The Kirkland Planning Commission has recommended the City Council approve MRM Capital’s zoning change request allowing them to redevelop the property just south of Parkplace to mixed use, residential and retail.

During a study session at the council’s Oct. 6 meeting, Senior Planner Angela Ruggeri presented the commission’s recommendations to the council on the request that the code be changed to allow six stories instead of the current five, but still maintain the current 67-foot height limit, as office floors are taller than residential floors. Right now, the 74,000-square-foot property contains a one story office building. It was formerly occupied by Bungie Studios, creator of the Halo video game series, from 2004 to 2010. MRM Capital has owned the property since 2005.

The council held another study session on the amendment request at their Oct. 20 council meeting, past the Reporter deadline.

Originally submitted in 2011, the request was to change the building story limit from five to eight stories or 100 feet, whereas current zoning allows for a height of 67 feet or five stories, with the intention of having retail on the ground floor if they were able to build residential above.

Discussion on the PAR (Private Amendment Request) in 2012 were ultimately tabled, then eventually postponed so it could be included as part of the city’s update to the Comprehensive Plan. Last year, city staff examined the amendment request as part of potential updates to the Central Business District (CBD) encompassing the property. There was another delay, however, after Touchstone, the original owner of Parkplace located north of 434 Kirkland Way, decided to sell the property. In response, MRM requested they put the PAR on hold until the fate of Parkplace became clearer. During a Planning Commission study session on March 12, MRM withdrew its request for an eight story height limit based on feedback from the community and later submitted the new request.

The commission’s recommendations include that the site have no limitations on residential, but offer incentives for the property owner to develop office space by allowing for an 80 foot height limit for office, compared to 67 feet for residential. As part of the redevelopment, the commission recommends the council require certain public benefits, such as a 54-foot wide easement road from Parkplace, which is currently planned for redevelopment beginning next year, and Kirkland Way. Other requirements include a minimum 9,000 square foot tenant space among the ground floor retail, a public plaza of at least 2,000 square feet and 10 percent of the residential be designated for affordable housing.

Commission Chair Eric Laliberte said that the recommendations reflect “fundamental changes” to the office market.

“We felt it was to keep existing zoning would be effectively land banking this, hoping that one day market conditions changed again so that office at this current zoning would happen,” he said. “So what we did was we thought that allowing for residential would allow for redevelopment to occur, but we also wanted to include an incentive for office.”

However, concerns have been raised about the effect a zoning change from office to mixed-use would have on downtown. In a June 20 memo, Planning Director Eric Shields wrote that “the change of zoning would result in a loss of job capacity and the addition of dwelling units.” Together with the changes made to the Parkplace masterplan that reduced the overall size, Shields wrote that it would result in a potential downtown job loss of 3,278, though at the same time he concluded that despite this the city would still be able to meet its citywide employment target due to the redevelopment planned at Totem Lake, which is currently designated as an urban center. The council has considered possibly designating downtown as an urban center. Under King County’s definition, downtown would need, among other things, a minimum of 15,000 jobs within half a mile of a high capacity transit station, a minimum of 50 employees per gross acre and a minimum average of 15 housing units per acre. While Kirkland’s downtown transit center doesn’t currently meet the county’s criteria, Asher said that allowing the site to change to residential might prevent them from meeting the criteria concerning jobs.

“If downtown Issaquah can be an urban center, downtown kirkland can be an urban center,” he said. “I think that’s a simple way of looking at it. If we are deficit in two items, right now the transit center, the second is jobs, then I would like to move that to one item that we’re deficit, and it’s not my problem, it’s someone else’s problem. Then we can go shopping for that and get that because we’ve done the things we can.”

“If we don’t designate downtown as an urban center it will not attract the investment,” he said. “It will not attract the state and regional investments, and we can already see it’s really tough to get that; and the sustainability of our downtown over the long term I think is jeopardized, seriously jeopardized, if it’s not designated as an urban center. I really don’t want to see us walking away from something we control, and that is converting office to residential.”

Councilmember Jay Arnold, supporting the recommendations, said the changes would complement the Parkplace redevelopment, though he supported the idea of regulating the design guidelines.

“What this amendment request does is bets on Parkplace as our economic development strategy downtown,” he said. “It leverages it, it builds on it, it connects to it, and it agrees with it.”

MRM’s desire to build residential instead of office has met with opposition from some in the community, including Ken Davidson of Davidson Serles & Associates, which owns the Emerald Office Building on 520 Kirkland Way. In a report for Davidson, Seattle-based consultant Gardner Economics stated that a very low vacancy rate for office space in Kirkland indicated a “healthy demand for commercial space.” The report concluded that the amendment request was “inappropriate from a market demand standpoint” and converting it into office space would undermine the city’s ability to meet obligations for employment under the GMA.

In response to the Gardner letter, real estate appraiser Anthony Gibbons wrote to the commission on behalf of MRM Capital stating that MRM’s site is not needed to meet the actual demand for space downtown.

“In any event, with 650,000 [square feet] on the horizon, we can comfortably predict that the Kirkland CBD (central business district) will have enough office space for the downtown area for the foreseeable future, without needing to rely on the MRM property for additional supply,” he wrote. “History tells

us that office markets are very vulnerable to business cycles, and occupancy and rental rates fluctuate significantly (down and up) when economic conditions change. The probability that we will encounter another down-cycle (which typically occurs at least once a decade) prior to the full absorption of currently proposed space is very probable, and will further delay other development opportunities.”

In regards to the GMA mandates, Gibbons said that “These goals are important to planners and city officers and that may in turn impact developers, but developers themselves (wisely) do not heavily base development decisions on its mandates…This is a 20-year goal, not a prediction or projection, and neither a developer nor lender would base a multimillion construction decision upon its contents.”