State Farm considering expansion in Tacoma?

State Farm Insurance, Pierce County’s seventh-largest private employer, appears to be looking for places to expand its work force, and downtown Tacoma is in the running.

A company spokesman said last week that State Farm recently toured the former headquarters of Russell Investments, Tacoma’s premier office building that has been empty since 2010.

Brad Hilliard, a State Farm spokesman, said the tour was part of the company’s ongoing evaluation of facilities. He would not confirm any other tours in the region. It also doesn’t appear that the company plans to close its DuPont offices. Hilliard said he was “unaware of any discussions to dramatically change the use of our DuPont facility.”

That, plus the company’s moves elsewhere in the U.S., indicate a local expansion could be in the works.

State Farm, the nation’s largest property and casualty insurance company, is showing signs of rapid change across the country. In the past six months, according to media reports, State Farm has leased enough new office space to employ thousands of people in Dallas and Atlanta. On Friday, The Atlanta Business Chronicle reported the company was in the market for enough new space to hold 800 employees — just six months after it announced 500 other jobs nearby.

Meanwhile, employees in DuPont, where State Farm already employs more than 1,000 people, say a significant reorganization is under way. People are transferring to Atlanta, Dallas and Phoenix, they said, but local open positions also are being posted and filled.

A half-dozen commercial real estate brokers in Tacoma said in early December that an unnamed tenant, now widely believed to be State Farm, put out a request throughout the region for at least 250,000 square feet or as much as 600,000 square feet of Class A office space — the best in the market. That amount of space potentially could hold between 1,000 and 2,400 employees. The larger number would represent more than twice the number of jobs from a single employer downtown than at Russell’s peak.

Specifics on the private Illinois-based company’s plans, including a timeline for decisions, are under wraps. Rumors that have percolated for weeks about State Farm’s intentions spiked at the end of last week, with several people believing the company had made a deal, or was working on a deal, to move into the Russell building.

DuPont Mayor Michael Grayum said he hadn’t heard anything about a possible State Farm reorganization and declined to comment, saying it was speculative. He said State Farm has been a “good neighbor” in DuPont.

“If State Farm grows and stays in Pierce County, that’s awesome for our region,” he said.

Nothing has been finalized. People with direct knowledge of the company’s plans, including their regional broker and local brokers representing the Russell building, won’t comment publicly on specifics.

“There’s no deal signed” for any tenant, said Greg Eastman of Ilahie Holdings, which owns the former Russell building at 909 A St. “It’s big news for everyone in town if we have someone to go in there, and we know that. We’re working to try to get a tenant, or tenants, in the building.” Russell’s lease expires this fall, so it still controls the space. Eastman said he’s working with Russell as well.

Pierce County’s economic development leaders said they’ve heard talk about State Farm, too, but aren’t aware of an active recruitment or retention campaign.

“I’ve only heard the rumors. I haven’t been in any meetings where it’s been discussed,” said Denise Dyer, Pierce County’s economic development director.

The City of Tacoma isn’t negotiating directly with any large tenants, said economic development director Ricardo Noguera, though he said he is working with a number of brokers who represent such tenants. He said Tacoma would welcome State Farm “with open arms.”

“The city will provide an expedited review process to ensure whoever comes to the door can be up and running as quickly as possible,” Noguera said.

SPACE ISSUES

State Farm built its regional headquarters in DuPont in the mid-1990s. It owns its building, which is about 364,000 square feet and has room for about 1,400 employees. About 1,070 people work there, according to 2012 figures from the Tacoma-Pierce County’s Economic Development Board, mostly in claims and underwriting. State Farm has only two other offices in Washington, in Tukwila and Bothell, both of which are small.

Weyerhaeuser and Boeing both have large office buildings in suburban parks that could accommodate the smaller requirement sent out in December’s space request. In Tacoma, meeting that need in the downtown core with contiguous Class A space would require the entire Russell building plus the space DaVita is vacating at the Columbia Bank Center — space that also once belonged to Russell.

To meet the upper-end figure would require another building the size of Russell’s former headquarters plus more. In downtown Tacoma, that would mean new construction. And that could mean engaging German billionaire Erivan Haub.

Haub owns the largest single development site in the downtown core — the so-called superblock at South 14th and A streets. Several years ago, when civic and business leaders were trying to retain Russell, plans for a new corporate headquarters were drawn up for that site.

Haub’s local representative, attorney John Barline, couldn’t be reached for comment. Haub’s real estate representative, Mike Hickey of Neil Walter Co., would not comment for this report.

Companies planning to employ thousands of people in an urban center generally require parking, something that’s long been a challenge for downtown Tacoma. Suburban parking is free. In urban cores, parking costs money. That means higher occupancy costs.

In Tacoma, city government has about 3,800 revenue-generating parking spaces downtown, including the garage next to the former Russell building. Noguera said the city has been conducting an audit of all available spaces.

“We could possibly have one thousand spaces available for a variety of users,” he said. The spots are both surface lots and in garages. Given the city’s deficit in its parking fund, can it afford to negotiate the price of those spaces to lure a big tenant?

“I think there’s always room to negotiate,” he said Friday. “The parking deficit won’t go away unless we attract more industry.”

MOMENTUM BUILDER?

The level of excitement about a potential tenant for the Russell building shows the hole that Russell’s departure created downtown.

“It could be a momentum builder for Tacoma,” said John Bauder of commercial brokerage CBRE. “Even if someone took the whole (Russell) building, there’s still plenty of room for other tenants.”

“Other office tenants who might work with a big tenant might move downtown,” said Dominic Accetturo, a broker with Kidder Mathews. “It would make a big difference in (perhaps seeing) more downtown living start to pop up.

“It would be a huge jolt to the retailers, who have been hurt the most,” he said.

Since the fall of 2010, when Russell left, many local businesses once supported by Russell employees have been hanging on.

Karen McGrath, owner of Watermark Gifts at 1115 A St., said business has generally been “not so good” since then.

“There was a drop, although we’ve been leveling off,” she said. “I’m very pleased about that. It took a year to find out what the bottom line was.”

Any influx of possible customers, McGrath said, “would be fabulous.”