An unusual proposal to convert an ailing downtown Seattle mall into office space appears to be on hold, according to media reports and city officials.
On Thursday, a 3-month-old plan to turn most of the five-level Pacific Place Center at Seventh Avenue and Olive Way into office space was said to be “off the table,” according to the Puget Sound Business Journal, citing a source familiar with the $260 million proposal.
Paperwork for the renovation filed May 11 remains in the city’s permitting system. But Seattle officials haven’t received any formal communication from Seattle developer Pine Street Group, which was listed in filings as the project applicant, since June 3, when the Department of Construction & Inspections asked for revisions to a preliminary site plan.
A delay or outright cancellation would be another setback for a downtown still reeling from pandemic closures, absent office workers, security problems and a traditional brick-and-mortar retail sector that was flagging even pre-COVID.
Pine Street declined to comment Friday on the project’s status. Pacific Place owner Madison Marquette and Los Angeles-based Hudson Pacific Properties, which is listed in filings as the project owner and is reportedly in a partnership with Madison, also did not respond to questions Friday.
Preliminary plans had called for converting “floors 2 through 5 to office, including adding elevators, new office lobby, adding windows,” and raised the possibility of “adding 1 to 3 towers on top of the existing structure, potentially residential, office and/or hotel.”
The nearly 340,000-square-foot retail center, which has an AMC multiplex theater on the top floor and a massive, 1,164-stall underground parking garage, opened in 1998 amid hopes for a revival the downtown retail core.
But the mall has struggled recently to attract and keep tenants, whose number has fallen from more than 50 in 2017, according to contemporary media reports, to the roughly two dozen currently listed on the Pacific Place website.
Several Seattle-area retail and office experts said they weren’t surprised by the project’s potential stall, given so much uncertainty over the downtown Seattle office market.
“I thought it was a foolish idea and I’m glad to hear that it may not be going forward,” said Jeff Rosen, a commercial real estate broker at Seattle Pacific Realty who specializes in retail.
Office vacancy in Seattle’s central business district, which includes Pacific Place, jumped to 18.6% as of June, from an already-high 16.2% in March, according to commercial real estate agency Kidder Mathews. That compares to 5.5% on the Eastside and 10.2% regionally.
With an “incredibly soft” office market, “I wouldn’t be surprised if all developers who have planned office buildings were reevaluating building those,” added Chris Kagi, a broker for Savills in Seattle who works with tenants leasing office space.
“There was a belief that after the omicron wave, office occupancy would go back up,” Kagi said, “and over this summer that has not proven to be the case.”
Some of that softness reflects the slower-than-expected return of remote workers to downtown offices, where physical occupancy last week was just 37% of the level from the same week in 2019, according to data from the Downtown Seattle Association.
News of the project’s possible stall didn’t surprise Earnest Thomas, president of the Onyx Fine Arts Collective, a nonprofit that primarily represents visual artists of African descent and that has been a Pacific Place tenant for five years.
Given downtown’s lagging recovery, he said, “a lot of us didn’t think it was going to happen.”
Thomas also questioned the wisdom of a plan that could sacrifice downtown retail spaces, many of them sized for smaller businesses, just as the city was trying to encourage office workers to come back downtown and attract more full-time downtown residents.
“There needs to be something here to keep them … in our downtown core, to keep the business revenue flowing,” he said.
Seattle Times real estate reporter Heidi Groover contributed reporting.
