Seattle Commercial Real Estate News of the Day

Friday, February 24, 2012

Seattle Times Daily Journal of Commerce Headline
Sears shedding some stores, reports 4Q loss

Two Seattle developers plan modular apartment projects

New-home sales dip after 4 straight monthly gains Two Seattle developers say they intend to start construction this year on modular apartment complexes in Ballard and the University District.

R.D. Merrill Co. plans a six-story, 124-unit building at 5601 24th Ave. N.W., with construction by the end of the year.

Triad Capital Partners plans to start construction this summer on a five-story, 75-unit complex at 4029 Seventh Ave. N.E. Nicholson Kovalchick Architects is designing Triad’s complex and Urbal Architecture is designing Merrill’s. DCI Engineers is the structural engineer on both.

R.D. Merrill Co. plans a six-story building with 124 apartments at 5601 24th Ave. N.W. in Ballard.

Merrill said it intends to hire Seattle-based OneBuild to make the modular units. Triad said OneBuild has done pre-construction work, but no construction contract has been signed.

Modular units are built in a factory. They include all the electrical, plumbing and lighting systems, and appliances — all the innards of typical apartments. The units are shipped to the site and stacked like Lego blocks using a crane. Then they are connected together and tied into the utilities.

Modular projects have been built nationally and internationally, but local market observers say these will be the first large-scale modular apartment complexes in Seattle.

Triad Capital Partners wants to start construction this summer on 75 apartments at 4029 Seventh Ave. N.E.

Seattle’s Unico Properties had announced in 2007 that it planned to construct several apartment buildings in Seattle and Portland using modular units, but the projects were put on hold due to economic conditions.

Unico said its modular project, called “inhabit,” represented the future of urban living. Called “the iPod of apartments,” the units were targeted at Generation Y renters who Unico said were willing to give up space to live close to shops and restaurants.

“Certainly there is a lot of hope this time,” said Brett Allen, a senior vice president with Triad Capital Partners. “It is once again the wave of the future.”

Dale Sperling, who formerly headed Unico Properties and is now CEO of OneBuild, declined to comment on any prospective projects. His firm manufactures modular units that can be used for multifamily, student housing, hospitality and single-family houses.

Sperling said wood-frame modular units are more efficient than typical stick-built construction. They offer greater quality control and less waste because they’re built in a factory, with no down-time because of weather.

“You’re not building linear from bottom to top,” he said. “While the site work is being done, we’re building the wood-frame construction in our factory. Time is money, so if we can speed that process and make that process more efficient then it saves the developer money.”

Triad’s project will be all studios, each less than 400 square feet. It will not have a podium, parking or retail.

Allen said site work can start while the modular units are built off-site, saving financing costs.

Triad hopes to open its complex in the fall of 2013 as University of Washington students are looking for apartments. Allen said modular construction will help it meet that time line.

“If you open the doors at the end of October you may have a completely empty building for 11 months because of the cyclical nature of the renters in that neighborhood,” Allen said.

R.D. Merrill’s project will have parking, 3,300 square feet of retail and five townhouses below the modular units, which will be studios, open one-bedrooms, one-bedrooms and two-bedrooms, ranging from 430 to 1,060 square feet.

Merrill Vice President Billy Pettit said the “inhabit” project introduced his firm to modular.

“From a conceptual standpoint it hit home for us because those were smaller, more efficient units yet it didn’t feel like that from the inside,” he said. “It felt very comfortable.”

He said the conventional portion of the Ballard project can be built in tandem with the modular units, saving time and money, and getting the project to market faster.

The Ballard complex will have the amenities of the firm’s conventional projects, he said, and should appeal to Gen Y renters.

Tom Steidl, managing associate with Nicholson Kovalchick Architects, said one of the big differences with modular is that the Washington State Department of Labor & Industries permits it — along with the Seattle Department of Planning and Development — because modular is a manufactured project.

Troy Bean, a principal with DCI Engineers, said modular can get to market “three to nine months faster than regular construction projects.”

Locally, he said, DCI worked on a modular condo project at the Suncadia resort prior to the recession, and is working on a six-building modular apartment complex in Regina, Canada.

Seattle developers started looking at modular multifamily during the last building boom as a way to get units to market faster, he said, and have continued to mull it since then.

Skip Slavin and Chris Langer considered it for their 48-unit apartment complex at 418 Bellevue Ave. E. on Capitol Hill, but it didn’t work with the project timing, Slavin said. Their LLC, ICP 418 Bellevue, plans to start the project in the fall. It was designed by Runberg Architecture Group.

“I think there’s definitely a future for (the modular) building system and we are going to consider it on other projects that were hoping to get,” Slavin said.

Daly Partners of Seattle is considering modular for a seven-story, 49-unit, all-studio apartment complex it plans to build in Belltown this year. The site is at 2217 Third Ave., and the building is being designed by Bushnaq Studio.

Managing member Jim Daly said modular offers quality control and faster delivery. But modular companies want a substantial deposit, and “when they arrive on site they want their other 50 percent.”

This doesn’t fit the way real estate projects are financed, he said.

“Like most developers we can’t just pony up 50 percent of the construction costs out of our pocket,” he said, but hopefully that issue can be resolved.

Allen, with Triad, said one negative with modular projects is that few have been built.

“There aren’t as many case studies of successful modular construction as we would like to see — that a lot lenders would like to see.” But, he said, “We think that the positives outweigh the uncertainties right now.”

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About CRE Northwest

Specialist in office & investment real estate in Seattle & the Eastside
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