Facebook will buy REI’s unused Bellevue headquarters complex, signalling offices are still relevant

REI is selling its new headquarters complex in Bellevue, Washington to Facebook before it is even occupied. It's seen here on August 12, 2020. (Alan Berner/Seattle Times/TNS)
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By Katherine Khashimova Long The Seattle Times (TNS)

SEATTLE — Facebook will buy REI’s so-new-it’s-never-been-used Bellevue, Wash., campus for nearly $368 million, the social media giant announced today.

The move further consolidates Facebook’s Eastside mini-empire in the upscale, multiuse Spring District east of I-405. Before the acquisition of the 400,000-square-foot REI offices, Facebook was already on track to lease nearly 850,000 square feet in three under-construction Spring District buildings.

Facebook, which opened its first Puget Sound office in 2010 with three engineers, now employs more than 5,000 local workers across 3 million square feet of space in dozens of locations in Seattle, Bellevue and Redmond, placing it neck-and-neck with Google for the title of the area’s largest out-of-town tech employer.

The Seattle area is home to Facebook’s second-largest engineering hub, after its Menlo Park headquarters.

“Our growth over the last decade is a testament to the thriving community and immense talent pool that has welcomed us with open arms,” said Nick Raby, Facebook’s director of North American real estate, in a statement. “This purchase doubles downs on our investment in Bellevue and our commitment to the Pacific Northwest.”

The company declined to say how many employees it expects to work in its now-larger Spring District complex — and uncertainty about how much space workers will need in a post-COVID-19 landscape makes the number difficult to estimate. Before the pandemic, office employers typically budgeted roughly 150 square feet of space per person. Now, many companies are reconfiguring floor plans to allow workers to maintain six feet of social distance in the office, doubling or tripling space-per-person allowances.

Even a conservative estimate for Facebook’s hiring plans, though, puts the number of Facebook employees expected to trickle into the Spring District in the many thousands. The full number may not be known until the last of Facebook’s three leased Spring District offices opens in 2023. The company currently has more than 400 open job listings in the Seattle area.

The deal signals that there is “no single approach” for white-collar employers envisioning the future of office space as work-from-home regimes stretch into their seventh month, said Greg Johnson, the CEO of Spring District developer Wright Runstad & Company.

REI decided to let its three-building Spring District campus go after the pandemic battered sales, leading the outdoor equipment retailer to conclude that it couldn’t afford not to sell the space, which it acquired in 2017 for $49.3 million. The company’s work-from-home program also proved to be surprisingly successful, said Ben Steele, REI’s chief customer officer. REI had last October agreed to sell its former Kent headquarters to an industrial developer which plans to build warehouses on the site.

Moving forward, REI plans to rely more heavily on remote work.It will also establish three smaller, satellite offices — on the Eastside, in South Puget Sound and at its existing location in Georgetown, said spokesperson Halley Knigge.

Other employers and builders have doubled down on offices. Amazon recently announced it plans to occupy nearly 2.75 million square feet of Bellevue office space by 2025. In addition to the building sale to Facebook, REI sold two undeveloped acres back to Wright Runstad and Shorenstein Investments for $22.4 million; the developers plan a 300,000-square-foot office building for the site.

And for Facebook — which expects half its employees to work remotely by the end of the decade — “the company’s offices are still vitally important to help accommodate anticipated growth and meet the needs of our employees that need or prefer to work from campus,” said spokesperson Tracy Clayton.

One thing the Bellevue acquisition doesn’t represent, Clayton said, is a repudiation of Seattle’s new JumpStart payroll tax for high-earning employees at businesses with at least $7 million in annual payroll.

“We’ve been in Seattle for 10 years and look forward to many more,” Clayton said. “Given the competitive real estate market in the area we are always on the lookout for opportunities to accommodate our growth on both sides of the lake.”

Facebook has expanded rapidly throughout the region since opening a tiny Pike Place Market office in 2010. It leases nearly 900,000 square feet in South Lake Union and has snapped up office and light-industrial spaces in Redmond for its Oculus virtual reality project.

Smaller Seattle employers, though, may be looking to jump over to Bellevue to escape the new tax, said longtime Bellevue commercial real estate broker Mike Schreck, of Newmark Knight Frank. Since the new tax became law this summer, Schreck said he’s seen an uptick in interest from Seattle tenants for open Eastside office space between 5,000 and 10,000 square feet.

“These companies have maybe a few employees making more than $200,000 and the head tax is real money for them,” Schreck said, using another term for the JumpStart payroll tax. Companies are taxed between 0.7% to 2.4% on salaries and wages spent on Seattle employees who make at least $150,000 per year, with salaries at larger companies taxed at the higher rate.

The Eastside has seen scorching office growth for more than a decade. West of I-405, longtime Bellevue developer Kemper Freeman began tacking tall, glassy office towers onto his Bellevue Collection in the early 2000s. East of I-405, Wright Runstad’s Spring District, on a former Safeway distribution center, broke ground in 2012.

The $2.3 billion, 36-acre multiuse project on the edge of the Bel-Red Corridor was billed as an “authentic” new Eastside neighborhood, Johnson told media at the time. The plan was to concentrate apartments, office and retail in a dense 16 blocks, adjacent to a light rail station opening in 2023 and 42 planned miles of pedestrian and bike trails along former railroad tracks between Snohomish and Renton. REI and Facebook will both donate $1 million to the trail project, called Eastrail, as part of the acquisition.

REI’s departure from the complex means that apart from Facebook, the only other office tenant in the complex is the Global Innovation Exchange, a graduate program partnership between the University of Washington, Tsinghua University and Microsoft, which occupies one building.

For now, it seems, the Spring District is a company town.

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