D
irectly East of Lake Washington, the once sleepy suburb of Seattle turned tech hub will soon be home to the most exclusive retail shops in the world.
Debuting later this year on a site that previously housed a Dairy Queen, Travel Lodge, Red Robin, and Taco Time, is The Bravern — a grand mixed-use development boasting Neiman Marcus, Hermès, Louis Vuitton, Jimmy Choo, Tory Burch, DNA 2050, Botegga Veneta, and Salvatore Ferragamo.
This striking before-and-after portrait is a perfect illustration of how quickly Bellevue, Washington has grown in the span of a few short years and its maturity as an economic center.
Impressive Demographics
In 2008, Fortune magazine named Bellevue the number one place in the country to live and launch a business. "Bellevue has grown with unusual grace in recent years," wrote Fortune, "Huge corporations exist symbiotically with startups, a booming downtown abuts healthy residential neighborhoods, and the rising skyline is tempered by an abundance of parks, as well as lakeside and mountain views."
The area's demographic profile is certainly impressive. The city's resident population stands at 118,000, while its workforce is over 138,000 and climbing. Average household income within a five mile radius is $122,000 — almost twice the national average. Estimates of daytime population are around 200,000.
Microsoft's Role
The area's biggest employer is Microsoft, based in nearby Redmond. It employs nearly 40,000 workers in the Puget Sound region. In 2006, the company signed commitments for over a million square feet of new office space in Belleveue, including the entire two-tower office component of The Bravern. Microsoft estimates that Bellevue will soon house 5,700 workers in three separate projects.
Microsoft says it chose Bellevue for the convenience of its employees — 80% of whom live on the Eastside. The proposed East Link light rail line has also been approved to connect Bellevue with downtown Seattle and Redmond and the area enjoys easy access to the freeway.
The town's relationship with Microsoft has not always been rosy. During the tech bust in 2000–2001, the company pulled out of Bellevue and propelled an office market collapse that scarred the community for several years, ultimately raising office vacancy rates north of 20%. It prompts questions about the strength of an area so heavily reliant on one company and its countless vendors and suppliers that call Bellevue their home. When the new space is delivered, Microsoft alone will occupy approximately 10% of the downtown office space.
Microsoft's huge presence and myriad of tentacles in and around Seattle are eerily reminiscent of cities such as Detroit that have paid dearly for their over-reliance on one industry and a small number of large companies.
There are already some signs of weakness in the Microsoft engine. The company recently cut 5,000 local jobs and backed away from a tentative agreement to take 300,000 square feet of space in a new office building in downtown Seattle which is under development by former Microsoft cofounder Paul Allen's real estate development organization, Vulcan, Inc. To be clear though, Bellevue does house other major corporate headquarters, including T-Mobile, Expedia, Paccar, and Eddie Bauer.
High Tech and High Fashion?
The abundance of technology companies has led some to wonder whether Bellevue's affluent residents and workers are as fashion-conscious as other shoppers in other affluent markets around the country. In an interview with the Seattle Post-Intelligencer in February 2009, Neiman Marcus' Senior Vice President of Store Development, Wayne Hussey, said psychographic issues were an original concern for the retailer. The Post-Intelligencer described it as the "shopping habits of fashion-blind Pacific Northwesterners." Hussey said the recent growth and maturation of the area has mitigated many of their concerns.
Andrea Wasserman, a Seattle-based retail strategist, reflected on her move to the area from Manhattan. "People ‘warned' me that everyone would be exclusively outdoorsy. In reality, while there's an appreciation for the outdoors, many of the same people who are camping in the woods over the weekend really care about what they wear to work each Monday through Friday," she said.
The fact that downtown Bellevue is home to one of the country's most successful enclosed malls, Bellevue Square, help further mitigate any concerns. The 1.2 million square foot center is reportedly grossing over $600 per square foot in average tenant sales. Already anchored by one of the highest grossing Nordstrom stores within the chain, it recently underwent a remerchandising effort to enhance the number of fashion brands, including Burberry, 7 For All Mankind, Vera Bradley, Eileen Fisher, Lacoste, and Free People.
Regarding the prospects for the area's new retail scene, Wasserman said, "There may be more interest in casual attire than there is in the Northeast, but that doesn't mean people don't want to look good. For many of these shops, it will come down to buying the right assortment for each store, which is no different than what they need to do for any of their other locations across the country."
Condos, Hotels and New Urbanism
Downtown Bellevue is also getting a jolt from thousands of new condominiums recently added and under construction. The Bravern alone has 455 new residential units delivering in 2010. According to a May 2008 article in the Bellevue Reporter, Bellevue's Planning and Community Development Director told a group of 300 realtors that the downtown population will double by 2010 and experience the fastest residential growth per capita of anywhere in the country over the next 10 years.
One challenge to creating the urban experience for these new residents will be the existing infrastructure. Originally developed in the 1960s and 70s, Bellevue is not exactly a pedestrian paradise. Each block spans two football fields creating "superblocks" and the streets span four to six lanes of traffic. These barriers will make it difficult to connect the new mixed-use projects like The Bravern with other existing amenities such as Bellevue Square.
Local foot traffic is getting another boost from thousands of new and renovated hotel rooms. Recent openings include a Westin, a Courtyard by Marriott, a renovated Hilton, and Hyatt Regency. With several more hotel projects in the pipeline, Bellevue expects the boom in downtown development to attract more visitors. Microsoft anticipates it will contribute 100,000 local hotel room nights per year.
The Impact of the Downturn
The recent economic slowdown has not missed Bellevue. However, relative to downtown Seattle, conditions remain strong. A first quarter 2009 Cushman & Wakefield report showed Class A office rents down nearly 15% in Seattle but down only 3% in Bellevue. Office vacancy rates are also lower in Bellevue than in Seattle.
Area observers credit the stable office market to successful pre-leasing and the lack of over-building. However, the slowdown may still stall some of Bellevue's aggressive growth plans. At least five office projects at various stages of planning have been shelved until the economy rebounds.
Bellevue's unprecedented rise has drawn national attention and many of the new development projects are poised to capitalize on its continued growth. The story of Bellevue is still very much being written though, and a new chapter will begin this Fall with the opening of The Bravern's retail portion in September 2009. Growth is certainly coming to Bellevue, but how the city reacts to this upscale center may have a great impact on the form of future development downtown. It is a fascinating case study, stay tuned.
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