Seattle Versus Portland… It Is Just a Totally Different Ballgame… But That is OK.

Aerial photo of Seattle
Photo by Ryan Wilson on Unsplash

Have you been to Seattle lately?  It is crazy!  The bustle and block after block of Amazon and many other tech and biotechnology buildings in the once seedy moribund South Lake Union district with another 8 cranes nearby building more space is more reminiscent of Tokyo or Shanghai rather than the former sleepy lumber and fishing town that counted only Boeing and Weyerhaeuser as corporate titans a few decades back. 

This is only a small part of it as there are multiple 40 story plus office/condo/hotel buildings being proposed or under construction in the downtown area; the 5 million square feet of planned office space for Bellevue and in the burbs where Microsoft is adding another 3 million square feet in Redmond to it’s Godzilla campus of over 10 million square feet. 

And I have not even mentioned the huge apartment and condo developments! Amazon gets a lot of the attention because of its huge footprint which really took off when it started taking huge chunks of space coming out of the recession in South Lake Union (much led by Paul Allen’s Vulcan real estate group) where now Amazon occupies close to 13 million sf of space throughout the Seattle area which dwarfs any other companies space commitments by a wide margin (other than Microsoft).

That is only part of the story as other well-known tech firms are catching up and looking to “draft” in the huge jet stream of Amazon’s massive flying machine.

One weird little real estate tidbit that is a bit mind boggling:  Amazon leased over 700,000 sf of space of  under construction in a 58 story tower in downtown Seattle (Rainier Square) last year but pulled out of the deal in February in a bit of a snub  to Seattle as they look “to spread out more evenly our human resource capital” and now is subleasing the space with WeWork and others looking to take over their space and brokers say they most likely will make money on the deal as rents have gone up in the short time frame from when they made their initial lease.  Wacky!!  Here are few more eye-popping deals.

  • Google leased a yet-to-be-built 12-story tower in South Lake Union last year, bringing their footprint here to over 1 million square feet and room for 5000 employees. Not to mention another 375,000 sf it has in Kirkland, and a recent lease in red-hot Bellevue for close to 100,000, and rumors abound on more to come with their footprint in Bellevue to reach one million sf soon.
  • Facebook now leases over 2-million square feet of space in Lake Union with a recent commitment to two buildings, totalling over 1.1 million sf under construction that will come on line in 2021.  This is addition to a plan for a 650,000 sf project for their Oculus Reality unit campus (with the mysterious moniker of “Project X”) next to Microsoft in Redmond.  But wait they are not done… they just inked a full building deal in Bellevue for 340,000 sf.  Plans are for 4 million sf in Facebook’s various operations around Seattle by 2022.
  • WeWork now has 1.5 million square feet under control in 14 buildings across Seattle metro and is eyeing a big chunk of Amazon’s sublease at Rainier Square.
  • Apple just committed to 650,000 sf in South Lake Union in two office buildings, tripling their space in Seattle.

I have not even mentioned more established and home grown companies such as T-Mobile that is merging with Sprint which is expanding its 900,000 sf of space in Bellevue. Or Expedia’s 600,000 sf campus completing construction along Elliot Bay, coupled with other commitments by Dropbox, Square, Oracle and Uber for less size spaces that are all over 100,000 sf, which barely even hit the press because it seems any deal around 100,000 sf is a footnote. 

In Portland a deal of that size would be plastered on every website and on our diminishing news sources for a week or more, not to mention a parade may be planned. I have not even touched upon the imprint some of the longer term corporate residents of Seattle such as Starbucks, Boeing, Costco, REI and U of Dub have on employment and facilities.  Portland always the lovable runt to Seattle’s brawny all-american athletic brother is fast becoming more distant in the economic rear view mirror since coming out of the recession as major or even minor commitments rare and puny from tech or other big users and employers as they just seem to wave to Podunk Portland as they fly over to Sea-Tac.  What is going on here?

In asking around and just noodling over this, there seems to not be one big reason but rather a phenomenon of momentum and maybe along the lines of the scientific thought from Newton: “An object at rest will stay at rest and an object in motion will stay in motion”.  Basically Seattle had a huge head start with Microsoft and a bit later with Amazon (there were many other smaller tech firms too) that established the baseline of talent, innovation and engineering and provided a rock solid foundation for spinoffs, venture capital in-flows and just an overall comfort for both investors and entrepreneurs, and lately well-established tech companies looking to diversify mostly out of California.

Seattle is not a big risk for these companies because of the incredible base of talent, (yes tech companies rob from each other daily) infrastructure and just like Portland a pretty darn good quality of life though affordability, traffic and more is providing some to rethink this attraction. But remember they are coming from the Bay area where even Seattle’s lofty cost of living looks pretty decent.

Also I think University of Washington’s influence cannot be underestimated as they have one of the best engineering and computer science programs in the county, and their research dollars ($1.4 billion) is over twice of all research dollars received by all of Oregon’s universities. Seattle’s head start was huge which helped them establish a rock solid economic foundation for technology investment and expansion.

A good telling observation from the prescient and vaunted CEO of Salesforce, Marc Benioff, regarding their recent $15 billion purchase of Seattle software company Tableau speaks to Seattle’s advantages. “This purchase dovetails well with Salesforce’s technology and future plans and additionally it helps us establish a bigger presence in Seattle.  I am a huge admirer of the talent pool and other firms we can partner with in Seattle.  It was one of the few places we can put together our software operations and scale quickly. Seattle will become our HQ2 if you will”  A nice little jab at Amazon.

Another tidbit… Christian Chabot who started Tableau out of Stanford 15 years ago moved the company soon after to Seattle because “We no longer wanted to live in the bay area.  It was too hard and expensive and Seattle had a great base of support talent and environment to grow our compamy”

What is Portland’s problem, as it seems like we don’t even get a look at some of these deals… a half million square foot office/tech deal happens almost quarterly and much of it off sexy renderings and plans for buildings two years out where we have had several bigger buildings sitting empty over a year of completion.  In asking around, the first mistake is to even make the comparison. “People get too caught up and trying to make any sort of comparison between Portland and Seattle it is like comparing Saturn and Pluto or a high school garage band with the Rolling Stones.  Seattle has such technology infrastructure, history and size advantage that most of the interest in Seattle would not even fit or be accommodated in Portland…we could not even make a pitch for most of the deals in Seattle which is not necessarily a bad thing” a economic development person with a city agency related to me lately.

“The Portland metro area has come a long ways in the last couple of decades by attracting start-ups, spin-offs and hubs from larger companies, first more of the hardware side, which is our history with Tektronix and then Intel, but lately with software, but our culture, size, talent pool is more conducive to the smaller firms in that 10-100 employee range that is looking to scale or the smaller engineering or specific product groups of the larger players, as we do have lots those with operations for Airnb, Google and of course Amazon with Elemental and Autodesk”,  he continued. 

OK I am starting to get it as I thought there was some sort of stench in Portland repelling these big deals.

In talking to few more folks (brokers, developers, and people involved in economic development and venture capital and technology executives), a bunch of observations and reasons were gleaned for Portland’s small ball game compared to the various home runs garnered by Seattle in attracting technology investments materialized.

Here are a few: While growing, Portland still has a comparably limited talent pool; lack of large and well supported engineering/computer science programs of a major university; an airport with good international connections; smaller and a more moribund venture and investor capital availability; no committed and well-funded economic development effort; a very decentralized technology culture that lacks the leadership and resources necessary for technology firms to grow; lack of incentives; a less than conducive tax structure; an outdated and less effective form of local government; deteriorating quality of life mainly due to prevalence of homelessness.

I don’t buy this last one as Seattle and San Francisco in many barometers has a worse or equally challenging with un-housed issues. So obviously there is no one answer, but many reasons with it coming back often times to characteristics that are not controllable and “are what they are”, namely Seattle’s size; the lit bonfires of highly successful huge existing tech companies like Microsoft and Amazon that throw off sparks for both growing new companies, as well as attracting established tech companies looking to diversify out of their taunt and over-subscribed existing locations. And just the existing scale that seems to perpetuate itself.

Seattle versus Portland office/technology space comparisons:

Population Metro4 million2.4 million
Office Market Size108 million sf48 million sf
2018 Net Absorption3.6 million sf720,000 sf
Under Construction5.3 million sf600,000 sf

Should we be worried and Is this all bad news for Portland’s ability to expand on and diversify its recently emergent technology sector? 

Depends on who you talk to, but as one tech friend told me over a couple beer discussion recently related, “If you are trying to compete or be the next Silicon Valley or Seattle your thinking and efforts are misplaced and probably wasteful. There is no problem on building on Portland’s recent ability to establish and scale both home-grown and relocating smaller firms and start-ups as well as attracting smaller product teams and engineering efforts of the larger firms. Getting  smaller firms with great ideas and technology say of 20-30 employees and growing it to 100 or more, or incubating a host of start-ups that will employ 30-50 employees, or attracting a team of Apple engineers working on particular product or service can really add up, and will in the end really add up.  You have to know what you are, and what you are not, and build on that.  It is more technology guerilla warfare that can really in the end provide Portland with a much more diverse and scappy technology scene that I think will really attract some very talented and intelligent people who feel lost and overwhelmed in the more costly and crazy bastions of California and Seattle.  We in Portland are just now trying to figure that out and how we can all work together to create this more cohesive and nurturing technology environment, but there has been some excellent foundations put into place over the last half dozen years. Our bigger thoughts should be about not just growing and nurturing firms to the next level, but keeping them here as they get bigger, or are often times bought by larger out of state firms.”  Amen.