Seattle survives Amazon HQ2

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Amazon’s search for a second headquarters was a gut punch to Seattle, likened to Boeing’s headquarters move to Chicago.

But after a 14-month sweepstakes that drew 238 bidders across North America, Amazon didn’t announce the “full equal” to Seattle as promised, but rather, revealed plans for offices half the size of its Seattle HQ in northern Virginia and New York.

Along the way, Amazon secured at least $2.4 billion in public subsidies for its offices in Crystal City outside Washington, D.C., Long Island City in Queens and a new operations outpost in Nashville.

Much of the reaction from Seattle was a resounding sigh of relief for not only the diminished possibility of a rival headquarters emerging anytime soon, but also the potential of more manageable growth at home.

“When it comes to infrastructure in our city, it’s no secret that we’re stretched thin,” said Michael Schutzler, CEO of Washington Technology Industry Association. “Their decision will help Seattle take a step back and catch its breath.”

Amazon in Seattle

Amazon still plans to add 2 million square feet of office space and 10,000 employees in Seattle by the end of 2020, a spokesman said, bringing the company to 12 million square feet in the city and more than 55,000 employees.

That doesn’t include planned developments in Bellevue, where Amazon has opened offices ahead of its takeover of Expedia’s headquarters tower.

There are no signs that Amazon plans to sublease its 722,000 square feet of Rainier Square tower office space as the company threatened to do before the city of Seattle passed and then repealed its per-employee head tax to fund housing and homeless services.
The downtown Seattle tower is expected to be finished by the end of 2020, but Amazon’s office space is not listed as available on CoStar or the Commercial Brokers Association’s website, and commercial real estate industry sources who declined to speak on the record about other companies’ business said they have seen no efforts to find different occupants.

“I quite frankly think (the sublease option) was a shot across the bow of City Hall,” Windermere Chief Economist Matthew Gardner said Tuesday. “My gut tells me it was a bluff.”

Amazon hasn’t said whether any teams will leave Seattle or when.

Hiring in the new offices starts next year. The HQ2 sites are each expected to have 25,000 jobs across 4 million square feet of real estate over the next two decades. Nashville is slated to get 5,000 jobs, on top of thousands of new technology jobs at similar centers around North America that Amazon announced in the year since launching the HQ2 search.

The downtown Seattle tower is expected to be finished by the end of 2020, but Amazon’s office space is not listed as available on CoStar or the Commercial Brokers Association’s website, and commercial real estate industry sources who declined to speak on the record about other companies’ business said they have seen no efforts to find different occupants.

“I quite frankly think (the sublease option) was a shot across the bow of City Hall,” Windermere Chief Economist Matthew Gardner said Tuesday. “My gut tells me it was a bluff.”

Amazon hasn’t said whether any teams will leave Seattle or when.

Hiring in the new offices starts next year. The HQ2 sites are each expected to have 25,000 jobs across 4 million square feet of real estate over the next two decades. Nashville is slated to get 5,000 jobs, on top of thousands of new technology jobs at similar centers around North America that Amazon announced in the year since launching the HQ2 search.

While cities were offering billions of dollars in incentives to land HQ2, Amazon announced plans to add at least 6,625 combined technology jobs in cities including Vancouver, Boston, Toronto, Chicago, San Diego, Minneapolis and Pittsburgh.

The offices – along with Long Island City, Crystal City and Nashville – are poised to become “centers of excellence,” as Seattle venture capitalist Matt McIlwain predicted last year when Amazon announced its search. Boston’s office focuses on robotics, for example, while Atlanta’s focuses on logistics.

All these other hubs give Amazon options for recruiting and growing in other markets, a logical decision according to many in the business community.

“For them it makes a heck of a lot of sense to spread out geographically,” Seattle Genetics founder and CEO Clay Siegall said. “I’m thrilled that (Amazon is) still here and I want them to still be powerful and big in Seattle. I don’t want to lose that, but to me this sounds like a good business decision.”

Two of Amazon’s fastest-growing businesses — Amazon Web Services and advertising — seem likely candidates to leave Seattle, which could slow down the company’s overall growth here.

If Amazon does pull back from Seattle, it wouldn’t necessarily mean vacant office space or unemployed tech workers.

“Even if there is less growth from just Amazon, the fuse has been lit,” said Craig Kinzer, founder of real estate consulting firm Kinzer Partners. “The diversity of tech here is so great we are going to continue to have growth.”

Facebook already occupies or has announced plans to occupy 700,000 square feet in Seattle’s South Lake Union neighborhood. The company is also building a 678,000-square-foot office and sources said it recently leased more than 1.1 million additional square feet in South Lake Union.

Amazon’s plans to grow elsewhere are freeing up space and “adding some diversity to our local tech tenant base,” Vulcan Chief Real Estate Officer Ada Healey said.

Vulcan is currently building Google a 607,000-square-foot campus in South Lake Union. Google is also expanding on the Eastside and is said by sources to be planning to buy the Kirkland Urban development that will ultimately have up to nearly 1.2 million square feet of commercial and residential space.

“For people who have seen major companies desert them, then it’s a really big deal. That’s not the case here,” said Cascadia Capital Managing Director John Siegler. “This is a growth strategy. I’m not worried about Seattle.” 


 PSBJ senior reporter Marc Stiles and reporter Casey Coombs contributed to this report

PSBJ senior reporter Marc Stiles and reporter Casey Coombs contributed to this report