Amazon puts its stamp on downtown Seattle
The online retailer's influence on the commercial real-estate market is unprecedented and extends far beyond its appetite for office space.
Seattle Times business reporter
Two gigantic deals electrified Seattle's commercial real-estate scene in 2012.
One company was behind both of them: Amazon.com.
The transactions solidified the fast-growing online retailer's status as the colossus of Seattle real estate. No company has ever dominated or driven the market so completely, insiders say.
"Amazon is the undisputed heavyweight champion of downtown Seattle," says Kip Spencer, president of The Spencer Companies, a Seattle real-estate consulting firm.
In January, Amazon agreed to buy three Denny Triangle blocks from Seattle's Clise family — then unveiled plans for a 3.3 million-square-foot high-rise office complex, downtown's biggest development ever.
Less than nine months later the company dropped another bombshell, announcing it was buying its leased, 1.8 million-square-foot South Lake Union headquarters campus from developer Vulcan Real Estate for $1.16 billion.
Those two deals, big as they were, only scratch the surface of Amazon's influence on Seattle real estate.
"In the 25 or 30 years I've been around downtown Seattle, I've never seen anything remotely like what Amazon has done to the market," says Dale Sperling, former president and CEO of Seattle's Unico Properties.
Amazon's breathtaking growth — it has moved into about 2.7 million square feet in South Lake Union and the Denny Triangle since spring 2010 — has spearheaded the downtown office market's recovery from record-high vacancy rates brought on by the recession and Washington Mutual's demise.
Richard Briscoe, a senior vice president at brokerage Kidder Mathews, calculates Amazon is responsible for about half the additional office space occupied citywide over the past three years.
The company's contrarian decision to locate downtown could spur more tech and Internet companies to move in from the suburbs, Downtown Seattle Association President Kate Joncas says.
Amazon's influence also extends beyond the office sector. Owners and developers of apartment buildings, condo towers, hotels and retail space are cashing in on the company's growth as well.
Holland Partners, for instance, is building nearly 1,200 apartments in five complexes on downtown's northern fringes.
Tom Parsons, the Holland executive in charge of the projects, likes to tell people they're all within walking distance of the Bravehorse Tavern, the watering hole in the heart of Amazon's South Lake Union campus.
Smaller big deals
Amazon also pulled off some smaller — but still significant — real-estate deals in 2012.
It agreed to lease all 110,000 square feet in Spear Street Capital's 202 Westlake, a South Lake Union office building scheduled for completion next year.
And it committed to take an additional 380,000 square feet in yet another South Lake Union complex that Vulcan plans to start building next month.
Amazon may not be finished. Brokers say the company is talking to Denny Triangle landlords about leasing still more space. Talon Private Capital's half-empty 1800 Ninth Avenue is considered the most likely candidate.
Amazon also has options to buy another 1 ½ Denny Triangle blocks from Clise, and there are indications it will exercise them.
"I think Amazon is just getting wound up," says Spencer, the consultant. By the end of the decade, he says, the company could occupy 8 million square feet of office space — the equivalent of more than five 76-story Columbia Centers.
Never before has any company had a downtown Seattle footprint anywhere near that big. Washington Mutual, No. 1 before its collapse, owned and leased about 1.6 million.
Amazon has helped make office developers bolder, Spencer says: "It seems like, if you build it, Amazon will come."
At least one developer is looking to start construction on a tower next year on speculation — without preleasing.
Amazon's high-profile real-estate moves also have helped focus institutional investor attention on Seattle, Spencer says.
Several downtown towers with no direct link to Amazon, including the 42-story Russell Investments Center and 55-story 1201 Third Avenue, sold this year for prices at or above pre-recession levels.
Pension fund TIAA-CREF bought the 37-story Aspira apartment tower this fall for a record per-unit price. That building is within 10 blocks of every Amazon office.
Amazon won't say how many people it employs in Seattle. But the Downtown Seattle Association's Joncas estimates the count tops 10,000 now, and could reach 30,000.
While there's no data, the conventional wisdom is that the typical Amazonian is young and well-paid. Many come from out of state.
Amazon buys thousands of downtown hotel rooms every year to house those recruits, Joncas says. A California developer recently proposed a 15-story hotel right in the middle of the company's South Lake Union campus.
Once they're hired, Amazon's employees seem inclined to city living.
"Amazon uses their urban campus and the in-city lifestyle as an effective recruiting tool," says Dean Jones of brokerage Realogics Sotheby's International Realty, "and that's good for downtown housing."
"They're driving urbanization," Sperling adds. "These kids are all urban dwellers."
Their arrival has helped ignite the city's biggest apartment-construction boom in at least 20 years.
"Amazon gave a lot of developers the confidence to go ahead with projects," says Tom Cain of research firm Apartment Insights Washington.
Developer Harbor Urban leased all 184 apartments in its 17-story Alto complex in Belltown in just three months after the tower opened this spring. Marketing director Emi McKittrick says more than 70 percent of Alto's tenants work in South Lake Union, where Amazon is by far the largest employer.
Pillar Properties estimates 15 to 20 percent of the tenants moving into its brand-new Lyric complex on Capitol Hill work for Amazon.
Smaller landlords are benefiting, too: Amazon employees account for 25 to 30 percent of the condo and house leases Seattle Rental Group has negotiated in close-in neighborhoods over the past five or six months, broker Ashley Hayes says.
Amazon workers seem more inclined to rent for now rather than buy, Jones says, but they still have given a boost to the downtown condo market. "The company's growth has had a profound effect on the consumer psyche," he says. "It bolstered confidence to invest in downtown Seattle."
Highflying Washington Mutual moved into a gleaming new headquarters tower downtown in 2006.
Three years later the bank was out of business, its offices most empty, the downtown real-estate market in a tailspin.
Developers and landlords who are riding Amazon's long coattails now shouldn't forget that lesson, some real-estate insiders say.
"It's pretty tough to put all your eggs in one basket," one says.
Amazon looks healthy. Sales are strong. Its stock price is up 40 percent this year.
But this fall it posted its first quarterly loss since 2003. And some analysts say it could face increasing competition for online sales in coming years.
Spencer says he isn't worried about Amazon's future. "I think they're about as suspect as Microsoft," he says.
Joncas concurs. "Amazon seems to be in a pretty unique business space," she says.
Even if the company does suffer a huge downturn, Joncas adds, its real-estate projects will have provided downtown with amenities — new streetscapes, open space, bicycle tracks — that won't go away.
"But right now," she says, "our focus is on helping them all we can, trying to make sure they're still around in 25 or 50 years."
Eric Pryne: firstname.lastname@example.org or 206-464-2231