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Real Estate Reporter
July 2, 2015
Expedia's plan to move to Seattle and Microsoft's decision to sublease some space have raised questions about the health of downtown Bellevue's office market.
But a corporate site selection firm called The Boyd Co., which is based in Princeton, New Jersey, sees both moves as good signs for downtown Bellevue. Vacancy will go up in the near term, but that won't last because Bellevue remains a strong market.
Bellevue is the envy of suburban markets around the country, said John Boyd of Boyd Co. It has an attractive downtown, a deep roster of big and small companies, and is a gateway to top Asian markets.
“The big picture drivers take precedence over that excess of vacant space,” Boyd said.
Vacant space could actually be a good thing. Over the last few years, Bellevue's office market has been extremely tight. A big company that wanted a big space had nowhere to go.
Boyd considers Bellevue to be one of the top 50 suburban office markets in the U.S. and Canada, and it's in a region with lots of top-tier companies so there is a heavy supply of talented workers.
Here's another feather in Bellevue's cap: The Spring District has been chosen as the site for the Global Innovation Exchange, a partnership between the University of Washington and China's Tsinghua University. This will be the first time a Chinese research university has established a presence in the U.S.
Boyd said the talk of companies rejecting suburban markets in favor of cities has been somewhat overblown. Seattle may be the poster child for cool urban areas, he said, but other places are seeing a renewed interest in the suburbs.
His best example is Atlanta. Mercedes-Benz recently committed to build a new headquarters on a 12-acre site in suburban Atlanta. Cox Media Group, State Farm, Home Depot and Geico have all taken space in Atlanta's suburbs recently.
Suburban locations will save these companies money, Boyd said, and public transportation in Atlanta isn't good enough to get thousands of employees into and out of a downtown office location.
This kind of corporate movement — specifically new headquarters — is at an all-time high, Boyd said.
We have seen it locally with Expedia coming to Seattle and Weyerhaeuser's future move from Federal Way into Pioneer Square. For every corporate headquarters move, Boyd said there are often two or three smaller moves for back office functions like finance, human resources and IT. These offices tend to land in lower-cost markets.
Bellevue could be a candidate for new headquarters as well as back-office relocations, Boyd said. With three new office projects under construction, a big company that wants a brand new trophy-type space now has options for the first time in awhile. Expedia's space — more than 500,000 square feet in downtown Bellevue — will be appealing.
“That's a great calling card, having a Class A tower available and ready to accommodate someone,” Boyd said.
A company looking to make a splash could move its headquarters to downtown Bellevue and put back-office functions outside of downtown to save money, Boyd said.
Bellevue makes a lot of sense for IT because of the all the tech workers. Call centers also would work in Bellevue because of the city's diversity and the number of residents who speak multiple languages.
As part of his analysis, Boyd put together a comparison of how much it would cost to operate a 125,000-square-foot administrative office in each of the top cities.
In Bellevue, the cost is about $40.1 million per year, making it the 18th most expensive of the 50 top suburban markets. Bellevue is the fifth lowest cost option on the West Coast.
The most expensive West Coast location is Redwood City, California, at $44.7 million per year, and the cheapest is Minden, Nevada at $34.3 million.
Stay awhile in Issaquah
Issaquah's first extended-stay hotel, and the first project in Rowley Properties' Hyla Crossing, will open later this month.
The eight-story, 123-room hotel is a Homewood Suites by Hilton. The site is near Hilton Garden Inn, which Rowley built off state Route 900.
Kari Magill, CEO of Rowley Properties, said the hotels will complement each other. Rowley decided to go with an extended-stay hotel because there wasn't one in Issaquah.
“We could see from our current hotel there was a demand that wasn't being met, and we could see the business going to Bellevue because we couldn't meet that demand,” Magill said.
Extended-stay hotels cater to people staying more than five days. Guests could include business travelers, contract workers, people getting care at nearby hospitals, families moving here because of good schools and local residents doing major home repairs.
Abbott Architecture designed the hotel, and GLY Construction built it. Other team members are The Hotel Group, Karen Earl Interior Design, BCRA, KPFF Consulting Engineers, Raymond-Northwest, Rushing Co., Cochran, Terra-Associates, Brumbaugh & Associates, Bellevue Mechanical, Auburn Mechanical, DCI Engineers, and Bush, Roed & Hitchings.
Rowley Properties has owned about 80 acres on either side of state Route 900 for three generations, Magill said. Hyla Crossing is on the west side of SR900, and is more of a destination. The area is near the base of Cougar Mountain and bordered by a stream, so it will be a little more nature-focused.
The hotel is the only project planned for Hyla Crossing right now, Magill said. Once it is done, Rowley Properties will look at what else is needed.
Rowley Center is on the other side of SR900 and close to the Issaquah Transit Center, so it is more office-oriented.
Rowley Center is “ultimately going to be the center of action, if you will, for the future downtown,” Magill said. It will have higher density housing, office and retail.
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