After more than 25 years in Seattle commercial real estate, we’ve seen our share of industry trends come and go, and watched how they’ve shaped the city. Reflecting on these changes can tell us a great deal about where the energy is–what are companies and investors gravitating toward when it comes to real estate? And what does that say about Seattle’s future? In this series, Kinzer Partners brokers share the top Seattle real estate trends they observed in 2018, along with the developments they’ll be watching closely in the months to come.

In the first installment, founding partner Craig Kinzer reflects on the necessary surge of satellite campuses in 2018, and why the best price doesn’t always equal the best value when it comes to selecting real estate.


 Kinzer Founder Craig Kinzer

Broker: Craig Kinzer, partner

Founded Kinzer Partners: 1992

Main projects and focus areas:

Master planning for King County campus downtown – a rehabilitation or complete revision for that part of downtown Seattle.

Notable trends of 2018:

Growth of sophisticated satellite campuses. We saw this trend in 2018, and we’ll see it in 2019. Companies have more than one campus – not just in a country but in a region, usually connected by light rail or some transportation system. Employees are always close to work – either in a downtown or an ‘urban village’ or even a bedroom community outside of the downtown core.

For example, downtown Seattle’s satellite regions could be – Bellevue, the University District, Kirkland, Renton, SeaTac, Northgate – to name a few.

I think these campuses are growing and thriving because the ability to get work done through telecom and other avenues is becoming so ubiquitous. There used to be a big difference between a satellite facility and the company’s primary headquarters. That difference is dissipating. Now, employees at headquarters and satellite campuses can communicate so efficiently, distance is not an issue in terms of accomplishing work.

Pure remote working isn’t perfect, though, and it’s often not the best solution for many teams. While a lot of work can be done remotely, there are still times you need to meet face-to-face and you don’t want to get on an airplane.

Local campus groups are the best of both worlds. They’re far enough away to better suit workers’ lifestyles, but close enough to facilitate meetings during low-traffic hours. They also give employees the option to commute via light-rail and other public transit.

 

Major tech firms are rapidly expanding office footprints on both sides of Lake Washington. This graphic shows occupied and committed office space, as well as rumored deals reported in local media, as of Jan. 24, 2019. By Jenny Jansen  //  Kinzer Partners


What is pushing companies to locate campuses nearby in the region?

I don’t think cost is driving it. I think what’s driving it is recruiting and retention. Most major tech firms are in the same cities, and those major cities are highly competitive for talent. It becomes a self-fulfilling prophecy: more tech talent comes to these towns, and so the towns keep recruiting them and finding ways to become more attractive. The competition is fierce.

A lot of younger workers want to join a company that will pay well and produce exciting work, but at some point the work can become commodity-oriented, and the benefits on the margins make a difference. If you’re a worker with offers from Facebook, Amazon, and Google, your deciding factors could be, “Where’s my office? How long is my commute? Is that good for my family? Is that good for me? Because I need to be downtown and socializing.”

Predictions for 2019:

A real estate trend I continue to see: As we represent corporations, over time, we’ve seen our champion changing from being almost exclusively the CFO to the director of HR. Real estate is now understood to be more of a qualitative decision than a financial one. I see that trend continuing and expanding in 2019. In the past, and currently, we’ve represented tenants who are trying to decide between rent at $45 NNN or $50 NNN per square foot.

Certainly, we’ll get them the best deal, but as you choose a company location – one may be more expensive, but it still may represent a better value for your company in the long term. Keep in mind that at some of these major tech firms, you are paying $800 per square foot for your employees’ salaries, and you need to be able to attract and retain those people.

As you sit here negotiating $5 per square foot, don’t lose track of the fact that real estate is just a tool. It’s a means to the end. The end is your company’s mission, the customer, the people who work for you, at $800 per square foot in Ballard. Be careful not to be penny wise and pound foolish when you need to make the best decision. The value graph that we created, that we’ve been using for 25 years, is starting to get more attention. It provides a well-thought-out, qualitative look at these decisions.