By Jacob Bourne
The growing interest of the Puget Sound region for tech firms is undeniable. A Seattle-based technology news site GeekWire recently compiled a list of about 80 engineering centers in the Seattle region hosting tech tenants, many of which have migrated from the San Francisco Bay Area seeking more economical value on office space rents. The tech boom has now been matched by a corresponding housing boom as data from the S&P Case-Shiller National Home Price Index shows Seattle as the nation’s hottest housing market with an 11-percent growth in prices between 2015 and 2016. This growth is well over the national average of 5.5 percent, stronger than the Bay Area’s 5.7 percent, and slightly above Portland’s 10.9-percent gains.
“Tech is driving Seattle’s office market,” said Ben Garrett, vice president, tenant advisory group, Kidder Matthews. “Seattle is cheaper for housing and office rents than the Bay Area. Our Q3 office vacancy rate is about seven percent—as low as it’s ever been. Rental rates are as high as they’ve ever been.”
The companies run the full gamut of the tech industry with firms geared towards software, security, e-commerce, analytics, cloud computing, gaming, artificial intelligence, social networking, media, mobile, wearables, virtual reality and aerospace. The companies with the deepest Seattle roots on GeekWire’s list are Intel and Adobe, which both arrived in the area in the mid-1990s. About 55-percent of companies on the list established themselves in the Seattle area between 2014 and 2016. This year’s new arrivals are 4C Insights, AirBnB, GrabTaxi, Huawei, MagicLeap, Mixpanel, Pinterest and Stripe.
Many small to mid-sized companies are flocking to the Seattle region following momentum created by the big names of Amazon, Google, Facebook and Twitter. This summer, Silicon Valley-based Mixpanel, an analytics start-up founded in 2009, opened an office in South Lake Union at 500 Yale Avenue North, to follow the technical workforce seeking more affordable accommodations outside of the Bay Area.
The six year old social networking company, Pinterest, also based in the Bay Area, opened an office for 30 employees at 107 Spring Street in Downtown Seattle. The move is an attempt to tap into the City’s strong tech workforce capital built over the decades by University of Washington, Microsoft and other entities.
“Amazon is the biggest player in the Seattle tech scene,” added Garrett. “Amazon is leasing about one million square feet of space per year. People from all over the country have come to Seattle to work for Amazon over the last four or five years.”
The Kidder Matthews Q3 Office Real Estate Market Review found that rental rates are on the rise as vacancy has dropped and inventory dwindles. Now, adjacent sub-markets are benefiting from the interest generated in the region, and one example of that is the city of Renton, which is located between Seattle and and the Seattle-Tacoma airport. A brand new Class A office product at the Southport Office Campus in Renton right on shores of Lake Washington will provide 730,000 square feet of space within the greater Southport Waterfront Corporate Campus once finished. SECO Development is slated to complete buildings one and two of the three-tower project in Q3 2018, with the final structure to be ready for lease in Q1 2019. Kip Spencer, director of leasing and marketing at SECO Development said that announcements regarding pre-leasing will be coming in the next few weeks and that the campus is ideal for Bay Area tech firms. An anchor tenant could potentially occupy anywhere from 500,000 square feet to the entire project.
SECO is in the final states of completing a 12-story, 347-room Hyatt Regency that will include a 43,000 square-foot conference center. The hotel is next to the office complex and will provide the closest 4-star hospitality accommodation to Seattle’s airport.
For tech companies seeking a deal on space as well as greenery, Industrial Realty Group’s Greenline development in Federal Way just opened up 355,000 square feet of office space as former tenant Weyerhaeuser has vacated the iconic five-story building. With the development about 30 minutes south of Downtown Seattle and just north of Tacoma, Tom Messmer, vice president of special projects at Industrial Realty Group is seeking one big tenant that he thinks will likely be a tech company.
“We’re fighting geography being a little further out.” Messmer said. “It’s a football field sized space, that’s very open and beautiful. The workspace has all the amenities for a great corporate headquarters. There’s an outdoor terrace, gardens, trails and a variety of conference rooms. We know it’s an economical option to be here. We’re hoping the pendulum will start to swing and that people will be looking further out as Downtown has become awfully crowded.”
Also coming soon to bolster supply, Kilroy Realty Company plans to bring 660,000 square feet of office space to South Lake Union at 333 Dexter, which the company announced recently could break ground in the first quarter of 2017. The property can be utilized for a single tenant or spaces divided for multiple companies. This location is just blocks away from Amazon’s ever growing presence in South Lake Union, as well as Google’s three-block, 313,500 square-foot project called The Lakefront Blocks, located at 625 Boren Avenue North, which Paul Allen’s Vulcan Real Estate is developing.