Seattle has been the envy of the nation, adding jobs and residents faster than nearly every major city most years since 2010. Unfortunately, greater Seattle was the first area in the nation to be impacted by COVID-19. Because of the growth of the tech sector and the area’s diverse, talented and educated workforce, Seattle will have advantages over other cities in the years ahead. Still, a full recovery will likely take two or more years.
Without intervention, the economic recovery will be uneven. Many of the industries hit hardest are in sectors dependent on foot traffic and visitors. With most office employees working from home and a once-thriving visitor industry decimated by the pandemic, businesses in the downtown core face ongoing challenges. This especially impacts people in lower-income job categories — those who can least afford it. Hotels, retail, restaurants, arts and entertainment have been particularly affected. Those industries will likely take years to recover to pre-COVID-19 levels of activity. Federal aid and downtown Seattle’s residential population of nearly 90,000 have been key components in supporting small businesses that reopened. Downtown neighborhoods saw restaurants and stores spill onto sidewalks and streets over the summer and innovate with tenting and heat to serve customers through the fall and winter.
In the section that follows, we look at the characteristics that have made downtown Seattle the economic powerhouse of the region and use these to assess the current health of the downtown economy.
Downtown Seattle Is the Heart of the City’s Economy
Despite being less than 6% of Seattle’s landmass, downtown accounts for approximately half of the economic activity in Seattle, including more than half the jobs, about a third of brick-and-mortar retail sales, more than a third of leisure spending (including dining) and half the taxes paid by businesses in the city. Downtown businesses contribute 49% of the gross regional product within the city of Seattle.
Downtown’s Most Vulnerable Populations:
The diversity index represents the likelihood that two persons chosen at random from the same area belong to different races or ethnic groups. It also captures the racial and ethnic diversity of a geographic area in a single number, zero to 100 (a higher score represents a more diverse population). From 2010 to 2019, downtown Seattle’s diversity index increased 6 points from 46 to 52. This is still 11 points lower than the 2019 average of 63 for downtowns nationwide.
Downtown Office Construction
With an inventory of 79 million square feet of office space, downtown supports a dynamic economy. This sector has experienced a net gain of 17 million square feet since 2010. This has expanded the downtown office inventory by 27% over that period.
Currently, there are 3.1 million square feet of office space under construction downtown. This is about on par with the average over the past 10 years. Despite this new supply, downtown occupancy rose from 86% in 2010 to 91% by the end of 2020.
In addition to space under construction, there is more than a half-million square feet in demolition, shoring and excavation phases in preparation for future development. An additional 7.7 million square feet are in earlier stages of development (“land-use issued” and “predevelopment” phases) and do not yet have building permits.
A Hot Housing Market Cools
The past decade was one of incredible growth in the residential sector. Approximately 45% of apartment units downtown were built since 2010 and yet vacancy was at a record low of 5% by the end of 2019. High demand drove rent increases faster in Seattle than in most U.S. cities, though this was tempered somewhat by unprecedented residential construction bringing new supply to the market.
In downtown, there are some signs of residential demand slowing down. For the first time since at least 2000*, the center city had fewer occupied apartments at year-end than at the start. Downtown lost 1,594 apartment households in 2020, with vacancy rising to 10.4%. Suburban markets saw a modest increase in occupancy and a slight increase in vacancy, mostly driven by new construction.
The condo market downtown was also not immune to a downturn. Through the summer of 2020, downtown experienced increases in the number of listings and decreases in closed sales and prices while other areas of the Puget Sound saw decreased supply and increased demand and prices.
One outcome of lower rents and condo prices downtown is that they may become more affordable and therefore accessible to a more diverse spectrum of individuals. Younger artists, middle-income families and working-class households may find downtown more affordable in the wake of geographic shifts caused by COVID-19.
*2000 is as far back as this data set goes.
Downtown is the center of the visitor industry for Seattle, with 37% of the Airbnb listings in the city, 78% of the hotel rooms and more than 80% of the hotel revenue. However, due to COVID-19 impacts, hotel revenue was down more than 90% nearly every day through the spring and summer of 2020. As many as 29 hotels closed at least temporarily. By June, the number of units listed on Airbnb in Seattle had decreased by 26% year-over-year.
The hotel sector is expected to take a long time to recover from the downturn, not returning to 2019 levels until 2023 or later.
July 2019 vs. 2020
Seattle serves as the leading U.S. West Coast port for Alaska cruises. The Port of Seattle has hosted more than 1 million passengers annually since 2017* and is homeport to the largest ships on the West Coast, including Norwegian Bliss, Norwegian Encore and Ovation of the Seas. The major cruise lines serving Seattle include Carnival, Celebrity, Holland America, Norwegian Cruise Line, Oceania, Princess and Royal Caribbean.
The 2020 Seattle cruise season was canceled with a loss of roughly $900 million in economic impact and 5,500 jobs.
Port of Seattle
Washington State Convention Center
At least 76 future citywide conventions previously booked at the Washington State Convention Center have canceled, resulting in a loss of at least $512 million in economic impact. Cancellations represent a definite loss to the region because of Seattle’s lack of available future dates and the fact that we have a smaller convention center compared to other major cities.
In conjunction with the State of Downtown Economic Report, the Downtown Seattle Association publishes a development guide each year to summarize construction and investment activity downtown. These statistics are a measure of optimism and confidence in the future of the downtown economy.
COVID-19 has so far affected downtown construction activity less than many other industries. There were fewer new projects announced in 2020 and some were canceled or put on hold. Safety measures also delayed some projects underway. However, Seattle remains one of the top markets in the nation for new construction, once again outpacing all other U.S. cities in Rider Levett Bucknall’s crane index (July 2020).
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21 projects completed
by downtown developers in 2020, including: