Office space is still a relevant holding in the greater Puget Sound area, with two factors at play: Changes from the impacts of COVID-19 and Seattle’s recently-passed JumpStart payroll tax.
Last week, news hit that REI (Recreational Equipment, Inc.) was selling its brand new, yet to be occupied 400,000-square-foot Bellevue campus to Facebook for $368 million. For Facebook, this was a double-down effort to establish a presence in the multiuse Spring District development, where the company had already had plans in motion to lease 850,000 square feet in buildings currently under construction.
In the region, Facebook has more than 5,000 employees occupying about 3 million square feet across Seattle, Bellevue and Redmond (for the latter, it acquired office and light-industrial spaces for its Oculus virtual reality project). By 2023 in Bellevue’s Spring District alone, thousands of Facebook employees will have funneled into the newly purchased office and neighboring leased offices. Right alongside Google, Facebook is one of the largest tech employers headquartered elsewhere. Amazon has also asserted its own plans to occupy 2.75 million square feet of office space across Bellevue by 2025.
For REI, the pandemic negatively impacted sales and the company faced a tough financial decision in shedding the Bellevue campus. Concurrently, the company realized a successful work-from-home program for its employees. But, like many local companies, it still needs offices, just scaled. REI reported it will establish three smaller offices: In Seattle’s Georgetown (where it has an existing office), in South Puget Sound, and on the Eastside. This underscores how company offices are still vital for growth, and to accommodate employees that need (or just plain prefer) an office environment.
For white collar employers operating out of central offices, the pandemic is imposing new, more spacious floor plan changes. Before COVID-19, office employers often estimated 150 square feet of space per person. That per-person allowance has doubled and even tripled in order to allow workers to maintain six feet of physical distance in the office.
The Eastside and non-Seattle offices will appeal to employers for another reason: Seattle’s new JumpStart payroll tax. This affects high-earning employees, notably where employers’ payrolls are at least $7 million per year. Companies are taxed from 0.7% to 2.4% on salaries and wages spent on employees that earn at least $150,000 annually, with salaries at larger companies taxed at the higher rates. Given a competitive real estate market across the entire region, companies will be looking in and outside of Seattle for office campus opportunities that pencil attractively. Especially for large employers and tech companies, factors such as payroll taxes can make all the difference in where offices are staked.
For those holding onto office space, recent news shows this: companies will still need hubs. They may be configured differently, in smaller satellite locations and (with new JumpStart payroll taxes in Seattle) popping up more in the Eastside or South Sound, but offices are still relevant and here to stay.
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