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Bellevue’s boom: City’s tech industry is poised to eat Seattle’s lunch

Geekwire logo Geekwire 10/27/2021 Mike Lewis

When Apptio launched in 2007, early employees debated whether the enterprise software startup should establish its headquarters in Seattle or nearby Bellevue.

Even though the five co-founders eventually settled on Bellevue, the location discussion continued on and off for years. But that talk ended long ago.

“There is no debate now,” said Apptio CEO Sunny Gupta, who lauded Bellevue’s downtown and livability. Plus, the tech exec delivers his staff a special perk seldom seen in Seattle: “I offer free parking to my employees,” he said with a laugh. “This is an amazing place.”

Tech companies are driving an unprecedented economic expansion in Bellevue, the 63-year-old city located just 12 miles east of downtown Seattle and just west of Microsoft’s sprawling campus in Redmond.

And what’s driving the boom? Tech execs say it’s Bellevue’s low crime rate, business-friendly politics, tent-free sidewalks, and vibrant downtown. 

Perhaps the best signal of Bellevue’s tech surge is Amazon, which humbly started in a small Bellevue house 27 years ago. It now plans to employ 25,000 people in this once sleepy suburb on the eastern shores of Lake Washington. That’s the same amount it expects to hire in Northern Virginia, or “Amazon HQ2,” as it looks beyond its Seattle headquarters amid an increasingly tense relationship with Seattle’s political leaders and policies.

Apptio’s Gupta is firmly rooted in the city he chose for his company more than a decade ago.

“We won’t ever consider moving our headquarters to Seattle,” he said. “Why would you?”

Bellevue Downtown Park stretches across 20 acres. (GeekWire Photo / Kevin Lisota) © Provided by Geekwire Bellevue Downtown Park stretches across 20 acres. (GeekWire Photo / Kevin Lisota)

Bellevue’s tech industry is buoyed by longtime local stalwarts such as T-Mobile and Smartsheet, as well as fast-growing startups including OfferUp and Icertis. 

Silicon Valley tech giants like Salesforce and eBay have discovered Bellevue, and Facebook paid $367 million last year for a 6-acre, 400,000 square-foot complex in the new Spring District development that already includes the University of Washington’s Global Innovation Exchange. Even TikTok parent ByteDance recently planted its flag in the city

During the past decade, Bellevue has grown 22%; the median income has jumped 27% to $162,434; and property values have soared. Census data shows that the city is increasingly married, home-owning and educated — traditionally a perfect recipe for white-collar hiring.

There is also plenty of real estate space under construction, including six office projects totaling more than five million square feet that will “transform the Bellevue skyline,” according to a recent report from Broderick Group. 

“An undercurrent of optimism is reverberating throughout the real estate community as the Eastside is in the midst of an enormous transformation,” the report noted. 

The city named after the French term for “beautiful view” appears ready for its closeup on the national stage. And it is doing much of this at Seattle’s expense. 

Waiting with open arms

Lynne Robinson tries out virtual reality in 2016. (GeekWire File Photo / Nat Levy) © Provided by Geekwire Lynne Robinson tries out virtual reality in 2016. (GeekWire File Photo / Nat Levy)

Lynne Robinson, a Bellevue councilmember since 2014 who was elected mayor last year, courts the tech industry at every turn. The physical therapist and small business owner organizes and attends tech and networking events, and makes sure startups have the support they need. 

Bellevue Mayor Lynne Robinson. (allinforlynne.com) © Provided by Geekwire Bellevue Mayor Lynne Robinson. (allinforlynne.com)

At an event hosted by the Washington Technology Industry Association earlier this month, Robinson noted that Bellevue city leaders have long created “a welcoming environment where people feel at home and feel they can get the support they need to grow their companies.”

The city also goes the extra mile to woo businesses, which runs in sharp contrast to what many describe as an anti-business political climate in Seattle.

To put that contrast into perspective, Robinson convinced the city shortly after joining the Bellevue council to convert two old, empty office buildings into affordable short-term office space, providing small businesses with an attractive place to grow.  

Icertis CEO Samir Bodas has been growing his enterprise software startup in Bellevue for more than a decade, and he can’t say enough about the support he’s received. 

“Bellevue has been wonderful to us,” he said. And while many of the company’s engineers, particularly the younger ones, preferred to live in Seattle, that has changed since the pandemic.

“The calculus shifted,” he said. 

Another factor helping boost Bellevue as a tech hub is Sound Transit’s light rail link from Seattle planned for opening in 2023. It will run 14 miles from downtown Seattle to the Overlake area in Redmond, Wash., with 10 Eastside stations including Mercer Island, South Bellevue, downtown Bellevue, BelRed and Overlake. 

Robinson said she has a simple philosophy that will guide her decision-making in the months and years ahead as Bellevue begins to feel the benefits and the pressure of the predicted growth. 

“The bottom line is you want to be a place where people want to be,” she said. 

Here comes Amazon

Amazon’s real estate footprint in Bellevue is growing quickly. (Broderick Group Image) © Provided by Geekwire Amazon’s real estate footprint in Bellevue is growing quickly. (Broderick Group Image)

Perhaps no one wants to be in Bellevue as much as Amazon. The tech giant already employs more than 75,000 employees in the Seattle region, and its desires to stretch further beyond its longtime home in Seattle’s South Lake Union neighborhood are well documented. 

Amazon, involved in an ongoing contentious spat with the Seattle City Council, now has its eyes squarely on Bellevue. In 2019, after a prior tax battle with Seattle politicians, the company announced plans to move its worldwide operations division — responsible for its massive fulfillment center and logistics footprint — to Bellevue.

Last year, Amazon nabbed two million square feet of office space in downtown Bellevue with leases at new properties being developed by Vulcan: 555 Tower and West Main.

Amazon is also building two towers at 600 Bellevue, and announced in early March that it leased a 600,000-square-foot office building called The Artise.

The company even contributed $7.5 million to help complete a bike and walking trail in Bellevue. 

Longtime Bellevue councilmember Conrad Lee said he doesn’t understand the Seattle City Council’s apparent indifference, if not hostility to Amazon and other tech employers. “I think they are foolish,” he said. “They are driving away jobs. They are hurting the economy.”

Bellevue developer Kemper Freeman Jr. agrees. He said the growth that Bellevue expects from Amazon is nothing short of transformative. Freeman Jr.’s family was key to Bellevue’s growth over the past century, including building bridges that connected the city to Seattle and the development of the Bellevue Square shopping center. 

But city leaders have also closely watched Seattle’s growth, at times with alarm. “There are going to be challenges,” Lee said. “Housing costs, more traffic, quality of life. When you get more people, you are going to face more situations.”

Construction is underway at 555 Tower, one of several new buildings Amazon plans to occupy in Bellevue. (GeekWire Photo / Kevin Lisota) © Provided by Geekwire Construction is underway at 555 Tower, one of several new buildings Amazon plans to occupy in Bellevue. (GeekWire Photo / Kevin Lisota)

Bodas, who prior to co-founding Icertis worked in various management roles at Microsoft, said he picked Bellevue for his company’s headquarters in part due to lower office rent compared to Seattle. 

But now, Class A office space in Bellevue’s central business district is pricier — at $57.57 per square foot — and in higher demand than similar buildings in Seattle, according to an analysis by the Seattle real estate company Savills. Apartment rent prices are up 10% year-over-year, and median housing prices are up 18.2%.

All of this, in a way, points to the concerns of residents and employers that Seattle issues are going to follow along as Bellevue pulls in more migrating business and additional startups. 

Todd Dunlap, CEO of OfferUp, said there is legitimate concern that a fast-growing Bellevue could see a growing number of the same issues — overpriced housing, crime, traffic — that Seattle has endured in the wake of the recent tech boom.

But he thinks Bellevue’s focus is different than its larger, older sibling to the West. Dunlap said the city has worried about both business climate and livability since its incorporation in the early 1950s and the subsequent decades-long business buildout.

“I work and live in Bellevue,” said Dunlap. “I think (the city council) is being very intentional here about the potential problems.” He said you can see evidence of that intent in the council agenda with regular items on affordable housing, transit and development.

Laying the foundation

A 737 final assembly line at Boeing’s Renton, Wash. plant. (Boeing Photo) © Provided by Geekwire A 737 final assembly line at Boeing’s Renton, Wash. plant. (Boeing Photo)

Bellevue’s transition from strawberry farms to Search Engine Optimization can be tied back in some ways to two Seattle-area giants: Boeing and Microsoft. 

During the 1960s, the city grew by nearly 50,000 people, an astonishing 10-year climb of 328%. The primary driver was Boeing, hitting the peak of its post-war boom.

That brought engineering talent and led to numerous high-tech suppliers in the region. Many practical-minded engineers settled in Bellevue, which geographically triangulated them between Boeing’s Seattle, Renton and Everett plants.

“It was a great time to get here,” said Lee, now 82 and serving his 28th year on Bellevue’s council. “So many engineers arrived. And that set the table for what we are seeing now.” 

Margaret O’Mara, tech industry historian, University of Washington professor and author of “The Code: Silicon Valley and the Remaking of America,” compared Boeing’s effect on the area to Lockheed’s spark in Silicon Valley in the 1960s.

“These old-school defense-driven companies draw in all of these engineers,” she said. “And those engineers have children. (Apple co-founder) Steve Wozniak’s dad was a Lockheed engineer.”

During this time Bellevue also saw an inadvertent social windfall of sorts, historians say: Forced busing in Seattle.

The desegregation effort, pushed by the federal government and implemented by the Seattle School District, prompted what is known as white flight, an exodus of white middle class families from urban areas to the suburbs. 

Local historian Feliks Banel said it is impossible to say precisely how many people moved from Seattle to the Eastside, but “it definitely had an effect.”

O’Mara agreed. “Income level buys mobility,” she said. And a sizable portion of the white middle class in Seattle packed up and moved to the Eastside, bringing along their wealth, college degrees and often conservative, business-friendly politics.

Even with Boeing’s growth slowing by the 1970s, some of the laid-off engineers who didn’t want to leave the area founded their own tech companies. Some went back to the University of Washington for advanced degrees. 

Microsoft elevates Bellevue

Former Microsoft CEO Steve Ballmer opens the company’s Bellevue Square store in November 2011. (Microsoft Photo) © Provided by Geekwire Former Microsoft CEO Steve Ballmer opens the company’s Bellevue Square store in November 2011. (Microsoft Photo)

Then there was a little-noticed fledging computer company that in 1979 relocated from Albuquerque, N.M. into the Old Bank Building in downtown Bellevue.

The young founders of that company, Bill Gates and Paul Allen, both had been born in Seattle and picked the area — already rich in computer talent — to grow their company. And while most of the company’s significant growth occurred at its eventual home in the nearby suburb of Redmond, thousands of its employees moved into Bellevue and along the Eastside corridor. Microsoft still has a 26-story office tower in downtown Bellevue. 

“The rise of Microsoft was also the rise of Bellevue and the Eastside,” Lee said. “That brought tremendous movement here.”

Bellevue, unlike Seattle, had seemingly limitless space for office parks, a prime habitat for tech companies. This was why when Microsoft grew, it stayed in the suburbs east of Seattle, said O’Mara. “I think it’s telling that for Microsoft, Seattle was really never in the mix.” 

Freeman Jr. said when Boeing engineers arrived and again when the wave of Microsoft families settled in, city leaders set about first working on the public schools. “We said, let’s create the best school system in the Northwest.”

The Bellevue School District is now ranked No. 2 among Washington state districts, according to Niche

Bellevue swelled as Microsoft grew, from 73,000 residents in 1980 to 109,000 people by 2000. Residents’ median income during that time rose from approximately $70,000 to $88,000. 

This led to a dramatic shift in the types of employment offered in Bellevue. Census data during the same period shows a rapid expansion of tech sector jobs. Initially, this also became a boon to Seattle — although not local commuters — as Eastside tech talent poured into Seattle-based companies, too. 

But as Seattle grew through the 2000s, its problems grew along with it.

When Amazon began expanding in South Lake Union, it brought unprecedented wealth and population growth to Seattle and set off a “prosperity bomb,” exacerbating the city’s poverty problems. New development cleared away the cheap short-term rentals and modest walk-up apartments in Belltown, downtown and Capitol Hill. 

So as Amazon increasingly became the target for housing and equity activists, and as the company took its expansion ambitions on a national search, one local town began making a strong pitch for the company to not look across the country and instead look across Lake Washington.

Learning from Seattle

Andy Jassy, new Amazon CEO, speaks at the 2021 GeekWire Summit earlier this month. (GeekWire Photo / Dan DeLong) © Provided by Geekwire Andy Jassy, new Amazon CEO, speaks at the 2021 GeekWire Summit earlier this month. (GeekWire Photo / Dan DeLong)

After Amazon said last year it would bring more jobs to Bellevue and give $1 million to the City of Bellevue’s Human Services Fund, Robinson called the company’s investment “a major win for our community and region.”

That’s a contrast to the relationship between Amazon and Seattle City Hall.

“The City Council has become less enamored with business or with Amazon,” Amazon CEO Andy Jassy said at the GeekWire Summit this month. “It’s just been rougher.”

The Seattle vs. Amazon issue came to a head four years ago with the council-approved head tax which while not limited to Amazon, specifically targeted the largest local companies with a per-employee tax in an effort to help the city raise tens of millions of dollars to pay for the effects of explosive growth. 

Amazon’s subsequent forays into city politics and elections, including spending more than $1 million on an effort to elect new city councilmembers, were met with stiff opposition. Two years later, the city revisited the head tax with a more modest tax on annual local salaries above $150,000.

Jassy said Bellevue is now “where most of our growth will end up being” in the Seattle region. 

“Downtown will be an altogether different place once Amazon begins to occupy their new towers,” Broderick Group said in its report, noting the multiplier effect on services, hospitality businesses, and multi-family investments needed to accommodate thousands of Amazon employees.

Dunlap, OfferUp’s CEO, said Bellevue’s downtown is better prepared for new business compared to Seattle. OfferUp now has 400 employees in Bellevue. He said the downtown offers more open space and amenities than downtown Seattle.

And similar to Apptio’s Gupta, he can offer staff free parking. It’s not a small perk, he said, as the Columbia Tower parking in downtown Seattle is $36 daily.

“Microsoft has been here forever, so this city knows how to handle growth,”  he said. “And (city leaders) have looked at Seattle as an example.”

Editor’s note: This is the first of a four-part series exploring Bellevue’s growth as a tech and innovation hub.  The series is underwritten by MN Custom Homes, and the GeekWire editorial team reports the story independently of any sponsor involvement. Learn more about underwritten and sponsored content on GeekWire.

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