For years, Amazon has gobbled up office space in Seattle at a breakneck pace, creating a red-hot commercial real estate market in the city’s urban core. But Amazon no longer seems keen to expand in its hometown at the same rate, at least not in Seattle proper.

As Amazon grows its footprint across Lake Washington in Bellevue, a project that will eventually be Seattle’s second-tallest skyscraper could become a shining symbol of the company’s shifting growth strategy.

In 2017, Amazon committed to leasing all 722,000 square feet of office space in Rainier Square, the skyscraper under construction in downtown Seattle. At the time, Greg Johnson, president of the Rainier Square developer Wright Runstad & Co., called Amazon’s lease “evidence that they are still on a pretty steep growth curve in Seattle.”

That evidence is beginning to wear thin. Amazon is considering subleasing all 30 floors of Rainier Square, according to sources in the real estate industry.

Meanwhile, Amazon is looking to neighboring Bellevue to satisfy its demand for office space.

Bill Cooper, a vice president in the Bellevue office of real estate firm Colliers International, told GeekWire he expects Amazon to double down on Bellevue.

“It is likely Amazon will focus on Bellevue as there are several large development sites ready to start in the pipeline and would better connect Amazon to the technology workforce living on the Eastside,” he said.

With Amazon’s New York HQ2 office dead on arrival and its Seattle plans uncertain, all those jobs have to go somewhere. Now Bellevue — Amazon’s original birthplace — is starting to look like the company’s real HQ2.

Seattle slowdown

Last year, Amazon threatened not to move into 30 floors of office space in Rainier Square amid an ugly battle with the City Council over a tax that would hit large businesses in the city.

At the time, the company was actively searching for “HQ2,” a second headquarters outside of Seattle. Animosity between Amazon and city officials, coupled with the HQ2 search, had many in the tech industry worried that Seattle’s top private employer was cooling on its hometown.

Earlier this month, when Amazon backed out of its plan to build a giant office in New York (one half of the HQ2 project) Seattle tech leaders celebrated. Surely this meant Seattle was, and always would be, Amazon’s most important home base.

But chatter in the Seattle real estate world tells a different story.

Although Amazon came out on top in its tax battle with the Seattle City Council, it still may not move into the 30-floor Rainier Square development. Amazon is seriously considering subleasing the office space, according to a real estate professional who represents commercial tenants in downtown Seattle.

“We all speculated when they selected the other two co-locations that maybe this would go on the market,” she said. “It’s not near their campus.”

She added that Apple, Dropbox, and Oracle are “circling” as possible tenants but “we’re all feeling like it might take a while” to lease such a large space. Amazon has enlisted real estate powerhouse JLL to sublease the project, according to the source, who requested anonymity because the deal has not been made public. JLL declined to comment.

Amazon currently occupies 12 million square feet of office space in Seattle and will grow to approximately 14 million when its projects under construction are completed. The company will “continue to evaluate future growth” when those projects are finished, according to an Amazon spokesperson. Amazon declined to comment on its Rainier Square plans.

From 2013 to 2017, Amazon scooped up at least 800,000 square feet of office space every year, according to GeekWire research. But aside from confirming a pair of previously reported leases last year, Amazon hasn’t snapped up any other office space.

It’s unclear whether Amazon is intentionally slowing down growth in Seattle or just waiting to finish everything it has in its pipeline before setting off on the next round. But Amazon’s real estate activity shows that the company’s previously insatiable appetite for office space in its hometown over the last few years has abated.

Trouble in paradise

Amazon’s relationship with its hometown has turned sour over the past year. It started with a proposed tax on the city’s top-grossing businesses to fund affordable housing. The tech giant became the explicit target of the tax’s most vocal supporters, who marched on the company’s Seattle headquarters carrying “Tax Amazon” signs.

As the debate raged on, Amazon paused construction on its 17-story Block 18 development in Seattle pending the City Council’s vote on the so-called “head tax.” The company also said it was considering subleasing Rainier Square. The mayor stepped in to broker a compromise between Amazon and the Council, which ultimately passed a smaller version of that tax.

Amazon resumed construction on Block 18 — but the battle didn’t end there.

We remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here.

“While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the Council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here,” Amazon Vice President Drew Herdener said in a statement following the vote. He added, “We are highly uncertain whether the City Council’s anti-business positions or its spending inefficiency will change for the better.”

A coalition of businesses launched a referendum campaign to overturn the tax, with $25,000 in support from Amazon. In a remarkable about-face, the City Council voted to repeal the tax less than a month after unanimously passing it. They said they couldn’t afford the fight with the business community.

But that capitulation may not have been enough to compel Amazon to hold onto its Rainier Square plans. Though there are a number of factors at play, the relationship between Amazon and Seattle suffered enduring blows during the head tax fight, which continues to hang like a cloud over conversations about the city, housing, and Big Tech.

It’s a shadow that followed Amazon all the way to the East Coast. The head tax came up repeatedly during public hearings in New York, where elected officials grilled Amazon executives about their company’s reputation. Seattle councilmembers who played key roles in the head tax battle even traveled to New York to warn local officials about what it’s like to have Amazon in your backyard.

When asked about Amazon’s growth plans in Seattle, Heather Redman, a Seattle venture capitalist and tech industry advocate, said “things are viewed as working better in Bellevue.”

“There is not an irrational, anti-business political body over there, but it looks like there is here, and it might continue to be that way if we don’t take this next election cycle really seriously,” she said.

Seattle’s commercial real estate market is hotter than ever. Amazon’s rapid growth in the urban core has been bidding up the office market for years. Seattle’s office space was at 90 percent occupancy last year, outpaced only by San Francisco, according to a report from the Downtown Seattle Association.

If Amazon does sublease Rainier Square, it will be relinquishing a big chunk of coveted space.

“A company that is growing works really hard to get office space,” Redman said. “So the idea that you’re not going to take office space that you’ve worked really hard to have available to you, and you’ve got to go look for office space somewhere else, is generally not because you don’t like the color of the walls. You have to figure there’s something else going on.”

Meanwhile in Bellevue

When Seattle passed the head tax, Bellevue Mayor John Chelminiak recited one of his city’s mottos. “Bellevue is open for business,” he said in an interview with GeekWire.

It seems Amazon got the message.

The company is leasing more than 1 million square feet of office space in Bellevue across three buildings and is rumored to be looking for a lot more.

It wasn’t that long ago that the impending departure of Expedia from Bellevue to Seattle invoked panic about the health of the office market there. But Amazon’s decision to open up an office in Bellevue a few years ago and a pair of subsequent deals have helped kicked off an unprecedented run-up of construction in the city just across the water from Seattle.

Chatter in the real estate community links Amazon to almost every downtown Bellevue project in the pipeline in one way or another. However, Amazon keeps its plans close to the vest and those working on the deals are staying quiet.

Vulcan Real Estate, the development firm founded by the late Paul Allen, is teeing up two projects in downtown Bellevue: A 1 million-square-foot tower that will be 150 feet taller than any existing high-rise in the city and a three-building project that will also be over 1 million square feet.

Vulcan built Amazon’s first campus in South Lake Union more than a decade ago before selling it to the tech giant. And several real estate sources said Amazon is considering leasing the Bellevue projects Vulcan was building, but weren’t able to say how serious those discussions are because they don’t have direct knowledge of the deals.

Vulcan’s Real Estate Investment Strategy Director Lori Mason Curran said “we are actively marketing our Bellevue sites but do not have any leasing activity to announce.”

A commercial real estate source told GeekWire “it’s a pretty sure bet” that Amazon is the front-runner to purchase a development site called 600 Bellevue. It’s a complicated site, but a previous plan there called for a pair of towers, including a 41-story high rise office.

The source, who has worked with several other groups interested in buying the site, sees the potential for an iconic building similar to Salesforce Tower in San Francisco. The site is on top of a future light rail station, meaning it could serve as a hub connecting Amazon’s offices in both Seattle and Bellevue.

Tom Alberg, managing director of Seattle venture capital firm Madrona Venture Group, sits on Amazon’s board of directors. He wouldn’t comment directly on Amazon’s growth plans but did say, “the Eastside brings a lot to the table with their quality public school systems and openness to new technologies,” in an interview with GeekWire.

Alberg criticized the Seattle City Council for appearing “unable to work with businesses to solve the city’s pressing social problems and to maintain a healthy economic climate.”

Although Amazon is eyeing locations outside Seattle proper for growth, the company’s hometown is still its center of gravity. Amazon has more than 30 office buildings in Seattle and employs about 50,000 in the city. There are 9,652 openings for Amazon jobs in Seattle, down just slightly from the 9,663 openings the company had this time last year. There are only about 200 listings for Amazon jobs in Bellevue.

But the prospect of subleasing Rainier Square, one of the most high-profile real estate developments underway in Seattle right now, could be a harbinger of things to come. Soon, Amazon will start hiring for new offices in Bellevue and Washington D.C., where the company will establish an “HQ2” across 4 million square feet of office space. When those projects are underway in earnest, Seattle may no longer be the epicenter of Amazon’s growth.