Yes, they are moving. They are going in to the corner spot in that new building. Bartell's will be next door. There is also a (non-local) bakery going in on street level.
You can find info about that development and all the others on the Queen Anne Design Guidelines site or the Queen Anne Neighbors for Responsible Growth site. Both of these groups are working hard to keep Queen Anne's 'local' feel, but it is an uphill battle and they could use all of our support.