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The view from street level at one of Amazon’s new office towers in Bellevue, Wash. (GeekWire Photo / Kurt Schlosser)
Real estate brokers are excited about Amazon’s new mandate that goes into effect next month, requiring employees in the office five days per week.
The policy is “obviously, a huge shot in the arm for us,” said Colin Tanigawa, a vice president with Seattle-area commercial real estate firm Broderick Group, speaking at a Bellevue Downtown Association event on Tuesday.
Tanigawa said he hopes Amazon’s move will be “the lift that we kind of need” that may catalyze other companies wanting to get back in the office.
That would help boost the outlook for real estate developers and brokers dealing with the aftermath of the pandemic and resulting work-from-home trends. In downtown Bellevue, office vacancies have risen from 3.2% in 2019 to a whopping 16.6%, according to a recent report from Broderick Group.
The shift to hybrid work is particularly acute in tech hubs like Bellevue, where Amazon has 12,000 employees and plans to eventually employ 25,000 in the city.
Amazon accelerated its expansion in downtown Bellevue after encountering strong political headwinds, including corporate tax initiatives, in its nearby hometown of Seattle. Bellevue is the focus of much of the company’s future growth in what it calls its Puget Sound headquarters region.
Amazon in July 2022 paused construction of several of its Bellevue projects, while experimenting with different office designs to adapt to the new era of hybrid work. Some of the construction has restarted.
Jason Smith, executive vice president at Kidder Mathews, said the company still has 40% of its square footage in Bellevue that is not occupied.
“If they get their employees back, you’re going to see a lot of backpacks on the street,” he said. “It’s just a matter of time.”
Outdoor spaces, with covered areas, are accessible at various levels of Amazon’s “Sonic” office tower in Bellevue. (GeekWire Photo / Kurt Schlosser)
But as Amazon adds more workers to Bellevue, another Seattle-area tech giant is moving out.
Microsoft, which has not mandated employees to work out of its offices, is ditching nearly 2 million square feet of office space in downtown Bellevue as it revamps its headquarters in nearby Redmond, Wash.
“It’s a huge hit to our economy,” Tanigawa said.
But other tech companies are filing the void. OpenAI recently opened an office in Bellevue, while Snowflake, ByteDance, and Pokémon are expanding.
“Over the past two years, we’ve seen companies like Walmart or [Snap] lease a floor in downtown — and in a matter of 2-to-3 years they are doubling or tripling their footprint,” Tanigawa said.
Though brokers are encouraged about recent leasing activity, the future of the commercial real estate market is still uncertain as companies establish various work policies and remain cautious about office investments.
“All of our clients are really approaching return-to-office a little bit differently,” said Char Patterson, partner at JPC Architects.
Mary Fialko, director of development at Skanska, said her team is focusing on how to reimagine office space that is better than a home office and invites collaboration and innovation.
“What people need right now is not hundreds of thousands of feet of more space — they need quality space, and they need interesting space,” she said.
Vacancy rates for the eastside, which includes Bellevue, have more than tripled since 2018. (Broderick Group chart)
Gary Guenther, senior vice president at Kidder Mathews, shared optimism when comparing Bellevue’s commercial real estate scene to downtown Seattle, which has vacancy rates around 30%. A major office developer in downtown Seattle recently defaulted on a loan backed by two properties, Bloomberg reported last week.
“Bellevue is definitely on better footing, and in a better position to continue to move forward with some positive momentum,” Guenther said.
The panelists touted Bellevue’s business-friendly environment and public safety as attractive attributes for companies. But they also expressed concern about affordable housing, especially for younger employees.
“The reality is, you can work in Bellevue, but unless you’ve been here a while and are established and timed the market, you can’t afford to live here,” Patterson said. “I think that’s a very big challenge, and no one knows what the answer to that is.”
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