Tech Firms Continue to Establish and Expand Engineering Centers

While Silicon Valleys tech community is far larger than Seattles, one thing that makes Seattle attractive as a location for engineering centers is its lower cost of living. The average software engineers 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.

Seattles quality of life is another attraction. Its 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 Amazons insatiable demand for more software engineers has also powered a positive feedback loop. Since many of those engineers dont 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 states 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 WTIAs 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. Googles Seattle and Kirkland operations, sometimes called SEA/KIR, play particularly central roles in the companys 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.

Facebooks new Dexter Station office in Seattles South Lake Union neighborhood has enough space to allow the company to double its workforce to 2,000, and theres 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, theres 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. Its 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 wifes 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 Dropboxs Seattle office when his wife accepted a position at Harborview Medical Center.

Satellite offices often develop their own distinctive cultures to help recruit new employees. Kiefer says he was attracted by the startup feel of Dropboxs Seattle office. I saw the opportunity to get in and help grow the culture, to help grow the new office, he says. Thats exciting.

Seattles Dropbox workers can easily connect with their colleagues at headquarters through online chats and presentations. Working in the remote office often feels as if youre just on a different floor in the same building, says Kiefer. And being away from the head office has no negative effect on a persons 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.

Googles 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. Ubers 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 Seattles 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, its 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. Theres the prestige of being in the Valley as the epicenter of the tech industry, says Seco Development executive Kip Spencer. But Seattles 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 masters degree program in technology innovation, and Seattle-based companies will be best positioned to snap up its graduates.

Looking forward, tech industry experts expect Seattles strength in cloud computing, big data, gaming, and augmented and virtual reality to continue to attract remote engineering offices.

In five years, its 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 Allens various institutes and the Bill & Melinda Gates Foundation.

While some Seattleites look at the growth of the tech sector and wonder if the region isnt 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 Ubers Orr. Here, theres a lot more space to grow.