If Tacoma learned one thing when Russell Investments ditched its hometown headquarters in 2010, and when State Farm stepped into that premium space three years later, it’s the incalculable value of having big-league employers occupy first-class real estate.
Downtown merchants fairly drool over the conga line of well-paid workers coming and going from local office towers. Home sale and apartment rental markets get a lift because people want to live near where they work. And Tacoma’s stature rises after locking up a Fortune 500 company and several hundred insurance jobs.
Who wouldn’t want a bigger slice of that pie?
True, most Puget Sound corporate headquarters are located in Seattle (including the transplanted Russell HQ) or in Bellevue. But it is not King County’s birthright to have them all.
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Alas, Tacoma is usually shut out due to its slim pickings of Class A office space, a dearth of the most prestigious, professionally managed buildings with the best amenities.
State lawmakers could adopt a financial incentive that might turn the tide and a fairly painless one at that. They could help make Tacoma and several other cities at least semi-competitive with Seattle.
But we’re disappointed to report it probably won’t happen in 2017.
Rep. Jake Fey, D-Tacoma, sponsored a bill this year that sought to give targeted tax breaks to developers who build or renovate Class A office space in a dozen cities, including Tacoma.
The original bill would’ve provided relief from local property and sales-and-use taxes on Class A projects, but only in cities with populations of 50,000 or more in counties of 1.5 million or fewer people. (That leaves out the greater 206 and 425 area codes. Don’t worry; they seem to be doing just fine without the help.)
A later version of the bill stripped out the most important part: the 10-year property tax exemption. Meanwhile, more cities lobbied for a piece of the pie, so the population threshold was lowered to 35,000.
In the end, Fey’s legislation wasn’t ready for prime time this year. That means Tacoma’s marketability to the corporate heavyweights will continue to languish, with its Class A vacancy rate just under 5 percent and no new projects coming online.
In fact, more than a decade has passed since new Class A space has been built anywhere in the state outside King County.
The problem boils down to basic construction industry arithmetic. The cost of labor, steel and other materials is fairly uniform throughout the Puget Sound metro area. But office building owners enjoy a lease rate of roughly $42 per square foot in Seattle-Bellevue, while reaping just $27 a square foot in Tacoma, according to figures presented to a legislative committee by a city of Tacoma lobbyist.
That makes it hard for developers to justify moving their bulldozers and cranes south, even with tax incentives.
Developers and executives have many criteria for deciding where to build and where to locate corporate offices. Convenient airport access and reasonably navigable traffic are near the top of every CEO’s list.
For Tacoma, competing with Seattle is always a daunting prospect. But Fey’s package of sweeteners at least would give the 253 a fighting chance for the holy grail. A chance to cultivate high-end capital investment. A chance to elevate our national profile. A chance to free more Tacomans from the grinding freeway commute, along with the baggage of being Seattle’s lower-cost bedroom community.
There’s nothing sexy about commercial office buildings. Most folks don’t get excited about them the way they do a McMenamins pub project or a Foss Waterway hotel. But service-industry developments don’t generate the incomes or have the same multiplier effects as Class A office space. As with manufacturing companies, corporate employers help round out a diverse local economy.
Fey, a former Tacoma City Council member, has held elected office long enough to measure progress in baby steps. “It may take another couple of years to get to the finish line on this one,” he told a News Tribune editor.
Maybe so. But Tacoma political and economic leaders cannot relax in their pursuit of prime commercial office space, and they will need to bring their “A” game.