As tech companies grow, Seattle grows with them
The pandemic was a disaster for commercial real estate markets. In the Seattle area, it was a boon.
In 2020, US office leasing activity fell 36% from the year before, according to the industry research group CBRE, as offices closed and employees were sent home to work remotely.
But in the Seattle region, technology companies gobbled up more space than they had the previous year.
The Seattle region became the top market in the United States in 2020 for large office spaces leased by tech firms, according to CBRE, surpassing the San Francisco Bay Area for the first time since 2013, as well as tech hubs like Atlanta, New York, Washington and Austin, Texas.
Among the 100 largest technology leases, 14 were in the Seattle area, totalling 3.4 million square feet, about 85% more space than in Manhattan, the No. 2 market on the list.
A confluence of factors spurred Seattle’s popularity.
The technology sector grew during the pandemic as Americans worked, shopped and entertained themselves from home; tech companies expanded their footprint in Seattle, attracted by a deep talent pool and a stream of graduates from local colleges; and the area just beyond the city had plenty of undeveloped land.
The US economy contracted 3.5% in 2020, according to the Commerce Department, but the technology industry soared on the surge in e-commerce, streaming content and virtual meetings.
The biggest tech companies — Alphabet, Amazon, Apple, Facebook and Microsoft — thrived in 2020, earning in total about 25% more than they had the previous year, according to company reports.
That blockbuster growth spurred a need for office space despite the remote-work trend, said Anthony
Paolone, co-head of US real estate stock research at J.P. Morgan.
“There is a net need for space,” he said.
“Technology companies have also begun establishing satellite offices employing hundreds of workers in cities with a high concentration of universities,’’ said Colin Yasukochi, executive director of the Tech Insights Center at CBRE.
“There is also a desire to improve diversity,” he said, by establishing a presence in cities, like Atlanta, Miami and Washington, that have large populations of Black and Hispanic people, who are underrepresented in technology.
“For example, Chicago had few tech jobs, and college students who wanted to work in the industry had to move to other cities after graduation,’’ Yasukochi said. “But that is changing; Google, Facebook and Amazon now have offices there.’’
“Tech companies are going to where the talent is, rather than making people move to a handful of cities,” said Dianne Crocker, the principal analyst of LightBox, which provides data and software for the real estate industry.
Still, the Seattle area, home to Amazon, Expedia, Microsoft and Zillow, has been the biggest beneficiary.
Most of the area’s new leases are in the nearby cities of Redmond, Kirkland and Bellevue, just east of Seattle across Lake Washington.
“Downtown Seattle is closer to capacity build-out,” said Yasukochi. “But the so-called Eastside has room for companies to expand. Some businesses are creating mini-campuses, and others are flocking to new developments like Bellevue’s Spring District.’’
“In some industries, the presence of a large company, like Boeing or Walmart, will attract partners and suppliers,’’ he said. “But in tech, big companies draw both synergistic and competing businesses.
“It’s the talent pool that drives the real estate market. It’s easier to hire specialists in cloud computing, machine learning or virtual reality when so many live in the area.’’
The Seattle region finds itself in a Goldilocks moment, with its momentum accelerated by the pandemic. ©2021