Tech Firms Continue to Establish and Expand Engineering Centers

Seattle area has become a veritable satellite office launchpad.
| FROM THE PRINT EDITION |
 
 
 
When Derek Orr left Microsoft last fall to join Uber in its new Seattle office, he was one of a handful of Uber employees who ate lunch at a makeshift picnic table in a small Pioneer Square office. Earlier this year, Uber moved into a 40,000-square-foot office downtown that includes expansive murals of Northwest-style landscapes and a proper cafeteria where its employees, now numbering 150, can dine in style.
 
By the end of this year, San Francisco-based Uber expects to have nearly 200 employees in Seattle, and it’s looking to enlarge its office — already the size of the average grocery store — by 50 percent.
 
The fast-growing Seattle office seems more like a startup than the Northwest outpost of a global company. Uber’s Seattle office is “empowered to work autonomously,” says Orr. “They’re there when we need them,” he says of the people at the home office, “but we do not have to wait for a decision from San Francisco.”
 
Uber is one of more than 80 companies headquartered outside the region that have established offices here so they can better recruit from the deep pool of software engineers.
 
“Seattle, arguably, is the fastest-growing tech hub in the country,” Orr asserts. “There are a lot of companies to draw amazing talent from.”
 
 
ROOM TO GROW: Derek Orr, left, and Jon Kantrowitz work at Uber's new office in the Second & Seneca Building downtown.
Uber expects to have 200 workersin Seattle by year's end.
 
Eighty satellite offices may not seem like many, given that there are some 12,000 tech firms in Washington state. But the number of branches has grown dramatically in recent years, and they tend to include the world’s most successful companies with astonishingly rapid growth trajectories.
More than half of the engineering centers have been established since 2014, according to GeekWire, the Seattle-based tech news service. While they typically start small, many have grown quickly and now play strategic roles for such global giants as Google and Facebook. 
 
The Seattle tech community, once described as Snow White and the Seven Dwarfs because of the overwhelming presence of Microsoft, has gradually become more diversified with the emergence of Amazon and numerous midsize companies like Tableau Software and F5 Networks. The new engineering centers add yet another important source of growth and variety.
 
Consequently, the tech sector has become a key driver in boosting the demand for commercial real estate. During the past year, tech companies leased 2.5 million square feet in the Seattle area — the equivalent of about 17 Costco stores — with South Lake Union, downtown Seattle and downtown Bellevue representing three of the six hottest tech neighborhoods in the country by transactions, according to JLL, a real estate research firm.
 
Much of this activity comes from satellite offices that were established earlier and are now expanding. Facebook, which set up shop in Seattle six years ago, currently has about 1,000 employees and has moved into new offices in South Lake Union that could accommodate twice that number.
 
“The city [of Seattle] has greatly contributed to our engineering growth,” says Vijaye Raji, Facebook’s director of engineering in Seattle.
 
Google, which recently completed a large campus in Kirkland, has 1,900 employees and is adding a new building in South Lake Union that will give the company the capacity to triple that number.
 
While Facebook and Google both started out with just 20,000 square feet or so of office space, Bret Jordan, managing director of the Bellevue office of real estate services firm Colliers International, says they now represent a significant presence in the region.
 
“Those second and third moves are the ones that have a significant impact on our office market,” he says.
 
And it’s not just the Silicon Valley tech giants that are choosing to establish engineering operations here. Chinese e-commerce behemoth Alibaba opened an engineering office here two years ago. Taiwanese smartphone maker HTC, Chinese telecommunications giant Huawei Technologies, Japan’s Mitsubishi Aircraft Corporation and French defense giant Dassault Systems all have software engineering operations in the Puget Sound area. There are also edgy startups like virtual-reality firm Magic Leap, Singapore’s GrabTaxi and Elon Musk’s SpaceX.
 
The companies are attracted by the Seattle area’s concentration of software engineers, who constitute a talent pool of more than 90,000, according to a 2015 Washington Technology Industry Association (WTIA) report.
 
 
“We have more software engineers than any city per capita in the nation,” says Suzanne Dale Estey, CEO of the Economic Development Council of Seattle & King County. 
 
And even though Silicon Valley is by far the leader in venture capital funding, WTIA CEO Michael Schutzler says, “For actual engineering talent, for software development, this is the center of the universe.”
 
Yet it’s not just about quantity. University of Washington Computer Science & Engineering Professor Ed Lazowska points out that Seattle area engineers are in the vanguard in a broad range of sectors, from cloud computing and e-commerce to online gaming and virtual reality.
 
“We are, honestly, in a different league,” says Lazowska. “It’s Silicon Valley and Seattle. New York has an extremely vibrant startup culture, but it is much less of a magnet for engineering offices.”
 
While Silicon Valley’s tech community is far larger than Seattle’s, one thing that makes Seattle attractive as a location for engineering centers is its lower cost of living. The average software engineer’s salary in Seattle is $125,000, more than 5 percent less than the average salary in the Bay Area, according to JLL. The personal finance website SmartAsset.com estimates that it is 25 percent cheaper to live in Seattle than San Francisco, thanks to lower rents and taxes. Commercial space in Seattle rents for 30 to 50 percent less than in the Bay Area, and the median home price is half that of the San Francisco area.
 
Seattle’s quality of life is another attraction. “It’s less about cash on the table and more about Mount Rainier and being on the ski slopes in under an hour,” Dale Estey notes.
 
The flood of tech talent that poured into the region to serve Microsoft and Amazon’s insatiable demand for more software engineers has also powered a positive feedback loop. Since many of those engineers don’t want to leave the Seattle area, companies interested in hiring them have established engineering centers in Seattle and Bellevue to accommodate them. Those engineering centers then create new centers of expertise and a greater depth of talent that, in turn, attracts more engineering centers.
 
This exploding demand for tech workers has so outpaced the state’s ability to educate them that, on a per capita basis, Washington state has become the leading importer of information and communication technology workers in the country, according to a 2015 WTIA report. 
 
To be sure, rising rents and a shortage of software engineering graduates relative to places like San Francisco and Boston could erode some of that advantage. But the UW has plans to double the size of its computer science and engineering program and dozens of institutions are popping up to provide basic training in coding, such as WTIA’s new Apprenti program, which offers software training primarily to women and disadvantaged minorities.
 
In many cases, engineering centers were initially established to take advantage of the availability of a particularly talented individual. For instance, when Lazowska learned that Brian Bershad, a colleague, was considering working for Yahoo, he contacted Google, which hired Bershad to open its first Seattle office in Fremont. When the UW hired the wife of a top Facebook executive, Facebook used the opportunity to have that executive open its first Seattle office.
 
Although those operations began small, they have evolved to play critical roles in driving the development of strategic products. Google’s Seattle and Kirkland operations, sometimes called SEA/KIR, play particularly central roles in the company’s cloud and mapping development efforts. At Facebook, the effort ranges “from video calling for Messenger to virtual reality to the infrastructure work that supports all of this,” says Raji. 
 
Facebook’s new Dexter Station office in Seattle’s South Lake Union neighborhood has enough space to allow the company to double its workforce to 2,000, and there’s potential for additional expansion with Seattle-based developer Capstone Partners planning to add 165,000 square feet of office space to the project. 
 
Google, which quickly outgrew its Fremont space, opened an engineering campus in Kirkland in 2004. To accommodate its continued expansion, Google recently added a 180,000-square-foot office building to that campus and is establishing a second campus in South Lake Union at Vulcan Inc.’s Lakefront Blocks project, which could house as many as 4,000 employees. The two campuses combined will give Google about one million square feet of office space in the Seattle area.
 
While many of the engineering centers are establishing themselves in South Lake Union or Bellevue, there’s also a strong move into prime office space in downtown Seattle as companies seek to be close to such amenities as restaurants, theaters and nightclubs that help attract millennials. Chicago-based Groupon opened an office in the 1201 Third Avenue Building, Redwood City-based Oracle Corporation is moving into Century Square and Venice, California-based Snapchat has established a beachhead near Pike Place Market.
 
In fact, tech companies often pick up the most attractive office spaces available downtown. “It’s a fight for talent,” says Doug Hanafin, a managing director at JLL. If the company is paying a tech worker more than $100,000 a year, whether the annual real estate cost is $8,700 a seat or $7,700 a seat is not that important, Hanafin explains. 
 
Situating offices in buildings that have views, easy access to bicycle trails and public transit or proximity to good restaurants is important because many employees choose the Seattle area precisely for quality-of-life reasons.
 
“My wife’s job, the kids’ education, the quality of life we have here is not something we would be able to do in the Bay Area,” says Will Kiefer, who moved from Boston and took a job in Dropbox’s Seattle office when his wife accepted a position at Harborview Medical Center.
 
 
NICE PLACES TO WORK: 1. Dropbox's office on the 64th floor of the Columbia Center downtown provides expansive views of the city
and Elliott Bay. 2. A design detail at Facebook's office in Dexter Station reflects the prevailing attitude about working in Seattle. 3. Google
plans to occupy Vulcan's huge Lakefront Blocks development in South Lake Union. 4. GoDaddy's Kirkland office looks out on Lake Washington.
 
Satellite offices often develop their own distinctive cultures to help recruit new employees. Kiefer says he was attracted by the startup feel of Dropbox’s Seattle office. “I saw the opportunity to get in and help grow the culture, to help grow the new office,” he says. “That’s exciting.”
 
Seattle’s Dropbox workers can easily connect with their colleagues at headquarters through online chats and presentations. “Working in the remote office often feels as if you’re just on a different floor in the same building,” says Kiefer. And being away from the head office has no negative effect on a person’s career. “Where your actual physical desk is does not play into any of those career decisions,” he says.
 
The tech strength in Seattle harks back to the Boeing Co., Pacific Northwest Laboratories and the University of Washington, but has clearly accelerated with the arrival of Microsoft, then Amazon, with their tens of thousands of employees, as well as dozens of companies in pioneering fields like data analytics, cybersecurity, home automation and virtual reality. 
 
Google’s virtual reality activities are led from Seattle by a group created by UW faculty member Steve Seitz. Los Angeles-based Belkin International opened WeMo Labs in Seattle to collaborate better with UW Professor Shwetak Patel and his team after acquiring smart-home automation technology developed at the UW. 
 
The increasing ties between Seattle and Silicon Valley tech communities have also helped. Uber’s Seattle operation came about because a UW alumnus who cofounded the storage company Isilon ended up running engineering at Uber and hired a former colleague at Isilon to head the Uber office.
 
In rare cases, an entire company will up and move, as happened when Tableau Software decided Seattle’s family-friendly environment made it “the promised land” for growing a business, says Tableau Chairman Christian Chabot. Seattle is more compact than the Bay Area, with a “fantastic outdoors culture” and a robust startup and engineering community, Chabot asserts. Tableau now has 3,100 employees worldwide, with 60 percent of its workforce residing in the Puget Sound area.
 
Another attraction of Seattle is the fact that employees here tend to job hop less than in the Bay Area. The average tenure of a tech worker in Silicon Valley is less than nine months, says Schutzler. “Basically, it’s a very mercenary world down there — I think of it as a crazy free-agent world,” he says. “Our average tenure is 2.5 years. … It is compelling for tech companies to know they have loyal employees.”
 
For some, of course, Silicon Valley remains the place to be. “There’s the prestige of being in the Valley as the epicenter of the tech industry,” says Seco Development executive Kip Spencer. But Seattle’s growing reputation for tech savviness is gaining ground, not just among domestic companies but also foreign multinationals.
 
“Companies overseas used to only look at San Francisco or Boston because those  are the most well-known tech hubs in the world,” says Schutzler. “Now they always add Seattle to their list of potential sites.” 
 
That trend could accelerate with the opening in Bellevue this fall of the Global Innovation Exchange, an educational institution established as a joint venture between the University of Washington and Tsinghua University in China, with financial backing from Microsoft. The institute will start by offering a master’s degree program in technology innovation, and Seattle-based companies will be best positioned to snap up its graduates.
 
Looking forward, tech industry experts expect Seattle’s strength in cloud computing, big data, gaming, and augmented and virtual reality to continue to attract remote engineering offices. 
 
“In five years, it’s hard to know what contraptions we will be carrying,” says Dale Estey. “Certainly they will be data driven.”
 
Lazowska also expects strong interest in developing medical apps spurred by health initiatives at Paul Allen’s various institutes and the Bill & Melinda Gates Foundation. 
 
While some Seattleites look at the growth of the tech sector and wonder if the region isn’t bumping up against limits to its capacity, many in the new engineering centers see far more potential for expansion.
 
“San Francisco is sometimes a very dense place,” says Uber’s Orr. “Here, there’s a lot more space to grow.” 
 

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