In the suburban community of Kirkland, Wash., where Google established its original beachhead in the Seattle area, the tech giant had big plans to expand even further.
The City of Kirkland was counting on Google to be the “catalyst project” in its proposed Station Area Plan, a reimagining of the area around a planned rapid transit bus station into a higher density community of housing and businesses.
As recently as last summer, two years after signing an agreement to purchase 10 acres of land owned by Lee Johnson Auto Family, Google reiterated its interest in moving forward. An executive told the Kirkland City Council in July that the project would “secure our ability to stay long-term and provide jobs in Kirkland.”
But suddenly and without warning, the plans evaporated last month. The City of Kirkland issued a surprising press release: Google, which on the same day announced it was cutting 12,000 jobs globally, no longer planned to be the tech centerpiece in the city’s development plan.
The company’s move to back out of the project — even with $113 billion in the bank and $60 billion in profits last year — highlights the fleeting relationship between big tech companies and the cities they’ve reshaped, and the mixed feelings and uncertainty left behind.
“What you’re seeing is just another recalibration of the sorts that have been going on for time immemorial between employers and communities,” said Chuck Wolfe, a multinational urbanism consultant and affiliate professor at the University of Washington.
‘Significant growth and change’
The Lee Johnson Auto Family features several locations and car brands, and goes back to 1933, when LeRoy Johnson first opened Eastside Motors in downtown Kirkland.
The land that Google intended to buy rises up a hill just off I-405, at the corner of NE 85th Street and 120th Avenue NE, about a 20-minute drive from downtown Seattle. The dealership made its home at the location 55 years ago, and today sells Chevys, Mazdas, and more from the location. It’s now surrounded by strip malls, small businesses, single-family homes and older apartment complexes.
There’s a Costco a few blocks north, and Lake Washington High School is just up the hill on 120th Avenue NE. The road turns into Lee Johnson Drive as it enters the school campus.
Government signs dot the streets around NE 85th Street, calling attention to “significant growth and change” that would be spurred by the Station Area Plan.
The City of Kirkland has called the area a “once-in-a-generation investment … to build a thriving, new, walkable district with high tech and family wage jobs, plentiful affordable housing, sustainable buildings, park amenities, and commercial and retail services linked by transit.”
Plans called for 6,000 Google employees to eventually occupy 1.5 million square feet of office development at the new site, practically doubling the tech giant’s headcount in the Seattle area, its largest engineering hub outside Silicon Valley.
Managers at Lee Johnson were happy to talk about the long history of the dealership during a visit by GeekWire last week, but at least one cited a non-disclosure agreement and said they couldn’t share any views about the Google decision or what’s next.
Google didn’t provide specifics on why it did not move forward, said Adam Weinstein, Kirkland’s director of planning and building.
“We’re sad to hear that Google was not pursuing this project immediately,” Weinstein told GeekWire at City Hall last week. “But we’re confident that there will be good development happening in the overall Station Area in the future.”
Weinstein added that Google “could come back” and pursue development on the site.
But at a gas station across busy NE 85th Street, a clerk behind the register showed some surprise — and delight — at the news that Google had pulled out.
“That’s good,” said the woman, who wished to not be identified. “Everything is already too expensive.”
Just east of the dealership at the Kirkland Court plaza, Ryan DeVries was working in the Budget Blinds store he owns. He said the plaza and lots of other buildings and businesses on the corridor will be torn down to make way for a rezoned stretch of taller housing with retail beneath.
“Google was all for it,” DeVries said, calling the future apartments “places for employees to stay close to work.”
DeVries has operated at the Kirkland location for three years and owns other showrooms in Bellevue, Bothell and Sammamish, Wash. Citing traffic and congestion concerns, he said he’s not disappointed about Google’s decision.
“At least 75% of the people I’ve talked to would be pleased as punch to hear that Google decided not to ransack this area and build a bunch of office space,” DeVries said. “I haven’t heard any of them that were necessarily for it. The City of Kirkland I’m sure was for it, because more tax dollars.”
When he talks to customers on the phone or at his other locations, and the subject of Kirkland comes up, DeVries said they laugh as he refers to the city as “the town that Google bought.”
Silicon Valley trendsetters
Google first set up shop in the Seattle region more than 15 years ago, and the Alphabet subsidiary now maintains four existing campuses: two just down the road from the Lee Johnson site in Kirkland, and two others across Lake Washington in Seattle’s South Lake Union and Fremont neighborhoods.
The company kickstarted a trend when it arrived in Kirkland, followed by Meta, eBay, Apple, and more than 100 other global tech firms that established engineering offices in the Seattle area. Their goal? Tap into the region’s vast technical talent base.
Google is the second biggest private employer in Kirkland, according to the city’s annual financial report. It employed 2,737 people in the city at the end of 2021, accounting for 6.6% of its total employment. That’s up from 658 employees in 2012, which was 2% of total employment.
The company’s growth in Kirkland tracked with the city’s population, which nearly doubled from 48,787 in 2010 to 92,247 in 2020, according to census data.
Last April, Google made a big show of opening part of its Kirkland Urban campus, a mile west of the Lee Johnson location. Phase one of that development featured two 8-story glass office buildings Google refers to as North and Central. Upon completion, four buildings will total 760,000 square feet of space.
Kirkland Urban features many of the trappings used to lure tech workers in a competitive market where Google competes for talent with Microsoft, Amazon and many others. It’s already home to a Shake Shack burger restaurant, a Topgolf driving range, a QFC grocery store, and more retail and dining.
During a ceremony that featured Gov. Jay Inslee, Kirkland Mayor Penny Sweet called her city the best place in America to live, work and play and said partners like Google make it that way. She called the new Kirkland Urban buildings a “glimpse of what the future can be” and said the city looked forward to “welcoming more Googlers to our community.”
‘Grow and stay in Kirkland’
As recently as July, Google’s plan to redevelop the car dealership site seemed to be moving along swimmingly.
“We want to grow and stay in Kirkland,” Mark Rowe, a real estate project executive with Google, said at special session with councilmembers to discuss the development agreement.
The dealership was a “natural site for Google to expand and to meet our growth needs and meet the goals of the city,” said Ian Goodhew, former head of government and external relations for Google in the Pacific Northwest. Goodhew left in December and is now at UW Medicine.
The first two office buildings on the redeveloped campus would have opened in 2027, based on the proposal, and two others in 2032.
The proposal focused on sustainability — mass timber construction for the office towers and no combustion engines allowed on campus. It included outdoor public open space areas and pedestrian and bike connections. Discussions even loomed about building a gondola to help shuttle employees between the new campus and Google’s existing Kirkland offices.
As part of the agreement, Google would help pay for affordable housing in Kirkland, as it has done in the past.
The agenda from a Kirkland City Council meeting in September stated that Google had until the end of 2022 to decide whether to go through with the purchase of the land owned by Lee Johnson. The dealership was already working on plans to relocate at a nearby site in Totem Lake.
But as 2023 arrived and the tech industry wobbled with thousands of layoffs, things changed.
Google was out.
“As we continue to shape our future workplace experience, we’re working to ensure our real estate investments meet the current and future needs of our workforce,” a Google spokesperson said in a statement to GeekWire last week. “Our campuses are at the heart of our Google community, and we remain committed to our long term presence in Washington state.”
‘This isn’t just a tech story’
The dynamic between tech companies and the communities where they build offices is changing.
The rise of remote work and widespread tech layoffs are forcing companies to rethink real estate commitments, especially as they look to reduce expenses amid a shaky tech economy.
Last year, Google said it was investing $9.5 billion in the U.S. in 2022 for offices and data centers, even as it implemented a hybrid work policy. Google and Alphabet CEO Sundar Pichai admitted that this may have seemed “counterintuitive.”
“Yet we believe it’s more important than ever to invest in our campuses and that doing so will make for better products, a greater quality of life for our employees, and stronger communities,” Pichai said in a blog post in April.
But during the company’s earnings call last week, CFO Ruth Porat said Alphabet expects to incur about $500 million in costs in the first quarter of 2023 related to exiting leases. “We will continue to optimize our real estate footprint,” she said.
Other tech companies are taking a hard look at existing buildings and future real estate projects.
Meta said last month it would sublease a 6-story building near downtown Seattle and a 325,000 square-foot space in Bellevue. Microsoft said it will not be renewing its lease at a 561,494 square-foot space in downtown Bellevue.
Amazon is cutting at least 2,300 Seattle-area jobs, and The Seattle Times reported last month that the company is pulling about 2,000 employees from a downtown office building. In July, Amazon said it was pausing construction on new Bellevue office towers, citing ongoing uncertainty about the impact of hybrid work on its office designs.
Finance and insurance companies replaced tech firms last year for the highest share of top U.S. office leases, CBRE reported this week.
Total vacancy in the Seattle area reached 16.7% in the fourth quarter of last year, the highest level in more than a decade for the global tech hub, according to a new report from JLL.
The vacancy rate on the Eastside — home to Bellevue, Kirkland, and Redmond, where Microsoft is headquartered — was 10.8% in the fourth quarter, up from 7.4% in the same period three years ago, according to CBRE.
It’s a rapid shift for a tech industry that occupied 20% of U.S. office-leasing activity in 2020. And Google’s decision to back out of Lee Johnson deal demonstrates that those shifts have repercussions beyond the tech sector itself.
“This isn’t just a tech story. This is an economic story,” Margaret O’Mara, a University of Washington professor and tech historian, said of the shift. “It’s a story that’s affecting local governments, communities and other parts of the regional economy.”
The proposed new campus had big economic implications for Kirkland, bringing in thousands of additional jobs and more tax dollars to boost the city’s balance sheet over the next decade and beyond.
Weinstein, the city planner, said his office is closely watching what’s going on with tech layoffs. But he’s confident that Kirkland will continue attracting companies from a bevy of industries. The city’s top employer ahead of Google is healthcare system Evergreen Health.
“The economic fundamentals [of Kirkland] are really good and that makes us optimistic about the future of employment, whether it’s in the tech sector or whether it’s in the healthcare sector or something else,” said Weinstein.
In its press release on Jan. 20, the City of Kirkland said that the Johnson family “is confident that similar opportunities for redevelopment will emerge as the economy stabilizes over the next few years” and that the family would continue to operate its car dealerships on its existing site in the meantime.
Google’s growth — and pullback — in Kirkland provides additional fodder for the debate over whether corporations should be allowed to “dictate urban development patterns,” as Wolfe writes in his book, Sustaining a City’s Culture and Character. Wolfe cites Amazon’s HQ2 sweepstakes, which pitted more than 100 localities against each other and ultimately unraveled as Amazon backed out of its choice, New York City, due to objections over financial incentives.
O’Mara said it can be dangerous for cities to make big bets on employers to occupy space. “This has been true for a very long time,” she said.
Both O’Mara and Wolfe agreed that Google’s decision to ditch the car dealership site won’t severely hurt Kirkland, particularly since the tech giant already has existing facilities in the city. Wolfe, a longtime land use lawyer, said he wouldn’t be surprised if another company buys the land.
But as more companies ditch or downsize their office space, the Seattle region as a whole could feel an impact.
“Tech has been such a huge driver of economic and population growth,” O’Mara said. “That’s going to change.”
Editor’s note: A previous version of this story incorrectly spelled the name of Google’s Mark Rowe.