If you’re a real estate professional, it’s likely that you’ve spent much of 2023 brainstorming how to help improve occupancy rates in the current climate. From interest rate recovery, to dips in multifamily home ownership, to single-use buildings that are still recovering from the COVID effect, there are certainly more than a few hills to climb in 2024.
At Porter, we are deep-diving into innovative solutions and mindsets to help our clients thrive in this new era of real estate. As we move into 2024, we had the pleasure of connecting with Seattle-based property developer Deborah Ross in a conversation about the challenges we’re facing in the industry—and her perspectives on the solutions (plus, she shared some optimistic gems to hold onto).
Our conversation with Deborah was so fruitful and inspiring—we knew we needed to share it with the greater Porter community.
A conversation with property developer Deborah Ross
PORTER: In the current economic climate, what is your perspective on what developers can do with the capital and the property inventory that they have?
DEBORAH: I would say no matter what the market is, there’s always this opportunity that some landlords don’t see about using the ground floor to turn the dial on the rent opportunity upstairs. Say you have 500,000 feet of office space and 5,000 feet of retail on the ground floor–rather than trying to maximize your rent downstairs, what do you do to put a retail tenant in there that’s going to drive your rent in the office above?
“The office worker is the customer now—not the corporate real estate committee. ”
And now there is another slightly different question. How do we get office workers to come into the office so that their corporate real estate committees will sign a lease? And how do we make those office workers want to come into the office? The office worker is the customer now—not the corporate real estate committee.
The obvious things are a coffee shop and nice lunch options. But it’s hard to compete with home in a lot of those ways. I’ve got coffee at home, I’ve got lunch at home. I also have my dog and a nap room. So then, how does the landlord create a community that people want to be part of? If I have an office building that I want to stand out and have a limited budget, I might focus more on how we get people engaged with each other in our office building. Because when you work from home, it’s the human connection that you miss.
“There's an amenity arms race going on.”
There’s an amenity arms race going on, and you can throw all the money in the world at it, but somebody else will be doing the same. I think our offices are pretty amazing. I think it’s great to have beautiful gyms, coffee shops, outdoor spaces, and all of those things—but that’s not necessarily going to be enough to incentivize people to come to the office.
“You can force a certain number of people, but there's so much uncertainty in the office market. As a group, landlords need to shift their thinking to answer, what's the incentive?”
How do we solve this so that people want to be there? You can force a certain number of people, but there’s so much uncertainty in the office market. As a group, landlords need to shift their thinking to answer, what’s the incentive?
For example, for me, my commute is a hassle. So, what makes taking that hour out of my day worthwhile? If I’ve got a lunch date with somebody downtown, that’s way more motivating. I’m going to get to see my friend.
“I do think that retail vacancy is a drag on the vibrancy of downtown Seattle.”
Not every apartment building can support its own coffee shop. The math doesn’t work. Two hundred people cannot keep one coffee shop in business. I do think that retail vacancy is a drag on the vibrancy of downtown Seattle. Part of it is that we just have too much retail, and we should be focusing on some key retail streets to make those feel active.
The good news is that we’ve got more people living in downtown Seattle than we ever have before! Cruise ship customers arrive in huge numbers, and there’s a brand-new convention center. We’ve got the Link light rail to the Kraken facility. We’ve got the waterfront being developed, which is going to be a game-changer. I think all of those things together really do make the neighborhood a consumer city. Seattle can be a place where people come to consume, not just to work. And that’s the draw.
DEBORAH: Right now, retail is a bright spot. There are definitely retail deals happening, and I expect that to continue. In regard to the bigger picture, I recently went to a dinner where my long-time mentor and former employer was the keynote speaker. He is close to retirement and has been a developer in downtown Seattle his whole career. He talked about how, in the 1970s, Boeing was going to leave Seattle. It was a real crisis. And then, in the 1980s, interest rates were 18%, and it felt like we were never going to recover. Then it was the dotcom crash. And then it was COVID.
However—if you had bought property downtown in the 1970s when everyone thought it was a disaster, and you were sitting on it today, it would be a goldmine! I think in the long term, Seattle has so much going for it. We have natural beauty, we have a great climate, we have vibrant arts and culture, and we have the intellectual capital from universities and the established life science and tech companies. The talent we have tends to spin off new interesting companies and create more reasons to be here, and more reasons why people want to live here. That’s why I would never bet against it. Whether 2024 is going to be a great year or not, I don’t know. But in the long term, Seattle is going to continue to be a strong market.
