As I wrote last week, downtown is never done.
So, despite the progress made in rebuilding Seattle’s central core since the pandemic, a serious problem remains with much unoccupied commercial office space.
As my colleague Paul Roberts recently wrote, 19 of famed developer Martin Selig’s 30 office buildings have been placed under outside management or ceded to lenders after COVID-related vacancies left Selig unable to cover more than $850 million in loans.
Earlier this month, a King County court handed over nine of the 88-year-old developer’s buildings to a “custodial receiver” — a court-appointed individual or firm charged with managing assets in financial distress — after Selig’s default on $378 million in debt.
Among them is the 36-story Modern, with a troubled loan of about $235 million, in Belltown across the street from my condo. With apartments and office space, the Modern was originally intended to be home to a WeWork coworking space — 200,000 square feet on the lower nine floors — when the company pulled out before the skyscraper was completed in 2020.
Selig and his company have navigated booms and busts for years. For example, in 1989 he was forced to sell his landmark 76-story Columbia Center, originally built for Seafirst Bank — lost to Seattle because of risky bets in the Oil Patch — in 1985 at Fourth Avenue and Columbia Street. Still, he made enough to fund new ventures.
Joe Cohen, who owned Belltown’s beloved Ralph’s Grocery and Deli — now an empty hulk after the upscale store closed in 2015 and CVS pulled out later — told me how he acquired the property from Selig during an earlier downturn. The last I heard, Cohen was living in Paris.
This time will be more difficult for Selig and his company because of a glut in office space, especially in downtown Seattle, while the Eastside is doing better.
“I don’t see how he can overcome the low occupancy issues that he’s experiencing in a way that would enable him to … bring these properties out of receivership and continue to own and operate them,” according to Steven Bourassa, director of the Washington Center for Real Estate Research at the University of Washington. “I just don’t see that happening.”
According to the latest gold-standard report, Emerging Trends in Real Estate, by the consultancy PwC and the Urban Land Institute, for the first time in years Seattle is not among the top markets to watch. Dallas, Miami, Houston, Manhattan, N.Y., and Columbus, Ohio (!) top the list. Seattle isn’t among the top 20 except in homebuilding, where it ranks No. 10.
Emerging Trends shows offices with the lowest prospects for investors nationally, topped by single-family housing, industrial distribution, multiple-family housing, hotels and retail.
“Office, although the lowest-rated core property type, still provided a surprise as the most improved in scores … after declines in the last few years”
Still, the industry executives and investors interviewed for the report rated offices as the “worst prospects” this year, even though sentiment improved from 2024.
It’s worth remembering that about 78% of Americans don’t have the option of working remotely. However, the rise of working from home increased substantially during the pandemic and especially affected technology centers, including Seattle. Amazon’s return-to-office mandate has helped downtown considerably and the neighborhoods in and around its buildings are clean, vibrant and inviting.
The investment management company Colliers International has the Puget Sound region ranked seventh nationally in preleased office space (nearly 68%). But much of this comes from Eastside strength. Philadelphia ranked first at 100%.
The consultancy Cushman and Wakefield reported that Seattle saw an increase of nearly 700,000 square feet of office leasing so far this year; but this goes against the headwind of years of losses, such as a loss of nearly 1.6 million square feet in the first quarter of last year. Nearly 31% of the city’s offices are empty, compared with 21% nationally.
Tulsa, Okla., posted office vacancies of 9.4% in the same report. Oklahoma’s second-largest city embarked on an ambitious program to lure remote workers, build a small local tech workforce, bridge economic divides and create greater equity in a place still coming to terms with the 1921 Tulsa Race Massacre, when a white mob destroyed the Greenwood area of the city — a place so prosperous it was called “the Black Wall Street.”
Urban scholar Richard Florida wrote, “Tulsa shows how economic development can be done in more inclusive, community-enhancing ways.”
Yet the real estate adage of location, location, location matters. Despite Tulsa’s jewel box of Art Deco buildings, it lacks adequate transit, light rail and Amtrak service, and sits in a deep-red state — the latter not attractive to some top talent.
With an inventory of 6 million square feet of office space, it’s no surprise that no new buildings are underway here. The skyscraper planned for the shuttered Bank of American branch at Fifth Avenue and Olive Street? Forget about it for now.
Seattle’s downtown office situation might be too much for the resilient Selig, who was born to a Jewish family in Nazi Germany, to bounce back from.
The family emigrated to Seattle, where young Martin worked in his father’s linen shop before going into real estate. His first major project was a shopping center in 1962.
I’ve appreciated the art at many of his buildings, such as the Popsicle sculpture outside the “Darth Vader Building” at Fourth Avenue and Blanchard Street. The Fernando Botero “Adam” sculpture was once in the nearby park, which, although generally private, is safe and well maintained. “Adam” was moved to another Selig property at Second Avenue and Madison Street.
Art is such a key feature in or around many of the buildings, and Selig was really into painting — as in, his own canvases.
Roberts said when he talked to Selig a few years ago, he was more interested in talking about his paintings and collection than he was in discussing office development.
Certain tenants were once attracted to Selig’s Class B office spaces — such as smaller companies unable or unwilling to pay for a Class A space (like in his former prize, Columbia Center), but who really wanted to be downtown.
Yet during the pandemic, many decided to leave, not venture downtown or seek less-expensive space in the central core, and his occupancy rates fell.
PCC Markets was one example — it leased a headquarters in a Selig building at 3131 Elliott Ave., which is among the nine properties that went into receivership last week. Selig insisted that space was Class A — brokers might disagree.
Some tenants complain about the upkeep of properties in some of the Selig portfolio.
Another factor clouding the future of Selig’s company was the departure of his daughter, Jordan Selig. She was the executive vice president of Martin Selig Real Estate and the presumptive heir.
Downtown Seattle has benefited enormously from the risks Selig took over many decades and the big bets he made, which mostly turned out well.
Even with the company losses, this man developed a sizable amount of the downtown during a period that helped prime it for the growth we’ve seen over the last few decades. Selig and his projects will be a lasting prize for downtown, regardless of ownership status.
