SEATTLE – Amazon's lease of a full city block next to its global headquarters puts the firm on track to occupy about 10 million square feet in downtown Seattle — or one-fourth of the market's inventory of premium office space.
The company confirmed in late March confirmed it will move into a 817,000-square-foot, two-building complex by Seattle-based developer Touchstone. One tower will open in mid-2016, the other a year later.
If the tech juggernaut fills all 10 million square feet, Seattle could have the nation's highest concentration of office space occupied by a single business. Based on that footprint, Amazon could grow to nearly 50,000 employees, easily topping the University of Washington as the city's largest employer.
"You're putting a lot of eggs in one basket," said Kip Spencer, a Seattle real estate expert who founded Officespace.com. "In the event of a retrenchment, it could have a fairly significant negative spiral effect."
Last year, when Amazon's local real estate empire already occupied about 8 percent of the downtown office market's inventory, Seattle ranked fifth in the nation in market penetration by a single tenant, a report by commercial real estate brokerage JLL said.
With its Seattle office space slated to more than double, Amazon is likely to jump much higher in that ranking.
JLL said Charlotte, N.C. — home to Bank of America — had the highest single-tenant concentration, at 22.7 percent. The troubled bank has been selling buildings and renegotiating leases as it slashes costs.
In Seattle, Amazon now occupies just over 4 million square feet, or about 13 percent of downtown Seattle's "Class A" office inventory, according to Seattle Times research.
To put that in perspective: Microsoft occupies an estimated 14.6 million square feet spread across Greater Seattle.
Amazon's rapid growth has put pressure on rents for offices and apartments in the area, even as it's ignited an unprecedented boom in apartment construction.
"The rate at which Amazon has been absorbing space has had a significant effect on Seattle's overall vacancy rate, which increases landlord confidence and puts upward pressure on rents," said tenant broker Brian Hayden of Flinn Ferguson.
Though Amazon doesn't divulge how many people it employs locally, real estate experts estimate the company has about 20,000 employees in Seattle.
Based on a case study of one tech company, the costs of that commercial real estate can be initially as high as $24,000 per employee, Gray estimates, and eventually drop to just under $10,000 per employee.
Real estate costs per employee have never been so high, he said, even during the dot-com boom of the late 1990s.
"You can stack people in there like sardines," Gray said, "but you've also got to give them terrific places to meet and unwind. We're seeing that common space swell dramatically."