By Jack Stubbs
While Seattle’s Fremont neighborhood might not yet be the obvious location for office space, as some of the region’s larger submarkets such as Bellevue, South Lake Union, or the CBD, some of the neighborhood’s recent commercial leasing activity suggests that it has well and truly arrived on the radar—at least as far as the rapidly expanding tech industry is concerned.
Google and Adobe, two ever-present big-hitters in the industry, both have offices established in the neighborhood. CoU Limited Liability Co., a prominent group of commercial real estate developers, announced in February that they would be leasing a five-story, 125,000 square foot office and retail project at 744 N. 34th St., just down the street from the Fremont Troll.
While some of the big players in the tech industry are making their presence felt in the Fremont neighborhood—which is located north of the Queen Anne District and east of Ballard—startups are also being drawn to the up-and-coming area. Last summer, GraphLab, a machine learning company founded in 2009, moved into a 4,320 square foot space in the neighborhood. One of the more recognizable names, Tableau Software Inc. last year expanded its Fremont headquarters by signing a lease for the space previously occupied by Sound Mind & Body Gym, located at 437 N. 34th St.
Further expansion, it seems, was only a matter of time. In a more recent breaking development, the company announced on June 9th that it had signed a lease for NorthEdge, a 210,000 square foot, four-story mixed-used building near Gas Works Park. The project will be developed by Touchstone. The building is currently under construction, and is expected to be ready for occupancy in the spring of 2016. Prior to this deal, Tableau had leased 150,000 square feet of space in Fremont and almost 24,000 square feet in Kirkland. One of the fastest-growing tech companies in the Puget Sound region, the company has almost 2,200 employees worldwide including 1,300 in the Seattle area. The NorthEdge building is expected to accommodate at least 1,300 Tableau employees.
While more and more tech companies—Tableau being the most prominent example—are beginning to locate in Fremont, the leasing landscape has always been plagued by a distinct shortage of commercial and office space, according to Lori Sandler, property manager at Equinox Properties Corporation. “It is a great place to be, but it’s really hard to find land to build more office space. Fremont needs more office buildings. Many people who want to relocate their office [to the core of Fremont] are unable to, and there’s a major shortage of commercial space,” Sandler said.
As the commercial and office leasing market in Fremont—and in the greater Seattle region—tightens up, developers would be wise to compensate for the rapid growth that is occurring, according to Michael Osterfeld of the Fremont Dock Company. “Seattle is out of land. If you want a city like Seattle to succeed and keep growing, you have to grow up. You have to urbanize,” Osterfeld said.
Although the idea of upward growth might seem like a viable option, the smaller size of Fremont’s commercial market—relative to the more robust markets in Seattle’s CBD or South Lake Union—means that vacancy rates have constantly remained at an all-time low.
The tech tenants occupying space in Fremont are having a large bearing on the low vacancy rates, now more so than ever. “For many months now, we have not had any vacancies. We have what we consider a large tech company on the fifth floor. Every time one of my fifth floor units becomes available, it’s snatched up,” Sandler said.
Osterfeld of Fremont Dock Co. echoed Sandler’s sentiments, which suggests that the low vacancy rates are being felt neighborhood-wide: “I have 108 tenants in commercial industrial real estate. I usually have one or two spaces to show you. So my vacancy rate is usually about less than one percent,” he said.
Because Fremont’s commercial square footage inventory is significantly less than that of surrounding areas, the rapid growth of the tech industry, especially, means that demand for space remains at a premium. “Fremont is a small market to start with. The entire market is growing as some of these projects continue to take shape. It’s about 1 million square feet, and from a vacancy standpoint in Class A [space], it is 100 percent occupied,” David Abbott, senior vice president at Colliers International in Seattle, said.
The high desirability and attractiveness of the commercial office space in Fremont—demonstrated by the perpetually low vacancy rates—is due in large part to the neighborhood’s ideal location, especially it’s accessibility to other nearby areas. Fremont is colloquially known in the Seattle region as the “Center of the Universe,” and it’s easy to see why. “Fremont is the access point to everything. The reason why commercial real estate has always been successful here is because [the neighborhood is] five minutes from everywhere,” Osterfeld said.
Fremont is not only a desirable location in itself—it is also a focal point for the rest of the region, according to Osterfeld. “Fremont is a crossroads, whereas other areas are destinations. Fremont is the connection to all the [other] neighborhoods,” he added.
Tech companies—potential tenants in the area—are starting to recognize the connectivity and accessibility that Fremont provides, according to John Teutsch of Teutsch Partners LLC. “The companies that are locating in Fremont are somewhat more oriented towards South Lake Union and the Seattle CBD than [other areas] in terms of being connected,” Teutsch said.
While the presence of the tech industry continues to increase throughout Fremont and the surrounding neighborhoods, such as Ballard and Wallingford, and commercial office space remains in high demand, issues of transportation and sustainability continue to play a role in terms of Fremont’s connectivity to the rest of the region.
“The concentric circles will continue to broaden. Well-located commercial office product [in Fremont] will continue to be in demand, so long as you can either walk to downtown or ride your bike and get there quite easily,” Abbott said. Residents of Seattle on the whole have always been green-oriented regarding sustainability—and tech tenants looking to locate in Fremont are no exception.
Although Fremont currently provides the ideal location and accessibility that so many potential tech tenants—and, more importantly, their employees to whom they cater—desire, the neighborhood’s prominent lack of commercial and office space might prompt companies to look elsewhere, especially those looking to expand their footprint. Ballard, Fremont’s neighbor to the northwest, might provide expansion opportunities unavailable in Fremont, according to Abbot.
“A couple of sites in Ballard are controlled by developers who are considering commercial office, and it wouldn’t be outside of our imagination to see high-tech tenants decide that Fremont isn’t large enough for them or doesn’t have the growth trajectory or additional square footage that they need,” he said.
Although Ballard is typically thought of as a residential and industrial neighborhood rather than as a commercially oriented one, the additional space available there might appeal to companies looking to settle down long-term.
While these practical considerations always need to be taken into account by tech companies looking to recruit and retain talent, it often boils down to a quality-of-life issue for the neighborhood’s residents, Sandler of Equinox Properties said. “Fremont has a good variety of coffee shops and restaurants, it’s very walkable. All the office space is located within a few blocks of places that people can easily get to.”
Located right along the Burke Gilman Trail, Fremont is an accessible, interactive and communal environment. According to Jeff Chaney of Kidder Matthews Bellevue, Fremont really is a place that is becoming increasingly desirable for the younger demographic—which in turn is a huge draw for the tech companies looking to recruit talent there. “[It] is a unique community within Seattle where a lot of young, urban, hip people are living,” Matthews said. “Fremont has become an office market that’s up and coming,” he added.
Indeed, while Fremont is a neighborhood experiencing considerable success currently, it also appears to be an area on an upward curve—so long as it retains its zany, unique character that made it so appealing in the first place, according to Osterfeld. “I believe Fremont draws the quirky: the not-so-normal. Fremont’s unique character will stay intact because [it’s] a neighborhood in the city that’s different.”
Tech companies located in Fremont might indeed be there for the long haul, too. Although the distinctly limited inventory of commercial office space might serve to dissuade companies looking to expand their long-term footprint, the neighborhood is one that these companies won’t give up easily. “When [the companies] run out of space in Fremont, they will just keep expanding in other places, but they won’t leave. It’s a quality of life standpoint,” Osterfeld said.
Photo courtesy of Hafida Acuay – spottedbylocals.com