Former residents of the pricey, red-hot San Francisco Bay Area market are not the only ones fleeing to Puget Sound. A wave of companies based in San Francisco and Silicon Valley, particularly in the technology sector, has been washing over the Seattle-Bellevue market over recent years.
“It’s no small number that tech is a major factor here,” said Chris Hughes, Bellevue-based managing director for commercial real estate services firm JLL. “It is certainly a trend. I’m not saying it’s a mass exodus (from the Bay Area) but an expansion of these companies into Seattle-Bellevue.”
“I couldn’t be more excited to be kicking off Uber’s Seattle Engineering team, and we’re hiring like crazy”
Puget Sound appeals to many Bay Area companies largely because of its highly skilled labor pool and affordability. San Francisco-based mobile app transportation-services company Lyft is just the latest Bay Area tech firm drawn to those qualities in Puget Sound, recently announcing that it plans to open a downtown Seattle office to house local operations and engineering efforts.
“Seattle is a thriving hub for innovation in technology and one of the fastest growing cities in the U.S.,” Lyft said in its company blog. “With more and more young professionals commuting downtown every day, Lyft has become a key alternative to owning a car.”
Lyft’s ride-hailing rival Uber, also based in San Francisco, has had an office presence in Seattle since 2011 and in March of this year announced that it was opening up an engineering outfit in the Emerald City. In addition, according to a report by the Puget Sound Business Journal, San Francisco-based Salesforce is looking to lease 75,000 square feet in Trammell Crow’s new development at 929 108th Ave., NE in Bellevue. It is estimated that approximately 500 employees would be able to fill that space for the CRM platform company.
“I couldn’t be more excited to be kicking off Uber’s Seattle engineering team, and we’re hiring like crazy,” Tim Prouty, head of that unit, said on his LinkedIn page. “There are huge technical challenges ahead as we blaze completely new trails, and I’m specifically looking for devs that want to make a huge impact on building something that is tangibly making people’s lives better.”
Lyft and Uber representatives did not immediately respond to requests for further comment, and Salesforce’s feedback was that it did not comment on rumors.
Matt Griffin, principal and managing partner of Seattle-based commercial developer Pine Street Group, noted that companies moving into town are opening up engineering or R&D offices for the most part.
“They are sucking up a lot of supply,” Griffin said. “We are in an office boom. In spite of big additions in supply, vacancy in Seattle is going down.”
One indication of how much space these companies are taking is the fact that nearly 46 percent of Seattle-Bellevue’s major leasing activities in the third quarter this year came from the tech sector, Hughes said.
The region saw about 1.3 million square feet of space taken in that quarter, according to a JLL Office Insight report, and net absorption was on pace to exceed 2 million for the third year in a row.
Seattle-Bellevue’s overall vacancy plummeted to the lowest rate in the past decade—10.2 percent—with the average annual asking rent of nearly $34 per square foot up 7.9 percent year-over-year, the JLL report also said.
Among other major Bay Area tech firms to have established footholds in Puget Sound are Intel, Facebook and Apple. Lesser-known tech companies from Northern California such as Palantir Technologies, Jawbone and Splunk have also expanded into the Pacific Northwest.
“Seattle is one of the top places they look” to open an office because of the availability of talent, said Joe Vranich, who runs the business-relocation consulting firm Spectrum Location Solutions based in Irvine, Calif.
These companies also face lower labor costs, taxes and regulatory hurdles in Washington compared to their home state of California, Vranich said.
In a way, Hughes said, these companies are chasing the skilled workers leaving the expensive Bay Area for Puget Sound’s still-affordable cost of living. A report in May by Seattle-based online residential brokerage Redfin indicated such a migration: The number of Bay Area people using its service to search for Seattle homes has quadrupled in the past four years.
The movement of outside companies into Puget Sound is changing the area’s tenant landscape from one filled with professional services such as those in the legal and insurance fields to tech, Hughes said.
One benefit of this movement is landlords and developers spending money to upgrade old buildings—which can lead to neighborhoods becoming revitalized, he said.
“The challenge is that changes are happening fast,” he said. “It’s a transition period, so you have cities trying to make sure they’re not turning away opportunities but being sensitive to the impacts on traffic, housing and basic amenities.”