become a desirable development type again. The new development near the Ashwood Condominiums (just north of the 164th station area) is one such example.

Employment Market

Market Summary Employment-based development in the market area is largely industrial and flex space. Office space is currently not as active outside of Canyon Park, and of the 22 million square feet of industrial buildings, 20 percent (4.3 million square feet) is located in the Boeing building at Paine Field.

The northwestern section of the market area is the industrial hub for the northern part of the metro. Inventory is largely owner-occupied, mainly because Boeing has a large presence here, including its 4.3 million square foot main assembly plant. The assembly plant is the largest building in the world by volume, and the company takes significant additional office space elsewhere in the market area as well. Boeing has occupied 314,000 SF at Harbour Pointe Tech Center (a flex building) since 2007 and owns and occupies a 180,000 SF building at 3003 West Casino Road. Other office tenants are smaller or feed off the aerospace industry, including LMI Aerospace.

Currently, the market area is largely a peripheral submarket and does not have a large tenant base. Several government agencies occupy large office spaces, but the largest tenants tend to be located in Canyon Park in Bothell, which hosts a long list of biotech tenants in and around Canyon Park, an area often affiliated with biotech manufacturing. The largest tenant is Seattle Genetics, which has its multi-building headquarters at RidgePoint at Canyon Park. The single largest occupier of one building is CMC Biologics, which occupies all 151,000 SF at the Seattle Life Sciences Facility in the Canyon Park area. Vacancy has tightened in the absence of large deliveries and due to strong lease-up in recent years. For example, Honeywell moved into 69,000 SF at Northpointe Corporate Center in Lynnwood in 15Q1 and The Everett Clinic moved into a 32,000 SF medical office space in early 2017.

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Figure 29. Employment Development Activity (Office and Flex)

Source: Costar and Leland Consulting Group For office, rents and vacancy trends are shown in the following chart. Thanks to the presence of Boeing and a large number of owner-occupied facilities, office vacancies are relatively tight, although vacancies appear to have stabilized around eight percent over the past few years. This tight market has resulted in moderate rent growth – most significantly in the last two years.

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Figure 30. Market Area Office Rent and Vacancy Trends, 2009-2018

$26.00 18% $25.50 16%

$25.00 14%

$24.50 12%

$24.00 10%

$23.50 8%

$23.00 6% ncy Rate (Percent)

$22.50 4% Vaca Avg. Rent Per Ft.Sq. (Gross) Rent PSF (Gross) $22.00 2% Vacancy (%) $21.50 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Costar New office space appears to have been absorbed quickly into the market, but both new deliveries and net absorption has been relatively low, particularly since a bumper year in 2013. With the lack of new office deliveries, and a stabilizing vacancy rate over the past few years, future office prospects in the market area look moderate.

Figure 31. Market Area Office Net Absorption and Deliveries (sq. ft.), 2009-2018

400,000 Net Absorption (Sq. Ft.)

Deliveries (Sq. Ft.) 300,000

200,000

100,000

0

-100,000

-200,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Costar For industrial, vacancies have compressed significantly since the beginning of the recovery, and recent deliveries have leased well. Developers have responded to tight vacancy and robust rent growth with record supply, increasing the industrial/flex inventory by almost eight percent from 2010 to 2018 Q1. Rent levels are slightly higher than the metro average but gains have decelerated sharply since a strong year in 2016. Sales volume reached a cyclical high in 2016, but trading has slowed drastically to levels lower than the cyclical average.

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Meanwhile, as the following chart shows, vacancies continue to decline to record lows, demonstrating a continuously tightening industrial market.

Figure 32. Market Area Industrial Rent and Vacancy Trends, 2009-2018

$12.00 9%

$11.50 8%

$11.00 7%

$10.50 6%

$10.00 5%

$9.50 4%

$9.00 3%

$8.50 2% Vacancy Rate (Percent) Avg. Rent per Ft.Sq. (NNN) Rent PSF (NNN) $8.00 1% Vacancy (%) $7.50 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Costar Both net industrial absorption and new deliveries have been significant since the recession. Annual deliveries peaked in 2015 with 543,000-square-feet of new office space. The industrial market looks set to remain strong into the near future.

Figure 33. Market Area Industrial Net Absorption and Deliveries (sq. ft.), 2009-2018

800,000 Net Absorption (Sq. Ft.)

Deliveries (Sq. Ft.) 600,000

400,000

200,000

0

-200,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Costar Employment in a Hub and Spokes System. The following figure shows a prototypical “hub and spokes” transit network, along with the land uses that are typically predominant. This pattern is visible throughout the Puget Sound region. The predominant land use at transit “spokes” is residential (including a mix of residential

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Figure 34. Prototypical Hub and Spokes Transit Network

Suburban locations – such as that of the two primary station areas – generally differ to downtowns in that housing is the predominant use. In downtowns, and sometimes other key hubs, office/employment is one of the predominant uses, along with regional land uses such as major entertainment, retail, sports, convention, and lodging. High density urban housing has also joined this mix in recent decades. This is unlikely to be the case for the proposed station area locations.

Major employers benefit from being at a hub transit location since they can draw on employees from many spokes, throughout a wide area. This is not the case at spoke locations, which are usually accessible by far fewer transit lines. Paine Field, Bothell, Everett, and Lynnwood are examples of regional hubs.

In addition, in the past decade, a significant amount of office development in most metro areas has continued to locate in downtowns, due to the abundant amenities, and because the most highly-educated and skilled employees (particularly “Millennials” in their 20s and early 30s) have also located in and near downtowns. This is the case in the Puget Sound and Snohomish County, where office has mostly been limited to downtown Everett and Bothell Canyon Park.

Planned and Proposed “Employment” Projects For office, developers have not targeted the area recently, but several large projects are in planning. There are no office properties under construction in the market area, but there are 11 proposed buildings totaling almost one million square feet. Teachers Insurance and Annuity Associate of America (TIAA) has proposed a new phase in a large office complex called Woodlands Technology Campus (below) in the Bothell Canyon Park area, with five proposed office buildings totaling about three-quarters of this space.

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Woodlands Technology Campus

For industrial, the pipeline is clustered near Paine Field, as it has been historically. There are no industrial properties under construction in the market area, but there are 12 proposed developments totaling almost 1.1 million square feet in three main clusters: Soundview Technology Center, Everett Technical Park, and Johnson Industrial Park.

Proposed Industrial Developments: Soundview Technology Center (left), Everett Technical Park (right)

Commercial Development Prototypes Commercial development prototypes are shown below. Once again, parking is a major driver of building form. Only one commercial development prototype—mid-rise office—includes structured parking; this building type is unlikely to be feasible due to the high cost of structured parking.

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Figure 35. Commercial Development Prototypes Industrial Retail Office

Name Adaptive Reuse New Construction Spec or Build to Suit Creative Office Mid Rise Craft Industrial Spec or Build to Suit

7 6 5 4 3 3

2 2

1 1

Parking Surface Surface Surface Surface Structure Structure As built Concrete tilt-up Steel or concrete Steel and concrete Steel and concrete

Employment Demand Based on the respective strength of the office and industrial markets, most demand for new employment-based development is likely to be in the industrial sector, specifically manufacturing, which will build off existing regional strengths. However, industrial development rarely fits the typical standards of transit-oriented development – which is generally what is envisioned in the station areas – because of lower density construction requirements, larger floorplates, and high space requirements per employee. As such, we anticipate industrial development to occur mostly near existing industrial clusters. Further, automation is likely to continue decreasing the total number of employees needed for industrial processes.

Office development, on the other hand, typically has more employees per square feet – and is expected to continue to increase. This development type has the capacity to be denser and more compact able to accommodate flexible parking strategies than industrial. As such – despite presenting market area demand for new industrial development – we limit our focus on office within the station areas.

It is important to exercise caution over the demand estimates. Regionally significant changes – such as commercial flights in and out of Paine Field, for example – may have a significant impact on overall demand.

For office, we project 20-year market area demand for an additional 1.33 million square feet of office space, or 66,500 square feet per year, which is relatively low throughout the entire market area. Employment growth in the industries of professional and business services, healthcare and social assistance, and manufacturing can expect to drive most of the demand for new office development. Considering about 445,000 square feet has been built in the market area since 2010 (approximately 63,500 square feet per year), and net absorption has averaged about 120,000 square feet per year during this period, we consider our future demand projection a conservative estimate, and that construction will at the very least keep pace with recent trends. Demand for new office is, after all, likely to increase as a result of new commercial service at Paine Field, although office development is unlikely to become one of the key uses in the station areas.

The figures below show LCG’s office development forecast for the market area, based on job growth forecasts from the state and PSRC (as shown previously).

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Figure 36. 20-Year Market Area Office Demand by Industry

Professional, Scientific & Tech Svcs. 443,000 Health Care & Social Assistance 302,000 Manufacturing 187,500 Information 102,500 Educational Svcs. 67,000 Public Administration 48,000

Administrative & Support Svcs. 46,500 Finance & Insurance 41,500 Real Estate & Rental & Leasing 23,500 Retail Trade 19,000 Construction 11,000 Transportation & Warehousing 9,500 Accommodation & Food Svcs. 8,500 Wholesale Trade 8,000 1.33 million Mgmt. of Companies & Enterprises 3,500 sq. ft. total Other Svcs., except Public Admin. 2,500 Arts, Entertainment, & Recreation 1,500 Utilities 500

- 100,000 200,000 300,000 400,000 500,000

Source: Leland Consulting Group For industrial we project demand for an additional 3.28 million square feet of new industrial/flex development over the next 20 years in the market area, or 164,000 square feet per year, with manufacturing comprising over half of total demand.

 Most of the remaining demand for new industrial falls within the industries of wholesale trade, transportation and warehousing, and construction.  Major office, flex, and industrial development is likely to continue near existing clusters, such as Paine Field and Bothell Canyon Park, and other areas where smaller-scale industrial development exists, such as Lynnwood and Mukilteo. o Bothell/Kenmore has a well-diversified tenant base, with biotech, aviation, telecommunications, and tech tenants alike, but large move-outs by multiple companies has been a concern recently. Significant move-outs contributed to a spike in vacancies, resulting in double-digit levels.

The following figure shows 20-year demand for new industrial development by industry in the market area.

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Figure 37. 20-Year Market Area Industrial Demand by Industry

Manufacturing 1,757,500 Transportation & Warehousing 494,000 Wholesale Trade 410,500 Construction 290,500 Health Care & Social Assistance 81,000 Retail Trade 57,000

Professional, Scientific & Tech Svcs. 43,500 Public Administration 36,000 Accommodation & Food Svcs. 26,000 Administrative & Support Svcs. 24,000 Educational Svcs. 21,000 Information 16,000 Utilities 5,500 3.28 million Finance & Insurance 4,000 sq. ft. total Arts, Entertainment, & Recreation 2,500 Real Estate & Rental & Leasing 2,500 Other Svcs., except Public Admin. 2,000 Mgmt. of Companies & Enterprises 500

0 500,000 1,000,000 1,500,000 2,000,000

Source: Leland Consulting Group

Station Area Absorption/Capture For office, we assume a capture rate of between 5 and 10 percent (67,000 to 132,500 square feet). There is approximately one million square feet currently proposed (per Costar data) in the market area – albeit all is unlikely to get constructed – which all represents about three-quarters of total 20-year demand (1.33 million square feet). Other challenges, such as the lack of buildable land, are likely to present significant barriers to office development. However, the opening of Paine Field for commercial flights in the near future is likely to improve the two northernmost station area’s attraction to potential office users.

For industrial – as noted already – the station areas are highly unlikely to attract significant development due to spatial limitations, zoning constraints, cost, more competitive locations elsewhere in the region, and the fact that industrial users generally do not locate adjacent to residential uses.18 Some craft industrial or makerspace may locate in or near the station areas, but we expect a capture rate of no more than two percent (33,000 sq. ft.).

Retail Market Retail in the market area is largely auto-oriented, clustering either side of Highway 99. Two major malls – Everett Mall in Everett, and Alderwood Mall in Lynnwood – lie either side of the proposed station areas. New and

18 Uses that are perceived to be non-complementary or incompatible, such as residential and industrial, are less likely to develop on adjacent parcels. Residential developers will generally try to avoid being proximate to industrial development, due to a perceived dis-amenity impact and achievable price reduction; industrial developers will generally try to avoid being proximate to residential development since residents may attempt to limit nuisances such as freight traffic, noise, light, and effluents.

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Market Summary Figure 38. Retail Development Activity

Source: Costar and Leland Consulting Group

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Despite low vacancy rates across market area retail development, rents have remained relatively flat, reflective of the fact that retail sector remains in a state of flux across the nation.

Figure 39. Market Area Retail Rent and Vacancy Trends, 2009-2018

$20.00 8%

$19.00 7%

$18.00 6%

$17.00 5%

$16.00 Rent PSF (NNN) 4%

Vacancy (%) $15.00 3% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Costar and Leland Consulting Group Aside from bumper years for new development in 2009 and 2015 (the former likely delivering buildings started before the recession), retail deliveries have been slow. From 2009 to 2017, about 783,000 square feet of new retail space was delivered to the market (87,000 per year). During this same time, net absorption totaled 343,000 square feet (36,000 per year).

Figure 40. Market Area Retail Net Absorption and Deliveries (sq. ft.), 2009-2018

400,000

300,000

200,000

100,000

0

-100,000 Net Absorption (Sq. Ft.) -200,000 Deliveries (Sq. Ft.)

-300,000 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Costar and Leland Consulting Group

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Existing Leakage Understanding the pattern of retail spending within a community is critical. By looking at estimated demand from existing households and current estimated sales, we can identify the relative strength or weakness of each retail category. Retail sectors in which household spending is not fully captured are called “leakage” categories, while retail categories in which more sales are captured than are generated by existing residents are called “attraction” or “surplus” categories.

A retail sales surplus indicates that a community pulls consumers and retail dollars in from outside the trade area, thereby serving as a regional market. Conversely, when local demand for a specific product is not being met within a trade area, consumers are going elsewhere to shop creating retail leakage.

The following table shows the current annual retail leakage for different retail categories. Almost all retail categories show a sales leakage occurring, with only General Merchandise showing a significant surplus. This indicates that the market area is a weak retail market with a lot of spending potential leaving the area. General Merchandise retailers – such as Walmart and Target – tend to have large floorplates and have large catchment areas, so it’s very possible that outside residents travel from denser urban areas to shop in the market area at these stores .

Leakage typically presents an immediate opportunity to increase new retail development activity and capture some of the demand leaving the area. This may be unlikely for many of the retail categories in the table below given the area’s proximity to Everett and Seattle.

Table 8. Annual Retail Leakage, Market Area

Current Est. HH Current Est. Sales Demand (ESRI) (ESRI) Current Leakage ($) Food and Beverage (grocery) $948,127,790 $760,345,469 $187,782,321 Foodservice and Drinking Places $628,942,339 $501,695,859 $127,246,480 Building Material, Garden Equip $355,190,758 $229,046,057 $126,144,701 Misc. Store Retailers $243,231,116 $120,403,596 $122,827,520 Other (incl. cinema, prof./med. office, $229,925,999 $197,645,374 $64,561,249 consumer banks, etc.) Electronics and Appliance $208,762,729 $144,993,165 $63,769,564 Furniture and Home Furnishings $197,560,827 $148,253,827 $49,307,000 Clothing and Accessories $332,411,648 $293,136,351 $39,275,297 Health and Personal Care $386,761,598 $353,614,424 $33,147,174 Sporting Gds, Hobby, Book, Music $207,414,402 $207,968,928 -$554,526 General Merchandise $1,090,116,766 $1,193,449,812 -$103,333,046 Totals $4,828,445,972 $4,150,552,862 $710,173,734 Leakage Categories Only $814,061,306 Source: ESRI (2017)

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Planned and Proposed Retail Projects There are three retail buildings totaling 43,000 square feet that are currently under construction in the market area, 30,000 of which is located in Lynnwood Crossings near Edmonds Community College. Between the Alderwood Mall, Everett Mall, and Mill Creek, there appear to be few other opportunities for large new retail.

Five small retail buildings totaling about 35,000 square feet are proposed in the market area, underlining the fact that this is not a strong retail center. Most of these are individual pad sites at existing larger retail centers.

Lynnwood Crossroads

Retail Demand We project total 20-year market area demand for an additional 853,000 square feet of retail, or almost 43,000 per year. This is based on the amount of square feet of new retail per capita since 2010 (9.22 square feet per person added to the population), multiplied by the projected new population growth (92,536 people).

While this might appear a conservative estimate of new retail demand, we expect a significant portion of existing market area retail development to be replaced with new space which utilizes less space. By 2038, ecommerce is forecasted to have a 34 percent share of all national retail sales, which means there will be less demand for traditional brick and mortar retail.

Further reasons for such low demand is that the market area is currently experiencing significant sales leakage, indicating that a significant chunk of new demand is leaving the market area as people shop in more established centers. This is likely to continue.

Station Area Absorption We estimate that approximately two to six percent (no more than 51,000 square feet) of new retail can be captured in the station areas over the next 20 years. Given the high leakage in food and beverage, a small grocery-anchored neighborhood center is likely to succeed in at least one of the station areas. Mixed-use and small-scale retail (such as restaurants, banks) is likely to absorb a significant portion of the remaining demand. General merchandisers are only likely to locate in the Airport Road/Highway 99 station area. ”Other” development includes health care, hospitality (hotel), sports and entertainment, and specialty.

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Lodging, Hospitality, Recreation and Other Development

Market Summary Figure 41. Other Development Activity

Source: Costar and Leland Consulting Group

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Lodging & Hospitality The primary demand driver for hotel development include:

 Tourism and tourist destinations  Entertainment activities  Business activity (number of jobs and businesses)  Business conferences and conventions  Travel patterns (visibility)

Recreation & Open Space Infrastructure—the physical facilities and systems that support economic activity—is a key driver of real estate investment and development. Historically, real estate was influenced by the quality and location of roads, bridges, and other forms of auto-oriented infrastructure. The Interstate Highway System, for example, was a critical factor in the growth of suburban America.

More recently, transit-oriented development has become a common term in the lexicon of real estate and transportation officials. Transit-oriented development is characterized by compact, mixed-use, residential, and commercial development that is clustered around a transit stop or a rail station. Today, bike trails, bike lanes, bike-share systems, and other forms of active transportation infrastructure are helping spur a new generation of “trail-oriented development.” This trend reflects the desire of people around the world to live in places where driving an automobile is just one of a number of safe, convenient, and affordable transportation options. The Urban Land Institute’s America in 2015 report found that, in the United States, over half of all people (52 percent) and 63 percent of millennials would like to live in a place where they do not need to use a car very often; half of U.S. residents believe their communities need more bike lanes.

Active transportation was, until recently, an overlooked mode of travel. However, in recent years, investments in infrastructure that accommodates those who walk and ride bicycles have begun to reshape communities.

Shared themes among active transportation projects include the following:

 Active transportation infrastructure can catalyze real estate development. Trails, bike lanes, and bicycle- sharing systems can improve pedestrian and bicyclist access to employment centers, recreational destinations, and public transit facilities, thereby enhancing the attractiveness of developments along active transportation corridors. In some cases, former industrial districts and towns outside urban cores have benefited from active transportation infrastructure due to improved walking and cycling connectivity.

 Investments in trails, bike lanes, and bicycle-sharing systems have high levels of return on investment. Regions and cities have found that relatively small investments in active transportation can have outsized economic returns due to improved health and environmental outcomes and reduced negative externalities, such as automobile traffic congestion and poor air quality.

Bike-friendly cities and towns are also finding that bicycle facilities boost the tourism economy and encourage extended stays and return visits. Tourism is one of the world’s largest industries. The U.S. Travel Association explains that U.S. residents spend over $800 billion a year on travel and recreation away from home.

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Planned and Proposed “Other” Projects Hilton Hotel (Under Construction) One hotel is currently under construction in the market area – a th 155-room Hilton just west of I-5 at 196 Street near the Lynnwood Town Center.

A 40,000 square foot self-storage facility is also under construction near Everett Mall Way and I-5 – in the northern section of the market area. Only one property is proposed – a 93,300-square-foot assisted living facility near Highway 99 and 164th Street.

Market Strength The strength of the real estate market in any given community is a significant determinant of the type of investment that might be made. It is difficult to catalyze private development in an area with limited or no existing market activity. Conversely, an area with strong market activity may not need the same level of intervention to attract development or encourage desired building types. As such, each station area can be grouped into one of three categories based on existing demographic and real estate market conditions: Limited, Emerging, and Stronger. Categorizing these areas by market strength helps to structure short and long-term investments in transit areas by priority – a critical component part of the implementation phase.

Table 9. Market Strength Categories

Market Description Strength Limited Characterized by weaker market conditions and lack the sales values or rents necessary to Market support new compact and/or mixed-use development. Investment in these areas are therefore less likely to catalyze additional private development and should be used only on a limited basis. Emerging Characterized by limited to moderate real estate market conditions and where intensive Market building types are generally not supported in the near-term. Although they may lack immediate market support for TOD, emerging areas may be ideally suited for catalytic investments to enhance local market strength. These areas represent a “sweet spot” for investment, since land and development costs are not elevated (as in Stronger market areas) and small investments may catalyze further market investment by creating market comparables. Strong Characterized by areas where market conditions are beginning to support higher density Market mixed use development and infill. Since the markets of these areas are already ripe or ripening, TOD Program investments should focus on improving urban living infrastructure (amenities), developing prototype developments for the region and funding more “aggressive” (e.g. more significant increase in density compared to recent development in the area) TOD projects. Low to moderate income housing development in these areas may be more challenging due to high land prices, so strong market areas may be an appropriate place for the City to support affordable and workforce housing projects. These areas would also be locations where the city should focus on aligning zoning to allow for the highest/most productive transit-oriented uses. Source: Metro and Leland Consulting Group

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Figure 42. Typical Feasible Development Types by Market Strength

Findings Based on the development trends and socioeconomic, economic, and real estate characteristics described thus far, the market area can be considered an EMERGING or on the cusp of being considered a STRONG market and may be ideally suited for catalytic investments to enhance local market strength. Market conditions in the greater market area appear to support TOD (rents and vacancy rates for the corridor are relatively strong, albeit significantly lower than more prominent parts of the metro region), and recent development has seen higher rents and fast absorption rates which may be indicative of greater market support.

The following information identifies the strength of the market in each station area and explains the reasoning behind each categorization.

164th Street/Ash Way: EMERGING Market with some STRONG Elements

 Very high population growth but no employment growth  Strong multifamily sector which has remained tight despite significant recent growth  Inactive office market despite low vacancies and proposed projects  Strong retail market despite lack of new construction

128th Street/Mariner: EMERGING Market

 Lower population growth but higher employment growth  Tight multifamily market but lower average rents; no recent deliveries but developments are under construction  Highest inventory of office development with strong average rents, but also high vacancies  Lowest retail rents but low vacancy and no recent or planned retail construction.

Airport Road / Hwy 99: EMERGING Market

 Relatively high population growth but no employment growth  Relatively tight multifamily market with some recent development  Non-existent office market (no inventory)  Strong retail market with highest inventory, good rents and absorption trends, and low vacancy

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Table 10. Station Area Market Conditions

164th/Ash Way 128th/Mariner Airport Rd/Hwy99 Market Area

Annual Pop Growth 8.9% 0.9% 1.6% 1.7% Annual Emp. Growth -0.1% 2.5% -0.2% 5.6% MFR (units) Rents $1.80 $1.51 $1.59 $1.62 Vacancy 3.1% 4.3% 5.1% 4.2% Existing Inventory 1,461 1,857 1,731 40,881 5-yr Growth 1,332 0 280 4,435 Avg. Absorption 259 2 53 934 UC/Planned 0 456 0 1,098 Office (sq. ft.) Rents $20.84 $26.85 $29.90 $25.71 Vacancy 0.4% 12.9% 0.0% 7.8% Existing Inventory 181,886 370,713 14,678 9,062,156 5-yr Growth 0% 0% 0% 2.7% Avg. Absorption 14,962 704 120 79,219 UC/Planned 105,000 0 0 978,161 Retail (sq. ft.) Rents $29.19 $19.21 $26.74 $18.93 Vacancy 1.2% 1.1% 2.8% 4.9% Existing Inventory 270,215 242,684 408,814 18,649,457 5-yr Growth 0% 0% 4% 1.7% Avg. Absorption 1,384 845 4,354 55,031 UC/Planned 0 0 8,500 70,450 Source: ESRI, LEHD, Costar

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Figure 43. All Recent, Under Construction and Proposed Development

Source: Costar and Leland Consulting Group

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STATION AREA LAND SUPPLY/TOD READINESS

Transit Orientation Five “P’s” of Transit Orientation

Measure Summary and Metrics People  Population and Employees  Number of destinations that can be easily accessed. (Walk Score). Place  Special destinations and amenities.  Connectivity. Physical Form  Street intersections per square mile.  Pedestrian and bicycle facility density.  Transit service quality. Performance (Transit)  Number of trains/buses per day.  Population and employment growth. Potential  Rents and sale prices PSF. (Market Strength)  Vacancy Source: Transit-Oriented Development Strategic Plan, Metro (Portland); Leland Consulting Group. People People drive demand for density. The greater the number of people, the greater the number of businesses, amenities, and other attractions that an area can generally support. The total number of residents and workers in an area also has a direct correlation with reduced auto trips and increased transit ridership.

With regard to transit-supportive densities, research shows that significant transit ridership gains begin to occur when density surpasses 30 activity units (residents plus employees) per gross acre. At lower density thresholds, the potential for TOD is influenced by other aspects of the built environment that are closely inter-related with density. These factors include land use mix, connectivity, urban form and design, circulation, and parking type. The presence of major destinations, such as employment centers or large institutions such as hospitals or universities, can function as anchors to the transit corridor that play a significant role in generating ridership. A more dispersed mix of uses across multiple stations along a transit corridor can generate travel demand, 19 including for many non-peak trips to access goods, services, and recreation.

Notable findings regarding people in the corridor are as follow:

 With 30 being the “gold standard” of activity unit densities, an activity unit density of 30 is considered the high “score” (10 out of 10). Conversely, a density of three would equate to a low score of one out of 10.  The activity unit densities at the Mariner, Ash Way, and Airport Road station areas shown in the figure below result in scores of three, eight, and six out of 10, respectively.

19 See PSRC’s Transit Supportive Densities guidance paper: https://www.psrc.org/sites/default/files/tsdluguidancepaper.pdf

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Figure 44. Activity Unit Density (Total Residents and Employees per Acre), 2018

24.1 18.2

8.2 8.8

164th/Ash Way 128th/Mariner Airport Rd/Hwy99 Market Area Avg.

Source: ESRI, LEHD, and Leland Consulting Group Places/Proximity Walkable areas require a mix of land uses; a balance of people and jobs and interesting places within a walkable distance enhance an area’s walkability by putting people near the places they work and shop. For “Places” we consider amenities and services that employees and residents would frequent, using Walkscore20 ratings.

Walkscore uses the concepts of walk route and block size to calculate the number of amenities within a 30- minute walk of any given address. In general, a site within easy walking distance to a high concentration of amenities will receive a higher walk score. A total of 100 points is possible.21 It should be noted that Walkscore data does not infer anything relating to quality, safety or access.

While there is room for improvement across all three station areas, Walkscore data indicates that some errands can be accomplished on foot for people living or working in the Ash Way and Airport Road station areas, while most errands require a car for people living or working in the Mariner station area.

20 Walkscore measures the walkability of any address, analyzing hundreds of walking routes to nearby amenities. Points are awarded based on the distance to amenities in each category. Amenities within a five-minute walk (0.25 miles) are given maximum points. No points are awarded for amenities further than a 30-minute walk.

21 A score of 90-100 indicates a “Walker’s Paradise” where daily errands do not require a car; 70-89 indicates a “Very Walkable” area where most errands can be accomplished on foot; 50-69 indicates a “Somewhat Walkable” area where some errands can be accomplished on foot; 20-49 indicates a “Car-Dependent” area where most errands require a car; and 0-24 indicates a “Car-Dependent” area where almost all errands require a car.

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Figure 45. Average Walk Scores by Proposed Station

100

80

60

40 60 63 20 42

0 164th/Ash Way 128th/Mariner Airport Rd/Hwy99 Source: WalkScore, Leland Consulting Group

Physical Form Walkable centers and corridors function best when the areas have good physical form. Safe, well-designed spaces make walking enjoyable; small block sizes with more street connections decrease the distance people must walk from one destination to another. As the following graphic shows, block size has a significant effect on the percentage of people using transit, cycling or walking versus driving.

Figure 46. Percent of People Using Transit, Cycling, or Walking versus Block Size, 2016

Source: Wanli Fang, 2016, The World Bank: Sustainable Cities For “physical form,” we consider the number of intersections (exclusive service roads) per square mile. The design of a neighborhood’s street network has a major impact on the ability of pedestrians and cyclists to travel efficiently to nearby destinations. The gridded network on the left side of Figure 46, features high street connectivity and allows for more direct travel between destinations. The cul-de-sac neighborhood on the right features low street connectivity. Cul-de-sac residents are required to travel longer and more circuitous routes, including arterial roads, in order to reach most destinations. Physical barriers such as railroad tracks, highways, lakes, and rivers can also reduce street connectivity.

Numerous studies have shown that people living in neighborhoods with higher street intersection density tend to drive less and walk and take transit more. A recent study found that vehicle miles traveled are most strongly associated with accessibility to destinations and with street network design variables. These attributes combined with a diversity of services tend to reduce the number of vehicle miles traveled. Results for walkability showed that the decision to walk was more often influenced by intersection density than street connectivity. The

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For the station areas, only Ash Way is considered reasonable for intersection density. However, even Ash Way remains low relative to other more urban locations.

Figure 47. Intersections per Square Mile, Half-mile Station Areas

136

69 42

164th/Ash Way 128th/Mariner Airport Rd/Hwy99

Performance As the number of transit lines and frequency of service increase, automobile dependency generally decreases. In theory, if people use more transit in lieu of a car, parking demands decrease and allow for the type of high density development typically considered “transit-oriented.” After all, building form almost always follows parking.

The following figure shows the number of buses (currently there is no light rail service) per hour during peak transit service.

22 Cervero & Murakami, 2010, Effects of Built Environments on Vehicle Miles Traveled: Evidence from 370 US Metropolitan Areas, URL 23 Frank, 2005, A Study of Land Use, Transportation, Air Quality, and Health in King County, Washington, URL

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Figure 48. Performance of Transit (Number of Buses Per Hour During Peak Transit Service)

46

22 9

164th/Ash164th/Ash Way 128th/Mariner128th/Mariner AirportAirport Rd/Hwy99Rd/Hwy99 Way The Ash Way station area sees the highest volume of buses during peak transit service, meaning residents in this area have significant access to transit. Airport Road, on the other hand, has few, although it is on a BRT corridor, as is 128th and 164th.

Transit Orientation The following graphic provides a summary of how each station area scored against the “Transit Orientation” criteria. The 128th station area is the most ‘well-rounded’ but does not have the same market strength or performance of 164th, while is clearly heavily influenced by the Ash Way Park and Ride (limiting density, connectivity, and mobility). Airport Road, meanwhile, is arguably the least “transit-oriented” station area in its existing state.

Figure 49. Transit Orientation, Proposed Station Areas

Source: Leland Consulting Group

Zoning (transit supportiveness) While zoning can usually change according to market demand, it presents an immediate and immovable barrier to developers looking to build transit-oriented development. It is therefore important to assess existing zoning conditions and requirements to ensure that barriers do not exist; and if they do, make recommendations for changing existing zoning.

The following map shows Snohomish County’s future land use vision per their comprehensive plan. Most of the land in the three station areas is designated either Urban Commercial, Medium-to-High-Density Residential, or Transit/Pedestrian Village (164th only).

The following table shows permitted uses for zoning in the three station areas. Most of the area surrounding the proposed stations are zoned “UC – Urban Center” with several other zoning designations further out.

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Figure 50. Snohomish County Land Use Plan

Source: Snohomish County

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The Urban Center zone appears to allow all uses except industrial and single family residential and is characterized as follows.

 Purpose: Urban centers are compact, well-designed areas that concentrate a variety of land uses in one place. Urban centers are people-oriented living and working places that allow residents to walk to shops and high capacity transit stations.  Permitted uses: a wide range of retail, office, multiple family residential, civic, and medical uses compatible with transit and pedestrian-oriented development are permitted.  Max height: Regulations allow up to 90 feet (~9 stories) and an additional 35 feet (~3 stories) if located within 1/8 mile of a transit center, major transit route, or high capacity transit station. If located within a low- density residential zone, the allowable building height will be limited.  Required setbacks: none  FAR: o Mixed Use: min=0.5, max=1.0, max w/ bonus=3.75 o Other development: min=0.5, max=0.75, max w/ bonus=2.50 o Bonuses are awarded for features such as: structured parking, affordable housing, sustainability, public space, etc.

The purpose, the permitted uses, and setback requirements all conform to typical TOD characteristics and do not pose significant challenges for new development. However, True transit-oriented development will likely require higher allowed floor-area ratios without the need for bonuses given that most high density residential or mixed-use buildings have FARs greater than three. A maximum buildable height of nine to 12 stories is probably tall enough given that building height is often limited by construction type, and the market conditions in the station areas are unlikely to warrant construction of building taller than eight stories.

Table 11. Snohomish County Zoning

UC R-9,600 R-7,200 LDMR MR CB GC BP MHP

Pedestrian Oriented Retail P - - - C P P P - Auto Oriented Retail P - - - - P P P - Industrial ------P - Office P - - - - P P P - Institutional P C C C C P P P - Multifamily P - C P P P P - - Townhouse P P P P P P P - - Single Family - P P P P P P - P Source: Snohomish County Parking One saying in the design and real estate development industries is: “form following parking.” In other words: parking—whether surface or structured—has a significant impact on the types of buildings that are physically and financially feasible.

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For residential uses, parking requirements are generally lower for transit-oriented development, with bonuses often offered for proximity to transit service, car shares, bikes, and other alternative means of transportation.

The traditional parking ratios for suburban office development is 3.0 spaces per 1,000 square feet of space. Parking demand may actually be increasing in some cases as denser “creative” and open office floorplans replace earlier floorplans with numerous enclosed offices. However, even if regulations do not require a high parking ratio, developers will try to build the amount of parking they think their tenants will demand.

Parking has an even bigger impact on retail than office development for two reasons. First, most retail buildings are one story since customers are accustomed to parking and walking directly into the store. Ratios of four to five spaces per 1,000 square feet are typical for general retail/commercial, but ratios can be much higher for specific uses such as restaurants.

Generally, parking requirements for Snohomish County are flexible. Arguably residential parking requirements could be lower, but the county does have the power to reduce requirements on a project-by- project basis. According to the county’s zoning code, required parking spaces may be reduced, by not more than 40 percent, when an applicant demonstrates that alternatives to automobile use will be implemented that will provide a permanent reduction in parking demand. Joint uses or shared parking is also permitted for mutually beneficial daytime and nighttime uses.

Table 12. Snohomish County Parking Requirements

Use Minimum Maximum Bicycle Parking

Restaurants 2 stalls/1,000 net sf 8 stalls/1,000 net sf 5 spaces min Retail 2 stalls/1,000 net sf 4 stalls/1,000 net sf 5 spaces min Office 2 stalls/1,000 net sf 4 stalls/1,000 net sf 5 spaces min Residential (units >1,000 sq. ft. each) 1.5 stalls per unit 2.5 stalls per unit 5 spaces min Residential (units <1,000 sq. ft. each) 1 stall per unit 1.5 stalls per unit 5 spaces min Retirement apts./housing 0.5 stall per unit 1 stall per unit 5 spaces min All other uses See SCC 30.26.035 5 spaces min Source: Snohomish County Land and building supply The following map shows improvement value to land (I:L) value ratios for the two primary proposed station areas and their surroundings. An I:L ratio is a general measure of land utilization and the likelihood of redevelopment. A very low ratio (<0.5) is indicative of a property with high potential for redevelopment as the parcel is likely to be vacant or have few existing buildings (or buildings in a state of disrepair). A high ratio (2+) is indicative of a property area with low potential for redevelopment, typically because it is occupied by well- maintained and/or high-value buildings. This ratio does not take into account all factors that determine whether a property is likely to redevelop. For example, redevelopment to a more intensive use may not be permitted by zoning; property owners may have no interest in redeveloping or selling the property; and assessor’s data for properties held by public agencies or nonprofit institutions can be incorrect.

The 164th/Ash Way station area appears far less utilized than the 128th/Mariner station area. Much of the vacant land to the west of Ash Way is wetland and not in fact buildable. However, there are significant more

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Figure 51. Improvement to Land Ratios, 164th/Ash (left) and 128th/Mariner (rightscdhjm) 2020-03-04 01:14:32 ------Ash Way

Source: TIGER, Google, Snohomish County, Leland Consulting Group The following maps show total value (the sum of building value and land value) per square foot of a property’s site area. Therefore, they approximate the amount that a third-party entity (e.g., investor or developer) would need to spend in order to acquire the property, compared to other properties in the area.

Based on this metric:

 Properties with higher values per square foot compared to others in the area suggest a high level of investment. They are more likely to remain in-place, as-is. They will cost more for developers to acquire and then redevelop, and therefore they are less likely to redevelop, all other things equal.  Properties with lower values per square foot compared to others in the area suggest a low level of investment. Uses include undeveloped or vacant parcels, parking lots, and low-density industrial or commercial properties with high vacancies. They are less likely to remain in-place, as-is. They will cost less for developers to acquire and then redevelop, and therefore they are more likely to redevelop, all other things equal.  Some low-value properties, such as wetlands and other natural areas, are highly unlikely to redevelop. Even though they do not have high-value buildings or other improvements, public agencies have acquired them with the express purpose of keeping them as open space.  The properties with the greatest likelihood of redevelopment tend to be low value properties near high value properties, because this pairing suggests the location of a valuable amenity (waterfront, attractive single-family housing neighborhood, pedestrian-oriented commercial center, transit) that the lower-value properties could capitalize on.  Unfortunately, this analysis cannot consider the difficult-to-quantify variables that make redevelopment inherently unpredictable, particularly the goals and future plans of individual property owners.

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Figure 52. Total Parcel Value Per Sq. Ft., 164th/Ash Way (left) and 128th/Mariner (right)

Land Value Per Sq. Ft.:

CASE STUDIES

Three case studies were chosen that displayed similar characteristics to the proposed station areas in Snohomish County. All three are light rail stations that are considered outer urban locations and near or on interstates.

Table 13 is a brief comparative summary of the location, light rail service opening year, and development summary for the three selected case study stations, compared with the three proposed station areas in Snohomish County.

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Table 13. Case Study Development Summary

TOD Metric Contra Clacka- Orenco 164th / 128th / Airport Costa mas Station Ash Way Mariner Rd / Centre Town SR99 Center Summary Info Metro Area San Portland Portland Puget Puget Puget Francisco Sound Sound Sound County or City County County City County County County Light rail start of service 1973 2009 1996 2036 2036 2036 Development (Sq. Ft.) By Time of Development At Start of Service 752,400 4,667,000 357,503 - - - Built Since Start of Service 5,532,000 92,200 2,790,497 - - - Total SF within ½ mile 6,284,400 4,759,200 3,148,000 1,762,700 3,341,000 2,788,262 Current Land Use Mix (2018) Multifamily 3,107,700 1,655,800 2,304,000 1,029,300 1,643,100 1,631,444 Office 1,958,500 520,600 155,000 181,900 405,556 14,700 Retail 295,200 2,180,800 373,000 254,000 272,171 423,614 Hotel SF 556,200 372,000 56,600 0 178,146 0 Other SF 366,800 387,400 259,600 281,300 475,935 654,592

Table 14 shows demographic and household characteristics for these same areas. What is clear is that the areas that have experienced significant development activity have a higher density of both residents and employees, and those that live there are higher income and well-educated residents, and there is a greater proportion of both young and old residents.

Other key takeaways from both tables include:

 Light rail service does not necessarily mean that new development will occur. The preexisting land use pattern appears to have a significant role in how development does or does not occur. Where large format retail exists, TOD is unlikely to occur, perhaps due in part to the lack of existing residential development.  Station areas that have experienced significant development activity tend to have residents that are better educated and have higher incomes.  For land uses within station areas, multifamily residential is the prominent across all three case studies. Retail is significant, although most retail development was preexisting prior to the opening of light rail service.  Multifamily residential and – to a lesser extent – office land uses tend to be the most favorable for TOD.

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Table 14. Case Study Demographic Summary

Contra Clacka- Orenco 164th / 128th / Airport Costa mas Station Ash Way Mariner Rd / Centre Town SR99 Center

Demographics/Growth Population 1/2 mile 7,464 4,632 7,114 3,393 5,862 6,342 1 mile 23,120 13,234 14,807 15,099 20,402 23,225 Pop Growth (10-16) 3.1% 2.1% 3.8% 9.7% 1.0% 1.4% Employment 1/2 mile 10,079 6,299 2,940 701 2,992 2,743 1 mile 16,937 12,512 10,051 3,907 4,461 10,873 People Total 1/2 mile 17,543 10,931 10,054 4,094 8,854 9,085 1 mile 40,057 25,746 24,858 19,006 24,863 34,098 Household Characteristics HH incomes $76,700 $36,212 $71,645 $79,927 $40,602 $57,167 % Education Bachelors + 69% 24% 62% 36% 15% 24% 25 -34 25% 23% 28% 19% 20% 20% 65+ 11% 11% 19% 9% 10% 7% Av HH size 1.9 2.2 1.8 2.6 2.5 2.3 Med Age 36 30 37 35 32 31

Contra Costa Centre, California

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History In the 1970s, the station area transitioned from a semi-rural agricultural/low density residential area to a suburban area dominated by the BART (light rail) station to a higher density multifamily residential area with proposed commercial and office development. The 1975 Area Plan envisioned the development pressure that would result from the Station’s accessible location but recognized the lack of coherence in the circulation pattern. The 1983 Specific Plan then established goals to create an employment and housing center around the BART Station.

During the 1980s and 1990s, the Contra Costa County Redevelopment Agency began implementing the Pleasant Hill BART Station Area Specific Plan by assembling smaller parcels of land and financing infrastructure improvements with the purpose of facilitating development of multi-family housing, office and retail space. Much of the existing development surrounding the station was constructed during this time.

The Pleasant Hill BART Station was originally designed as a suburban station serving an area of low-density single-family homes. It has become a regional magnet for commuters throughout Contra Costa and Solano counties due to its easy freeway access and ample parking.

Pleasant Hill Station is highly home-origin based, with 83 percent of average weekday boarding’s coming to the station from home. Overall ridership is projected to grow by 12 percent over a 10-year period. The entry and exit patterns by time for the station are highly concentrated around the peaks in a typical commute pattern. The station has minimal passenger activity in the off-peak periods and very narrow shoulders in the peak. Boarding’s in the AM period begin to drop off sharply around the same time the parking lot fills (8:05 a.m.). Furthermore, half the residents of 1,600 apartment units near the suburban Pleasant Hill BART station work in downtown San Francisco or Oakland, compared to a citywide average of just 10 percent.

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Figure 53. Contra Costa Centre Development

Source: Costar, Leland Consulting Group

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Lessons Learned Builders in the area have started to recognize that a number of young downtown workers earning professional wages are attracted to rail-based housing. Projects with more amenities and catering to the tastes of young professionals will likely appeal to potential renters and buyers. One example is the Park Regency Apartment development near the Pleasant Hill BART station, an upmarket complex, complete with a pool, spa/ sauna, and recreational building, that has a waiting list of hopeful tenants. Three-quarters of the Park Regency’s occupants are in the 18-34-year-old range, and more than 50 percent earn more than $40,000 annually.

Using hedonic price models, researchers found residences near BART leasing for around $35 more per month, controlling for the influence of unit size, amenities, and other factors. At the time of the research, monthly rents per square foot for one- and two-bedroom apartments near Pleasant Hill were $1.20, compared to an average of $1.07 for comparable projects in the same geographic submarket but away from BART.

The Redevelopment Agency had a significant role in the redevelopment of the area. They assembled land, provided infrastructure finance, and entered into public-private partnerships. There has been $90 million in major public infrastructure improvements with or prior to development using property owner supported assessment and special tax bonds, and redevelopment tax increments. The Redevelopment Agency also has the capacity to finance up to $30 million in additional infrastructure through redevelopment tax increments.

Clackamas Town Center, Oregon

History The Clackamas Town Center MAX station opened in 2009, includes a 750-space park-and-ride garage, and is served by 10 bus lines. The station is the terminus for MAX Green Line (light rail) which connects the Clackamas Town Center to Downtown Portland. The transit center is served by 10 bus lines and the I-205 Bike Path passes through the center.

While the area has relatively low density and a lot of vacant space, much of it is parking rather than greenfield vacant lots. This is largely due to the 1.23 million square foot, auto-oriented mall (including parking), which was built in 1981 and includes approximately 6,800 parking spaces. A renovation and 250,000 square foot expansion was completed in 2007, which includes a new 75,000, 20-screen Century multiplex theatre. Elsewhere in the station area there are existing multifamily developments to the north of the station, and a large condominium

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New development has been sparse, with only a few properties developed since 2012.

Figure 54. Clackamas Town Center Development

Source: Costar, Leland Consulting Group

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Lessons Learned The Clackamas Town Center MAX station shows an alternate reality where mass transit does not catalyze significant new development. In fact, the MAX station and the adjacent garage mostly serve as a park and ride or transfer service (bus to rail or vice versa) for in-commuters to downtown Portland. Employment here is largely limited to retail, and office development is located nearer Portland, much like Snohomish County’s existing office clusters that are nearer Seattle, Everett, Bothell, and Paine Field.

The light rail station only opened in 2009 in the midst of the recession, so one may argue that the area has not yet fully had the chance to see significant new development occur as a result. However, the land use pattern of big box retail and/or mall development is difficult to alter without the influence of a public agency driving the change. Also, market conditions would not support the scale of redevelopment necessary to turn the Clackamas Town Center into a transit-oriented development. Elsewhere, however, plans for small new office development, infill single-family attached housing and multifamily housing development have begun.

With the decline of traditional brick-and-mortar retail, it is possible that transitioning the existing mall to more of a lifestyle center is necessary to keep the mall alive. Indeed, the addition of the movie theatre in 2007 is evidence of a mall trying to keep up with the times. For now, the mall has very little vacancy and a strong tenant mix.

Ultimately, the Clackamas Town Center case study shows that patience is critical, and the foundation of TOD (street pattern, density, infrastructure, etc.) must be either preexisting or pushed along by a redevelopment agency or equivalent public agency, particularly in areas with a challenging land use pattern.

Orenco Station, Oregon

History Orenco Station, located in Hillsboro, Oregon, about 15 miles west of Portland, is one of the most successful transit-oriented development districts in the western United States, and provides some interesting takeaways for planners seeking to catalyze TOD in locations such as the Brooks Corridor. Several images of Orenco Station are shown above. While these images look “urban,” the density of development in this early “town center” center phase is no higher than 14 residential units per acre, and 0.5 floor area ratio (FAR) for commercial development. It is horizontal rather than vertical mixed use, and therefore far below the density standards that many planners think of as TOD.

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The image to the left shows the Orenco Station “town center” phase, including its component parts: townhouses, a relatively short (400 foot long) mixed-use main street backed by surface parking. North of the main street are a series of single family neighborhoods whose residents help support the commercial spaces on the main street. A grocery store (not visible) is just a few feet to the west. Light rail transit is approximately ¼ mile south of the main street. Cornell Road (which borders the main street on the south side) is a four- to six-lane arterial road, not unlike Brooks Street. Though Cornell is not pleasant or easy for pedestrians to cross in most locations, this crossing is now much easier, due to intersection improvements, and the fact that drivers recognize they are in a special location due to surrounding development. It is notable that the main street was built perpendicular to the arterial road, not along it. Building the main street in this format enabled developers to create a primary “people place” where auto traffic is slower, and at lower volumes.

Early phases in the 1990s and early 2000s “set the stage” with a well-thought out framework of streets and open spaces, and low- to medium-density development. Throughout the 2000s and 2010s, development projects have increased in terms of scale, density, and ambition, as shown below. As described above, these higher density (largely residential) projects are more costly on a per square foot basis, and thus required higher rents. During the 2000s and 2010s, potential residents were increasingly willing to pay these higher rents because a very high-quality sense of place had been established in early phases including high-quality streets, sidewalks, landscaping, and parks; retail and commercial amenities such as coffee shops, pubs, restaurants, and a grocery store had been completed; and the overall area had achieved an amount of ground-level vibrancy much higher than anywhere else within a 5-mile radius.

Lessons Learned Some of the key takeaways demonstrated by Orenco Station and relevant to many TOD projects are:

 TOD districts can be accomplished in many phases.  Great TOD places can take many years to fully develop and mature. It has been about 20 years since the first projects at Orenco Station broke ground.  While initial phases may be modest or lower-density, they can set the stage for projects that are more ambitious—in terms of mix of uses, design, tenants, density, or other features.  The highest quality places are often located on perpendicular streets and/or back from the main arterial.

One aspect of Orenco Station not discussed above is that the district and entire City of Hillsboro has benefited from strong growth in the technology employment sector, and particularly a large Intel facility located a half- mile from the district. This strong jobs base—along with high quality design and transit—has enabled Orenco to

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ENCOURAGING TOD: TOOLS AND APPROACHES

Zoning and regulations can help guide the form and distribution of development, but they generally do so by setting parameters to restrict certain development types and densities based on location. At its best, zoning discourages projects that are poorly designed or have undesirable impacts on neighboring properties. However, zoning and regulation are less effective in encouraging desired types of development activity.

In order to achieve TOD, a number of stakeholders will need to consider taking a range of pro-development actions, employing tools, and making related investments. This is particularly important for the Snohomish County station areas, given that zoning and regulatory policies currently in place do not appear to be acting as the primary barriers against TOD.

Rationale for Public Support. It is reasonable to ask why the public sector should take action to encourage particular types of TOD or other development. Some of the primary reasons are:

 To achieve strategic goals or public benefits, including vibrant, mixed-use, pedestrian and transit-oriented neighborhoods; reduction of sprawl and compact development; reduction of traffic crashes and injuries; etc. (In some cases, agencies must complete analyses or studies that specify what goals and/or public benefits are being sought, and the value of those benefits.)

 To overcome the development track record within particular areas such as the Brooks Corridor that suggest that new forms of development will result in higher costs, lower returns, and/or greater risk;

 To provide demonstration and/or catalyst projects that help the community to achieve strategic goals and demonstrate to the development community (developers, lenders, appraisers, brokers, etc.) that TOD is logistically feasible, profitable, and will be well received by the market (potential residents, office and commercial tenants, etc.).

In recent decades, many of the most successful urban infill and TOD projects have been accomplished through “public-private partnerships” (PPPs). Definitions of “partnerships” in this context vary widely; broadly, though, LCG views PPP development as development in which both the public and private sectors are playing active roles in enabling a desired type of development to be realized—in this case, TOD. (Parts of the Tools section of this report have been adapted from Successful Public-Private Partnerships, Urban Land Institute, 2016.)

Approaches to Public Support. Given the perception or reality of higher development costs and/or lower developer returns, broad approaches to public-sector assistance include:

 Enhancing project value through investment in public infrastructure or open space, or increased density;  Reducing effective project costs through investments, grants, cost sharing, or philanthropy;  Lowering the cost of capital through financing tools;  Overcoming regulatory and other institutional barriers;  Anchoring the development with a public facility lease or facility; and  Moderating operating cost differences (e.g., often via property taxes, or possibly via common area maintenance, or utility costs).

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The primary approaches to encouraging TOD are shown below. Note that list represents the approaches used by cities, redevelopment agencies, and transit agencies nationally; some of these approaches may not be allowed by Washington state law or local ordinances or may simply be difficult to implement.

 Infrastructure and Public Facility Investment: Prioritizing enhanced transit, street, sidewalk, multimodal trail, water, sewer, park, school, parking, and government building projects to support development. In some cases, it may make sense for public agencies and private developers to divide and/or share the cost of infrastructure (e.g., roads, sidewalks, utilities, etc.). Transit nodes and locations will a full complement of urban infrastructure are more likely to be viewed by developers as promising locations for development.

Capital Improvement Plans (CIPs) defined by cities, counties, service districts (such as special parks or utility districts), transit agencies, and others, are often the first place to look for the resources to support infrastructure investments.

 Entitlement and Process Assistance: Streamlining development approvals and providing appropriate entitlements more quickly at less cost to the project. In development, time is money. If the time required for project approvals can be reduced, development in particular locations becomes more attractive. Often, this can be achieved through zoning and other codes that are clear and predictable (covered above), and through assistance by public-sector officials to ensure that entitlements (design review approvals, building permits, certificates of occupancy, and other required approvals) are awarded efficiently.

 Site Assembly and Assumption of Extraordinary Costs. Cities, redevelopment agencies, and other public agencies may acquire and “assemble” multiple contiguous sites, in order to bring to market a site that is larger or more logically shaped for development. In addition, agencies may conduct related activities such as the demolition of underutilized buildings on site; lot line adjustments or subdivisions; “site preparation” due diligence such as site-specific geotechnical or environmental reports, etc. The purpose of these actions is to prepare sites for development and eliminate as many obstacles or questions about development feasibility as possible.

Public agencies may use their dedicated funds (such as TIF, capital improvement plan funds, general funds, or other), and/or seek grants or low-cost loans from higher levels of government to absorb extraordinary costs including: demolition, environmental remediation, and geotechnical/structural issues linked to site conditions such as soil bearing, engineered caps, flood protection, and wetlands.

 Site Assembly and land write down: Acquiring land and reselling at its redevelopment value or providing financial assistance to a developer where land costs are greater than supportable residual land value for the desired use.

 Financing Tools that Reduce Cost of Capital: Facilitating tax-exempt bonds where allowable (e.g., industrial revenue bonds, periodic disaster bonds, housing bonds, 501(c)(3)) and government loan funds that may be available for public or in some cases private costs;

 Tax Abatements, Impact Fee Abatements, and Sharing: In many states, public agencies may enable private developers to retain or receive back a portion of taxes (property, sales, or other) generated by the project, for use to assist the economics of the project. In Washington, municipalities may extend partial tax abatement (varying between eight and twelve years of taxes) to projects that are mixed-use (including housing and ground floor commercial), achieve certain densities, and/or provide affordable housing. This tax abatement reduces developers operating costs and enables them to use some or all of the savings towards front end capital improvements. (Sometimes, the operating cost reduction increases net operating

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income and therefore increases project value and lenders’ willingness to make loans on the project.) In Washington, these programs are often called Multifamily Property Tax Exemption (MFTE.)

 Impact fee abatement, waivers, or reinvestment is another approach to reinvesting project-generated public revenues near the project site. For example, it is sometimes possible for agencies to direct the transportation or parks impact fees generated by large-scale TOD projects into adjacent transportation or parks improvements. Another approach is to “waive” impact fees by having one public agency (e.g., MRA) pay the fees to other agencies (e.g., transportation or parks departments) on behalf of the developer. This can also be considered a fund transfer.

 Securing funds from Grant Programs. One example is the Community Development Block Grant Program (CDBG).

 Tax Credits that Reduce Capital Requirements: Assisting developers in obtaining tax credits for projects, including new market tax credits (NMTC), housing (LIHTC; by coordinating with allocating body), and historic, and possibly others enabled in Montana;

NMTC is a federally funded program providing subsidy financing to a wide variety of projects in low-income communities. The NMTC program gives taxpayers an aggregate 39 percent federal income tax credit over seven years against equity investments made in designated community development entities.

 Facilitation of Improvement Districts and Special Assessment Districts. Municipalities may help in forming a variety of special districts to enable infrastructure development, real estate development, or district management. These include special assessment districts, local improvement districts (LID), and business improvement districts. Typically, property owners or developers within the defined district contribute to these districts contribute funds on a pro rata share, commensurate with their acreage, square footage, property value, or “benefit” (e.g., access, utility service, or other) to be received from particular improvements. Public agencies may also contribute. Property owners are often reticent to support such districts as they perceive them to be an additional tax or fee—unless they understand, support, and potentially control the improvements to be made. Public agencies may also take the lead to manage the administrative and legal processes needed to form such districts.  Public Development Authorities (PDAs). Public development authorities or PDAs are public corporations created by a city or county to perform a particular public purpose or public function specified in the ordinance or resolution creating the PDA and its charter (RCW 35.21.730). Although PDAs may be created for a general purpose, PDAs are more often created for a specific project or undertaking reflected in the PDA's charter. o The powers of a PDA are provided in chapter 35.21 RCW. PDAs may:

. Own and sell real and personal property; . Contract with a city, town or county to conduct community renewal activities; . Contract with individuals, associations, corporations, the State of Washington and the United States; . Sue and be sued; . Loan and borrow funds and issue bonds and other instruments evidencing indebtedness; . Transfer funds, real or personal property, property interests or services; . Engage in anything a natural person may do; and

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. Perform all types of community services. o A PDA may undertake any "public purpose" specified in the PDA's charter and that is a lawful public purpose or undertaking of the creating municipality.

o PDAs do not have the power of eminent domain or the authority to levy taxes. A PDA may borrow funds or issue tax-exempt bonds. Despite broad authority to undertake various projects, PDA financing is generally project specific. To facilitate access to the financial markets, PDA project financings are often backed by a city or county guarantee, typically in the form of a contingent loan agreement.

CONCLUSION

A comprehensive narrative is provided in the Conclusions and Recommendations section of the Executive Summary.

The current market in the station areas is relatively limited, and significant redevelopment is unlikely over the next 15 to 20 years to the extent of other TODs in the region, largely due to the existing land use pattern.

However, looking at the market potential today is relevant, but short-sighted in a long-term planning effort. Trends, such as preferences, lifestyles, and buying habits may change dramatically in the next two decades. Flexibility should be a key consideration in planning for any development in the three station areas.

That said, with light rail set to open in 2036, discussions of 2038, 2048, or 2058 are not unwarranted. In that time frame, the County has the capacity to change market conditions if they County implement the “Encouraging TOD: Tools and Approaches.” Investments that would improve TOD outcomes (as Contra Costa County, and cities such as Bothell and Mill Creek have done) may be a defining factor. In order for the County to achieve significant mixed-use, mid-rise TOD, they will have to get aggressive and invest in pedestrian- and TOD-appropriate infrastructure. They will also need to target land acquisition, both with South Transit and on their own, look to enter into public-private partnerships, actively attract investment and institutions, and work with Community Transit to build a transit-oriented development in the near term.

If the county does not do this, the future will be like the present, not TOD.

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