Real Estate Updates December 23, 2021

Amazon’s second chance: Bellevue gives tech giant an opportunity to reshape its regional legacy

GeekWire explores what’s fueling the rise of Bellevue, Wash., the fast-growing tech hub located just east of Seattle. In this editorial series, we’ll explore key issues shaping this ever-changing city.

BELLEVUE, Wash. — Amazon is poised to transform a major swath of this city, much as the company reshaped Seattle during the past 15 years. But the tech giant’s approach in Bellevue couldn’t be more different.

Before the company opened its first office here, Amazon representatives met with City Council members to ask how the company could help. Amazon supports numerous causes and groups in Bellevue. It also works with business and community leaders on key issues and a shared vision for the city.

“They’ve been a very good community partner for Bellevue,” said Bellevue Mayor Lynne Robinson. “They knew they were going to be coming in and making an impact, and they wondered how they could give back.”

This was not the Amazon that Greg Nickels experienced in the early days of his tenure as Seattle’s mayor. After winning the election in late 2001, he remembers reaching out to local CEOs, including Amazon’s Jeff Bezos, to see how his administration could help, or at least not hurt, their efforts to create jobs.

“His office was the only one that didn’t respond in any way, shape or form,” Nickels recalled in a recent interview.

It was a sign of Amazon’s larger lack of civic engagement at the time. Nickels points out, in Amazon’s defense, that the company was at a very different point in its history back then, focused on building what would become a global empire.

Six years later, Amazon announced plans to move from Seattle’s Beacon Hill to the South Lake Union neighborhood, sparking a period of unprecedented growth for the company and massive change for the city. In the news release announcing the plan, Nickels called Amazon “one of those great Seattle success stories.”

But neither Bezos nor any of the company’s top executives participated in the groundbreaking of Amazon’s Seattle headquarters with Nickels and then-Gov. Chris Gregoire.

And from that early indifference, Amazon’s relationship with its hometown eventually evolved into conflict, as a new guard on the Seattle City Council challenged the company over the impact of its growth on the city.

Now, as Amazon looks to the other side of Lake Washington for its future growth in the region, it’s clear that the company’s approach has matured. Bellevue’s new era is Amazon’s clean slate — and the combination could finally complete this suburban city’s transformation into the region’s second major urban core.

“Bellevue is a very business-friendly environment. It’s a great place to do business,” said Brian Huseman, Amazon’s vice president of public policy. At the same time, Huseman acknowledged, Amazon “is a much different company now than when we first launched in Seattle and moved to the South Lake Union neighborhood.”

But will a spirit of cooperation result in a better outcome for the community? Transportation and housing will be two key tests. The rapid growth of Amazon and other tech companies in Seattle clogged downtown streets and contributed to soaring home prices that made housing unaffordable for many longtime residents.

Amazon expects to ultimately have as many as 25,000 workers in its Bellevue offices — on par with the size of its second headquarters, or HQ2, currently under development in Arlington, Va.

“With that many moving in, we’re taking a look at it from many different angles from an economic development perspective, and what it brings to the region … but also how we manage some of that growth through our infrastructure, transportation systems and housing,” said Bellevue City Manager Brad Miyake.

The changes are big, and they’re coming fast.

Bellevue, revisited

Twenty years ago, as Nickels was running for mayor, I was learning the commercial real estate beat as a reporter in the Seattle area. Walking around downtown Bellevue — past modest office towers, low-slung commercial buildings and vast surface parking lots — its big-city ambitions seemed at the time like a big fantasy.

With 5 million square feet of office space back then, downtown Bellevue was overshadowed by downtown Seattle, which had more than 30 million square feet of office space. The dot-com bust had doused the regional economy. The news in Bellevue was about companies giving up space, and developers halting projects.

Two decades later, the story has changed dramatically.

The total amount of space leased, planned and under construction just for Amazon in Bellevue now exceeds 6.6 million square feet. That’s 1.6 million square feet more than all the office space in downtown Bellevue in 2001.

Amazon projects leased, owned, and under construction in Bellevue. 

One of the people who showed me around Bellevue back then was commercial real estate broker Oscar Oliveira. We met up on a recent weekday morning to reprise the tour, joined this time by his Broderick Group colleague Eric Haehl, who grew up in Bellevue.

I’ve spent lots of time in Bellevue over the past two decades, but like many people, I haven’t been there as much during the past two years, due to the pandemic. Sections of downtown looked like a whole new city. Almost every time I asked about a construction site, or a new building, the answer was the same: “Amazon.”

It wasn’t that long ago, back in 2017, that Amazon moved into its first building in downtown Bellevue, the 16-story, 354,000-square foot Centre 425 building at NE 4th Street and 106th Avenue NE.

Four years later, the total now stands at nine Amazon projects occupied or in the works, some of them with multiple buildings. As we looked at everything planned for the city, I couldn’t help but marvel at all the activity, and the incredible pace of change.

“Isn’t it amazing?” Oliveira agreed.

Amazon’s Bellevue 600 project will have two office tower’s 43 and 31 stories tall. (NBBJ Rendering)

The central hub of Amazon’s Eastside presence will be a project called Bellevue 600, on a 3.5-acre site from 110th Avenue NE to 108th Avenue NE, on the north side of the Bellevue Transit Center, kitty-corner from the future Link Light Rail stop on the east side of downtown.

Construction has begun on a 43-story office tower on the Bellevue 600 site, slated for occupancy in 2024. Amazon has also submitted plans for a 31-story building on the western portion of the site, set to open the following year.

Nearby, at 555 108th Street, Vulcan Real Estate is building a 42-story, 1 million-square-foot building, the 555 Tower, which has been leased to Amazon and is slated for occupancy in early 2023.

The Bellevue 600 and 555 Towers are examples of developers taking advantage of an increase in downtown height limits approved by Bellevue in 2017, which will ultimately give the city’s skyline more of a “wedding cake” feel, with taller towers toward the center and shorter buildings toward the edge.

Facebook — or Meta, as the social network’s parent company is now known — keeps expanding its planned footprint in the Spring District east of downtown. Microsoft and Salesforce also remain major tenants in the city.

“Destiny” video game maker Bungie is remodeling and expanding its headquarters in Bellevue, at the former Bellevue Galleria. Valve, the company behind the dominant Steam PC game platform, is headquartered at the Two Lincoln Tower downtown.

As in other downtown business districts, questions remain about how the pandemic and the rise of remote work will impact offices in Bellevue long-term. Apart from all the construction activity, I was struck by how empty Bellevue’s sidewalks were on our recent walk around downtown, in the middle of a workday.

City leaders are also working to make downtown Bellevue more of a residential hub, and they acknowledge the need to establish more of a nightlife to make downtown more vibrant and busy after working hours.

In the meantime, Amazon is helping to make Bellevue more of a center of gravity that attracts additional companies, in a virtuous cycle. As many as five or six companies are currently looking for space in the range of 100,000 to 150,000 square feet in Bellevue and the broader Eastside, Broderick Group’s Haehl said.

“What we’re seeing in terms of large tenant activity in downtown Bellevue is pretty incredible,” Haehl said.

HQ1 is Puget Sound

But Amazon is quickly becoming the biggest player in town. The company’s growth plans in Bellevue have led some to think of the city as the “real HQ2,” in the words of angel investor Charles Fitzgerald.

Amazon puts a different spin on it, referring to Bellevue and Seattle together as its “Puget Sound headquarters.” Reinforcing this notion, Amazon buses can already be seen navigating the streets of Bellevue to shuttle employees back and forth between the company’s buildings on either side of Lake Washington..

“First of all, we don’t think of HQ1 being Seattle any longer. We really think of it as Puget Sound,” Amazon CEO Andy Jassy said at the GeekWire Summit in October. “We have a lot of people in Seattle, but we also have a lot of people in Bellevue, and it is where most of our growth will end up being.”

Access to tech talent is a key factor driving Amazon’s expansion in Bellevue, said Huseman, the company’s vice president of public policy, describing the plans as part of the company’s overall growth in the Seattle region.

That explains one of the big differences between Bellevue and the company’s second headquarters in Arlington: Bellevue didn’t need to offer tax breaks or other financial carrots to land Amazon, city officials say.

“The projects in Arlington and Bellevue are completely different,” Huseman said. “Bellevue is part of the organic growth of our existing presence, and our Puget Sound headquarters, whereas Arlington was a national search where we were building a headquarters and building a presence from the ground up.”

Economic incentives are “obviously a factor as companies look to expand,” he said, although the overriding factor in any decision about new offices is access to a strong pool of tech talent.

Amazon’s work in Bellevue has “set a standard for community engagement and collaboration, and issues engagement overall,” said Patrick Bannon, president of the Bellevue Downtown Association, in a recent interview at the BDA office. “They’ve been just doing everything they can to stitch themselves into the fabric of the community.”

Amazon is working with the city and the BDA to ensure that the company’s projects complement and integrate with the larger vision for downtown Bellevue. That includes the planned “Grand Connection” pedestrian corridor that will stretch from Meydenbauer Bay to the Eastrail corridor, a regional trail that will connect to future light rail stations.

As one example, they’ve worked together on plans to the intersections at 110th Avenue NE to 108th Avenue NE, next to slow traffic down and make the area more pedestrian-friendly.

Bellevue is creating a “Grand Connection” pedestrian corridor through the middle of downtown. (City of Bellevue Image.)

Robinson, the Bellevue mayor, said Amazon has followed through on its early promises to help the community. In addition to its major investments in affordable housing, Amazon supports groups including Bellevue LifeSpring, KidsQuest Children’s Museum, LifeWire and the City of Bellevue’s Human Services Fund.

Another example is the company’s $7.5 million contribution to complete two key segments of the Eastrail corridor.

Amazon has also become much more active in Seattle, participating and contributing to a wide array of philanthropic and public projects, addressing issues such as hunger relief and homelessness. One recent example was its $5 million donation to the Seattle Waterfront Park, on top of a previous $7 million contribution to support that project.

But the company’s relationship with the city has been defined in recent years by a series of conflicts with the Seattle City Council, as the city sought to tax Amazon and other large companies to raise funds to help the city address the impact of rapid growth. Amazon opposed the tax and spent heavily to support a business-friendly slate of council candidates in the 2019 election, without much success.

Councilmember Kshama Sawant, standing, during Seattle’s tax debate. (GeekWire File Photo / Monica Nickelsburg)

City Councilmember Kshama Sawant, one of Amazon’s fiercest critics, appears on track to survive a recall effort.

Addressing the city’s relationship with Amazon, Seattle Mayor-elect Bruce Harrell has called for a new era of “collaboration and forward-thinking relationships” with large and small businesses.

Huseman said the company’s experiences in Bellevue and Arlington show the potential for a more collaborative relationship. “We would like to have that same partnership and that same relationship in Seattle,” he said. “We’re going to do our part to do that, including working with the new mayor.”

Politics aside, it makes sense for Amazon to grow elsewhere in the region, said Nickels, who was Seattle’s mayor from 2002 through 2009. Amazon has essentially maxed out its footprint in Seattle, he said, and for the city, it’s smarter economically to leave room for a diverse array of companies to grow in Seattle.

However, Nickels said he disagrees with the overall tone and approach toward Amazon from the Seattle City Council.

“The idea that we should try and punish Amazon is just off-base.” Nickels said. “We should welcome companies to our city that provide good jobs, that provide living wages and benefits that allow people to successfully live within the city and prosper.”

For the record, Nickels did end up meeting Jeff Bezos during his term as mayor — once. It was a chance encounter at Marjorie Restaurant in Seattle’s Capitol Hill neighborhood. Another former Seattle mayor, Norm Rice, was also there, and he introduced Nickels to Bezos. They exchanged pleasantries, but that was about it.

Nickels wondered why Amazon didn’t engage with the city at the time, but he didn’t harbor any resentment. “They were building a business, a world-class business, breaking all kinds of barriers, and were focused elsewhere, which was fine,” he said. “We wanted them to be successful.”

Geekwire BY TODD BISHOP on December 16, 2021 at 10:17 am, see article here