To Attract Tech Workers, Developer Envisions the City in the Suburbs

2/6/14Follow @bromano

Can a real estate developer create the feeling of an urban neighborhood, complete with its grit and culture, in the suburbs? Assuming it’s possible would such a place attract the kind of employees that technology companies today are competing to hire?

That’s the challenge venerable Seattle real estate developer Wright Runstad & Company has set out for itself and its partners with the Spring District, a multi-phase redevelopment project now under construction in suburban Bellevue, WA.

The company developed parts of Microsoft’s Redmond campus as far back as the ‘80s. It has catered to the evolving demands of technology tenants and their workers in the Pacific Northwest for 40 years, observing the transition from private offices in suburban campuses to the open, flexible spaces close to city life desired today. Now it’s embarking on an ambitious, 10-year, $2.3 billion project to transform a 36-acre warehouse district situated between Bellevue and Redmond into a modern, pedestrian-friendly enclave of apartments, offices, stores, and parks that might resemble Seattle’s much-sought-after—and pricey—South Lake Union neighborhood, home to Amazon’s headquarters, or the Pearl District in Portland, OR.

Wright Runstad President Greg Johnson says the development represents a long-term bet on the region as an international technology hub that will continue to attract people and companies. It’s a view he shares with many other real estate developers and economists, who gave a generally sunny outlook at last month’s Economic Development Council (EDC) of Seattle and King County annual forecast event.

The company is developing the project with partners including Shorenstein Properties, a San Francisco-based group including international investors who also see the strength of this market, he says.

“The companies that will be interested in being there aren’t necessarily from Seattle today,” Johnson says. “There’s a migration of firms from Silicon Valley and other places that are establishing outposts up here, mainly to tap into the talent pool.”

Those firms and their employees are looking for something specific, Johnson says.

“It’s no longer about how efficient can you be in your office space,” he says. “Today, it’s the human resources person saying, ‘Deliver me some office space that’s going to help me snag the most talented people and keep them.’”

Johnson

Johnson

That means cool buildings, sustainable designs, and urban amenities that can be easily reached on foot. Witness the tight market for commercial real estate in Seattle neighborhoods such as South Lake Union, Pioneer Square, Capitol Hill, and Fremont.

If people are your company’s greatest asset—and that’s how many tech companies operate—the focus of real estate necessarily becomes how to create a great work place that fosters creativity and innovation, said Lisa Picard, executive vice president and regional manager with developer Skanska. “A lot of that has to do with why you see people moving into an urban environment, or why you see the suburbs trying to create urban environments where people can connect,” she said, speaking at the EDC event. “This is so important, and I think that’s the strongest amenity [real estate developers] can provide to the market.”

Maybe Wright Runstad could have been fine just building a few million more square feet of high-end offices at the Spring District. The location between two major employment centers and near the intersection of State Route 520 and Interstate 405 has a lot going for it. It’s part of the Bel-Red Corridor, an area targeted by the city of Bellevue for redevelopment over the next two decades.

But in an attempt to meet that tech industry demand, the company is taking what could be viewed as a riskier approach in designing an urban neighborhood literally where the sidewalk ends—at least on 120th and 124th avenues Northeast, which form the western and eastern borders of the Spring District, respectively.

Plans call for shorter blocks—16 in total—and narrow streets with wider sidewalks. Contrast that to the “superblocks” of the downtown Bellevue core cut through with four- and six-lane streets a mile away to the west or the forested, suburban neighborhoods off to the east.

The first two office buildings to be developed will still be car-friendly in one important way: They will have plenty of parking. Plans are to create 3.5 spaces per 1,000 square feet—all underground—compared with two spaces per 1,000 in downtown Bellevue, and four or five spaces per 1,000 in suburban Redmond and Bellevue.

That’s an acknowledgement that it’s going to take quite some time for the Spring District to make the full transition to a pedestrian-friendly neighborhood.

One key part of the vision for a high-density neighborhood where you don’t need a car is a planned light rail stop at the development. When the Sound Transit East Link Extension is completed—in 2023 on the current schedule—people could reach Microsoft’s campus from the Spring District in seven minutes and Seattle in about half an hour, Johnson says. (The limit on parking spaces at the development drops to 3 per 1,000 square feet after the light rail station opens, Johnson says, adding that the he expects the entire Spring District to have a ratio of 2 parking spaces per 1,000 feet when all is said and done. Further traffic impact studies will also be required before future development phases.)

Wright Runstad purchased the 36-acre property from Safeway in 2007 for $68 million, when it was still zoned industrial, and before the light rail decision had been made, Johnson says. The base land value of the property is currently $42.3 million, according to King County records.

The plan is to build out the site in three phases, but here, too, Wright Runstad says it has flexibility.

“With such a large area, we can build out block-by-block based on the market demand for apartments and office and fill it in,” he says. “But we also have the ability, if this region were to be lucky enough to have a company that needed a million square feet all at once (or 2 million or 3 million square feet), we can do it at the Spring District.”

As it drew up plans for an urban neighborhood in the suburbs, Wright Runstad studied successful redevelopments including Denver’s LoDo, South Lake Union in Seattle, and Portland’s Pearl District. All of these neighborhoods have something that the Spring District lacks—proximity to the metropolitan core.

I grew up in Portland frequenting the Pearl District, before anyone called it that, as it transformed, slowly, into the archetypical urban neighborhood that so many others want to emulate. People came to the neighborhood well ahead of the redevelopment. Artists found cheap, bohemian studio and living space in old warehouses. In the 1970s, Powell’s Books was established and grew to be an intellectual and cultural hub in the city. A few more shops opened; the greasy spoons got busier.

“It became the mildly eccentric and quirky home of individuals and businesses that valued its proximity to the downtown, without its formality or expense,” according to an official history of the neighborhood. This was well before the Whole Foods or the Portland Streetcar.

Formal development and planning began in the late 1980s and the neighborhood took off from there. (South Lake Union, by contrast, came up under the unique circumstances of a supremely wealthy landowner—Microsoft co-founder Paul Allen’s Vulcan Real Estate—that could quickly redevelop virtually the entire area without much concern for short-term market conditions.)

An artist's rendering of the completed Spring District with downtown Bellevue in the background.

An artist’s rendering of the completed Spring District with downtown Bellevue in the background.

Johnson acknowledges that one of the biggest challenges for the Spring District is creating the culture and authenticity of an urban neighborhood out of whole cloth in the suburbs. But, he says, this kind of neighborhood is missing from the Eastside, presenting the opportunity for something new.

“You’ve got the transition from a former industrial, commercial area, into a mixed-use area, which is what we’re doing,” Johnson says.

The urban feel comes from various aspects of the design. Block size is one thing. Amenities and building materials are another.

“You want to have cool places to go eat, drink that you can walk to, shops that you’re not going to find in a mall somewhere, coffee, co-working spaces,” Johnson says, adding that attracting “the cool new restaurant or the brewery or the distillery” is a top priority.

When the enormous 60-year-old former Safeway distribution warehouse occupying the southern portion of the site was torn down last fall, crews salvaged huge beams of solid Douglas fir, garage doors and warehouse lights. These elements will be reused in the new construction. (Another warehouse, where Amazon Fresh operates and Microsoft parks its Connector shuttle busses, will remain until development of the Spring District advances.)

Each block is designed to have a distinct feel, Johnson says, as opposed to creating a “faux village” where everything is the same. While upper floors may get the sleek glass treatment common to high-end commercial developments, the ground floors will have smaller storefronts built of “grittier” materials such as concrete, reclaimed wood, and maybe those old garage doors.

From an environmental standpoint, Wright Runstad plans to pursue a Leadership in Energy and Environmental Design certification for the entire Spring District.

Planning such a large, multi-building development from the ground up allows for things like integrated storm water management. Water runoff will naturally filter into the ground through green roofs and landscape drainage features called bioswales, as opposed to draining into storm sewers for treatment. Johnson calls this a “real step forward in sustainable practices” that’s made possible by developing the entire neighborhood as a whole. (It also promises to help improve streams and wetlands in the area, which still host salmon but are characterized as “unhealthy” by the city of Bellevue.)

Other building features such as big windows for natural lighting and fresh air access, as opposed to air conditioning, are now de rigueur.

“Companies are no longer saying, ‘Oh, that’s neat,’” Johnson says. “They’re saying that’s a requirement because the people that they’re trying to attract to work there are saying, ‘I want to work in a sustainable environment.’”

Technology companies have long viewed their work environments as one more tool to win the “war for talent” as Johnson put it. It can often be the differentiator among competitors that can provide prospective employees high salaries and interesting work. But the definition of a quality, sought-after work environment has changed over the years.

Wright Runstad developed a large portion of Microsoft’s Redmond campus beginning in the mid-1980s with the iconic X-shaped buildings clustered around “Lake Bill.” They were designed to maximize the number of individual offices with closing doors and windows to the outside.

“To attract programmers then, the college campus feeling with a private office, that was the ticket,” Johnson says.

As companies transitioned away from that model, more emphasis was placed on “open plan” offices, which, in some cases was a nice way of describing row upon row of cubicles, the “cube farms” of the Dilbert comics.

“You had the CFO saying, ‘Let’s jam more people in here so we can lease less space,’” Johnson says.

Today, companies view collaboration and interaction as keys to innovation and success. They want spaces that encourage ad hoc teams to form and dissipate easily. Workers signal a need for privacy not by closing their doors, but by putting in their earbuds.

“We now have to have a variety of spaces,” said Susan Wagner, senior director of Microsoft’s real estate and facilities group in Puget Sound, at the EDC event last month. She described an ongoing “modernization” of the company’s buildings based on a decade of internal workplace research, and an array of configurations from traditional offices to open areas to hardware labs—not surprising, given the company’s 43,000 local employees—all with an eye toward fostering collaboration.

“We’re consciously trying to create those connection points… an area that [people] can collide,” she said.

The company is also incorporating amenities such as more locker rooms, bike cages, walking and running trails, medical services, meditation rooms, and other things that can contribute to employee health and wellness, and “the urbanization of suburban campuses,” Wagner said.

Artist's rendering of commercial buildings at the Spring District.

Artist’s rendering of commercial buildings at the Spring District.

Johnson has similar goals in mind for the Spring District.

“As we think about building, we’re thinking about maximum flexibility, big open spaces, more people on one floor so that people spend less time on elevators and more time walking past each other,” he says, adding that companies will pay more for that flexible, open space.

The first phase includes two commercial office buildings totaling close to half a million square feet and five to six apartment buildings planned for the southwest corner of the site, with about 320 units. Construction on the apartments is to begin in September.

The office buildings are designed and permitted, but Wright Runstad is waiting for an anchor tenant to begin construction. It’s also contemplating breaking ground on a speculative basis, with no signed lease with an anchor tenant, which would be a strong endorsement of local economic conditions.

“Given the energy that we see in the market overall—the tech sector in particular adding jobs—we’re in the process of evaluating [whether] we go ahead and start these even though we haven’t signed up a tenant,” Johnson says.

Whenever the work gets going, it will still take years of development before we know the results of the Spring District’s experiment in suburban urbanism.

Benjamin Romano is editor of Xconomy Seattle. Email him at bromano [at] xconomy.com. Follow @bromano

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