Seattle is America’s biggest company town
Amazon’s large presence in Pacific northwest city is unparalleled in the U.S.
SEATTLE— Amazon.com’s extraordinary growth has turned Seattle into the biggest company town in America.
Amazon now occupies 19 per cent of all prime office space in the city, the most for any employer in a major U.S. city, according to an analysis conducted for the Seattle Times.
Amazon’s presence in Seattle is more than twice as large as any other company in any other big U.S. city and the e-commerce giant’s expansion here is just getting started. The swarms of young workers crowding into South Lake Union every morning represent an urban campus that is unparalleled in the United States — and they have helped transform Seattle, for better or worse. Amazon’s rapid rise has fuelled an economy that has driven up wages and lowered unemployment, but also produced clogged traffic on the roads and sky-high housing prices.
And while Seattle’s booming economy is often attributed to a wide variety of factors, increasingly, it’s all about one company.
Amazon now occupies more office space than the next 40 biggest employers in the city combined.
And that’s only the beginning: Amazon’s 8.1million square feet in Seattle is expected to soar to more than 12 million square feet within five years.
Amazon’s supremacy in e-commerce and cloud computing has translated, locally, into an avalanche of glass, steel, people and money. It’s given Seattle more prominence as a magnet for talent from all over the world and reshaped formerly forlorn parts of the city into vibrant livework-and-play neighbourhoods.
The company’s unparalleled impact in determining Seattle’s fortunes may give some pause to those who experienced the downturn of the 1970s, when the shine of “Jet City” was tarnished as Boeing cut about two-thirds of its huge local workforce.
“Seattle’s been through this before,” said Tracey Seslen, a professor at the University of Washington’s (UW) Foster School of Business. “If Amazon were to leave, that would create a giant hole in their wake.”
However, unlike Boeing, whose local operations focus on the single business of building airplanes, Amazon runs a vast web of mutually reinforcing, but diverse businesses — selling computing power, retailing nearly everything, publishing books and producing films, among other things.
John Schoettler, Amazon’s director of real estate, says that all he’s experienced in his nearly two decades at Amazon is “steady, continued growth,” the result of the company’s zealous focus on satisfying customers.
The legacy of what so far amounts to $4 billion (U.S.) spent by the company on real estate here will be longlasting, he said: “These buildings will stand for hundreds of years.”
For this story, the real-estate data firm CoStar provided a list of all office tenants in the nation’s 20 biggest cities by population, looking at only Class A offices, the modern buildings used by the vast majority of major employers.
While other company campuses may be larger and more dominant in some suburbs — Microsoft in Redmond, Wash., or Apple, Google and Facebook in Silicon Valley — in big cities, corporate tenancy is generally fragmented.
For example, financial giant Citi has 3.7 million square feet in New York — making it the second-largest majorcity office tenant in absolute terms after Amazon. But it represents less than 3 per cent of Class A office space in the Big Apple.
That’s typical: In most big cities, the top employer has less than 5 per cent of local office space.
Among the country’s largest 20 cities, only Columbus, Ohio — where insurer Nationwide occupies 16 per cent of office space — has a situation comparable in its dominance to Amazon. But it’s still less than half of Amazon’s total square footage.
In Seattle itself, Amazon is in a league of its own. Its presence is nearly 20 times greater than that of the next-biggest employer.
Amazon got its start in a Bellevue garage in 1994 and it first grew without much of a plan — its employees were scattered in various downtown Seattle buildings and in the former Pacific Medical Center building on Beacon Hill. When Schoettler, the Amazon real-estate executive, joined the company in 2001, it had 630,000 square feet in Seattle.
In 2005, Schoettler said, he told CEO Jeff Bezos that the company needed a plan and Bezos agreed. His only condition was that Amazon stay in downtown Seattle, Schoettler said.
That coincided with the reversal of a decades-long outflow from U.S. cities to their suburbs: By staying in the urban core, Amazon would attract members of the hip, creative class.
“It was a very conscious decision we made,” Schoettler said.
Amazon’s expansion has led, in the short time since the end of the recession, to a “record level of private investment,” as well as significant levels of public infrastructure investment, according to John Scholes, CEO of the Downtown Seattle Association.
Over the past decade, South Lake Union has had $668 million in infrastructure improvements, including a new electrical substation under construction, the revamped Mercer St., a new streetcar line and upgraded parks. Amazon has become the go-to scapegoat for people complaining about Seattle’s problems associated with growth, like housing prices and clogged streets. And while it’s certainly not the only reason Seattle is bursting at the seams, Amazon makes up a disproportionate share of the city’s rapid growth.
Apartment rents this year are 63per-cent higher than in 2010, as Seattle has become the fastest-growing city in the country.
Home costs are rising faster here than anywhere else in the nation and have doubled in the past five years, pushing the middle class to surrounding, less expensive towns.
Seattle now also has the nation’s third-highest concentration of commuters who travel at least 90 minutes each way to work. Their numbers have grown 72 per cent in five years.
Buses are more packed than ever and lines that run along the Amazon campus are often standing-roomonly during rush hour. Metro drivers, at times, have to leave commuters waiting outside an Amazon office because their buses are full. Local officials added buses to accommodate the crush of Amazon interns that arrived this summer.
“It’s hard to keep pace in terms of development of infrastructure,” said Simon Stevenson, the director of the Runstad Center for Real Estate Studies at UW. But overall, “the positives, economically, outweigh the potential of the downside.”
Wages here are rising faster than anywhere else in the country, driven by Amazon’s hiring binge of employees making six figures. Unemployment is near a record low.
Amazon has begun turning around the reputation that it has done little to alleviate the problems stemming from Seattle’s growth. The company recently said it would house a homeless shelter in one of its new offices and is offering non-profits space for restaurants in some of its other buildings. It gave $10 million to UW last fall, created plazas for public use and has helped underwrite the South Lake Union streetcar.
Amazon’s growth has been so substantial that it can single-handedly skew the city’s core office market, said Matthew Gardner, the chief economist of Windermere Real Estate.
In the last quarter of 2016, for example, all non-Amazon employers in Seattle’s greater downtown region shrank by a combined 150,000 square feet of office space. But Amazon gained 408,000 square feet by itself, making it a positive quarter for the market overall.
Amazon’s supercharged growth has made it harder for other companies to find offices in the downtown core, said Eric Blohm, a senior managing director for Savills Studley, which represents companies looking for office space.
The company’s expansive effect is being felt well beyond the South Lake Union and Denny Regrade neighbourhoods. Amazon recently leased 400,000 square feet in Bellevue and various real-estate sources said the company is interested in taking over the entire office portion of a forthcoming 58-storey downtown Seattle skyscraper at Rainier Square, scheduled to open in 2019. Amazon declined to comment on the potential expansion.
If that happens, it would have a cascading effect on availability for other businesses in the core of downtown, outside of South Lake Union, Blohm said.
Previously, he said, “A landlord in that (downtown) market couldn’t really say, ‘Oh we’re holding out for Amazon’ . . . Now they would have some ammunition to say that.”
Amazon’s growing mass has also created a gravitational pull for other big tech companies on the prowl for employees. Google and Facebook have set up big offices in Seattle’s urban core and by the end of the decade they are both poised to be among the top 10 tenants in the city.
Apple, Airbnb, Uber, the makers of Snapchat and others have also set up shop downtown after Amazon’s success in recruiting engineering talent.
That, said Seslen, the UW professor, helps strengthen the local tech community.
Because Amazon does not have an isolated suburban campus like Microsoft, “there’s more opportunity for employees at Amazon to network with their peers at other companies,” she said.
But that influx of deep-pocketed tech giants also makes it more difficult and expensive for smaller busi- nesses to find space.
“Some landlords aren’t even talking to us about (leasing) full floors,” Blohm said. “They’re holding out for the full building user. Or they’ll say, ‘Get in line, you’re third in line, we’re talking with other people.’ ”
Although Amazon, the world’s largest e-commerce company, has been long criticized for destroying Main Street retail jobs, in Seattle’s case the influx of Amazon jobs has been accompanied by a boom in local retail.
Between 2010 and 2015, retail sales in downtown Seattle have grown more than 19 per cent annually — much faster than in nearby cities, according to the Downtown Seattle Association. Just in 2015, sales rose 27.5 per cent, to about $1.4 billion. By comparison, Bellevue sales grew by 13.3 per cent and Redmond’s by 5.7 per cent that year.
Scholes, the Downtown Seattle Association president, says there’s been a shift toward beverage and food services, a corollary of the expanding downtown residential population, many of them well-paid.
Even department stores — a category that’s been eviscerated by Amazon’s success elsewhere — have been buoyed here.