Tech companies fill new downtown office towers
First Isilon. Then Dendreon. Now Amazon. These three companies with the same last syllable may be leading a turnaround in the downtown office market.
Seattle Times business reporter
Tech companies take space to growSome recent leases by tech firms around downtown Seattle
Amazon: Internet retailer — leased 460,000 square feet close to its growing South Lake Union campus.
Dendreon: Developer of prostate-cancer therapy — leased 280,000 square feet at Russell Investments Center and Earl Davie Building.
Isilon Systems: Maker of data-storage systems — leased 140,000 square feet at 505 First Avenue South Building in Pioneer Square.
Acucela: Developer of eye-disease treatments — leased 22,000 square feet in Russell tower.
DocuSign: Provider of electronic-signature technology — leased 32,000 square feet in Russell tower.
First Isilon. Then Dendreon. Now Amazon.
These three companies with the same last syllable may be leading a turnaround in the downtown office market. And that could portend better days for Seattle's economy.
Over the next few months all three firms will move into new downtown buildings, consummating the region's three biggest office-lease deals so far this year.
They're not just taking new space; they're taking more space — about 650,000 square feet more altogether. Companies usually do that only when they're growing and hiring, or expect to.
"It is a positive harbinger," said Seattle land-use economist Matthew Gardner. "It bodes well for economic growth."
After giving back office space over the past two years, or at best sitting tight, more companies are beginning to display an appetite for downtown real estate again, brokers and landlords say.
Tech and biotech firms — relative newcomers to downtown tenant rosters — are in the forefront. Empty buildings, some completed after the economy tanked, are starting to fill.
Few other cities are enjoying such a spurt, said Kevin Daniels, president of developer Daniels Real Estate.
The new leases are indeed a positive sign, others agree. But they also caution against reading too much into them just yet.
"The growth prospects are definitely more solid now," said George Rolfe, director of the Runstad Center for Real Estate Studies at the University of Washington.
"But I don't know that [companies leasing more space] necessarily means we're going to see thousands of new employees downtown in the next two years."
When it announced its move to the new 505 First Avenue South Building in Pioneer Square in January, data-storage firm Isilon Systems was straightforward about the reason.
The company said it planned to increase local employment from 300 to 500 this year, and simply needed more room. At 140,000 square feet, its new headquarters is 60 percent larger than its old home.
A month later biotech Dendreon announced it was doubling its downtown space, leasing nearly 280,000 square feet at the Russell Investments Center at Second and Union and the Earl Davie Building on Eastlake Avenue East.
Amazon's lease dwarfed the others. The big online retailer confirmed last week that it is taking 460,000 square feet in recently completed 1918 Eighth, increasing that 36-story tower's occupancy from less than 25 percent to more than 90 percent.
The lease pushed Amazon's total footprint in greater downtown, including South Lake Union, to more than 2.3 million square feet, about three times as much as the company occupied four years ago.
Amazon and Dendreon didn't announce any specific hiring plans in connection with their new leases. But it's no secret both are growing fast:
If you assume about 200 square feet per worker, as brokers generally do, the additional space the two companies are taking could translate into 3,000 jobs.
And those jobs could create more jobs.
Specialty's Cafe & Bakery, for instance, opened a store on the ground floor of 1918 Eighth a year ago. Full floors upstairs are infinitely better for business than empty ones, said Sean Reiter, vice president for branding and sales.
"We're thrilled to have Amazon coming in there," he said. "We're prepared to hopefully see our business increase."
The renewed appetite for more office space has helped fill the 42-story Russell Center, nearly emptied two years ago after Washington Mutual, its former owner and sole occupant, imploded.
Now it's more than 80 percent leased.
"The sectors that are really taking off are technology, Internet services and biotech," said broker Brandon Weber of CB Richard Ellis, part of the Russell Center's leasing team.
Online electronic-signature company DocuSign took nearly 32,000 square feet in the tower last fall — more than double what it had been leasing at the Columbia Center, its old home.
Company employment doubled last year, a spokesman said, and is expected to double again in 2011.
Biotech Acucela, which is developing drugs to treat eye diseases, leased 22,000 square feet in the Russell Center, also more than doubling its occupied space. CEO Dr. Ryo Kubota said the company outgrew its original home in Bothell, where its labs remain.
"We're expecting to continue to grow," he said. "We're hiring a lot of people these days."
Employment jumped from 30 to 60 last year, Kubota said, and could grow by another 30 this year.
Cumulatively, the real-estate decisions of small companies like Acucela and giants like Amazon all provide evidence that "we're on the upswing of the cycle," said Oscar Oliveira, managing director at Seattle brokerage Broderick Group. "There's enough momentum out there that landlords are getting pretty excited again."
But some say any celebration may be premature.
Unlike tech and biotech companies, said Weber, most other employers still are hanging back.
"I do think it's a trend," he said of the bigger leases, "but only within specific sectors of the economy."
Other real-estate insiders caution that some tenants may be leasing more space not because they need it right away, but because it's too good a deal to pass up.
While the greater downtown office vacancy rate has fallen slightly in recent months, it remains in the high teens. That has kept rents relatively low.
But if demand does increase significantly, the UW's Rolfe said, office space could get more expensive in a hurry — in part because there are no new buildings in the pipeline.
It takes three years to get a new tower approved and built in Seattle, Rolfe said. "So if there's space available now, and you think you're going to grow in the next three years, you'd better take it."
Jonas Sylvester, senior vice president with Unico Properties, a major downtown landlord, doubts many tenants are leasing more space purely on speculation.
Companies that are taking more space now at least foresee expanding, he said, even if they aren't growing yet: "You probably don't want your real estate to be the bottleneck to your company's growth."
It will take several years of sustained growth to get the downtown office-vacancy rate back down to where it was before the recession hit, said regional economist Richard Conway: "We've dug ourselves such a big hole that it's going to take time to get out of it."
But he projects the four counties in the central Puget Sound area will add 11,000 jobs this year in business and professional services — office jobs. That's an increase of more than 4 percent.
"We haven't seen that for a long time," Conway said. "It's certainly better to be speculating about growth than speculating about decline."
Eric Pryne: 206-464-2231 or firstname.lastname@example.org