Booming real estate might make you think Seattle would be a great place to build a career. But think again, before you move. Except for a handful of very large IT companies, the market for commercial space to house new hires isn’t as hot as it may seem.
For example, the “giant tech bet” touted by Seattle-area promoters as a $2.3 billion economic bonanza may ultimately fail to come to fruition. In fact, the new Spring District in Bellevue, Wash., as well as other large projects in the area, may be constructed only if, and when, large companies agree to lease huge amounts of space.
The Spring District is not alone. Improvements in the Seattle-area commercial real estate market – and related job growth — are driven by only a handful of tech giants.
Facebook, Google, Microsoft and Amazon are driving planning and construction of office space in Seattle and tech-friendly suburbs like Bellevue, located 10 miles from Microsoft’s headquarters in Redmond.
Amazon, for example, is adding 3.3 million square feet of office space in three downtown Seattle office towers. Google and Facebook have taken large spaces as well.
The fate of the Spring District, as well much of the local real estate market, may be closely tied to the fate the these large companies. For Engineers, software developers or other IT professionals looking to work at Amazon, Google or Facebook, a move to Seattle is grounded in tangible evidence of job growth, compared with others who move up to the area based on real estate vaporware.
Despite the hype, the Spring District lacks tenants or construction financing, according to the Wall Street Journal, as it prepares to begin demolition on the first phase of the project, which includes 490,000 square feet of a potential 5.3 million square feet of office, retail, hotel and housing space.
Build It, But Will They Come?
“We are very bullish on the tech market,” said Greg Johnson, President of Developer Wright Runstad & Co., quoted by GeekWire. “The poster child for that is Amazon but we see it across the board.”
That may be true, but only if the board is limited to Amazon, Google, Facebook and Microsoft as demand for space by smaller companies is essentially flat, analysts told Dice News.
The development company did not return Dice News’ calls seeking additional comment.
While a $2.3 billion investment and 16-square-block development would be impressive, it isn’t being done all at once or even soon. Build-out of the Spring District is expected to span 15 years, leaving lots of opportunity for economic booms – or busts.
“Amazon, Facebook, Microsoft and some gaming companies” are driving the commercial real estate market in Seattle, according to Richard Briscoe, Senior Vice President of Kidder Mathews, a real estate services firm.
More than 3 million square feet of office space is under way in the Seattle area, according to Kidder Mathews.
The Wall Street Journal reports developers are planning to start construction on well over 1 million square feet of additional space, including projects in downtown Bellevue that might compete with the Spring District project.
Briscoe said it is likely some projects will only be built once large tenants agree to leases. Others will likely never be built at all, as space for smaller companies is already widely available in the area.
While Microsoft does not monopolize the Seattle tech economy as it once did, growth is being driven by a handful of younger companies, only one locally grown, that together will decide the future of both real estate and jobs in the area.