Boeing is considering selling its big Commercial Airplanes headquarters campus at Longacres in a broad initiative to slash its costs in the downturn and take advantage of the new reality that many employees can work a lot from home.
While no decision has yet been made, a senior company executive said Boeing Commercial Airplanes CEO Stan Deal is leaning toward effectively ditching the concept of having a headquarters at all.
Instead of a fixed local headquarters, Deal wants himself and his leadership team to be mobile and “closer to where the products are being built,” the executive said.
Deal wants to be “moving around, not planting a flag. Being able to move from site to site freely without being anchored down anywhere,” he added.
The impetus for the potential real estate sell-off is the urgent need to cut costs and position the company to survive the coronavirus pandemic’s shocking blow to the airline business.
Yet the prospect of the sale of the 215-acre complex in Renton, built 30 years ago on the site of the former Longacres horse-racing track, will stir new unease about Boeing’s long-term future here.
News of the possible headquarters sale was broached to local Boeing managers in a recent memo, which told them the company’s leadership is “evaluating our facility and site footprint” in the area and wants to “exit buildings where appropriate.”
For many of the more than 1,000 people who work at the Longacres site, the note suggested telecommuting may continue even after the pandemic ends.
In an interview Friday, the senior local Boeing executive said this is not about leaving the area, but about conserving cash and looking for efficiency in a difficult time.
“Boeing has been deeply impacted by this pandemic,” said the executive, who asked not to be named but spoke officially for Boeing. Management wants to “position this company to be sharper, leaner, more competitive long-term.”
“We want to be ready when we come out of this,” he said.
In the memo to managers, Boeing tried to counter any notion that a leadership with no fixed abode might put South Carolina on equal footing with Washington state.
“Commercial Airplanes leadership will remain in the Puget Sound region,” the message said.
Deal typically goes to Boeing’s South Carolina manufacturing site about once a month and that won’t change, said the executive.
The examination of Longacres is part of a broad, systemic review of all of Boeing’s real estate holdings, even its Chicago headquarters, Chief Financial Officer Greg Smith told Bloomberg News, which first reported the potential sale.
“We’re evaluating all real estate across the globe,” Smith said.
A shrinking presence over decades
The news of the potential headquarters sale follows Boeing’s decision to consolidate assembly of the 787 Dreamliner in South Carolina — abandoning the original assembly line in Everett — along with ongoing layoffs and buyouts that will see about 12,600 Washington state employees leave the company this year.
In addition, as noted in the memo to managers, Boeing has already begun to vacate another major local site: its leased offices at Harbor Pointe in Mukilteo.
After more than 13 years there, the company is dropping the lease and will move more than 1,500 engineers into other offices in Everett by Nov. 30.
Whatever assurances Boeing leaders may utter, these developments inevitably bring to the surface again the perennial doubts about the jetmaker’s commitment to the region, doubts first sown in 2001 when it moved its corporate headquarters from Seattle to Chicago.
Ironically, if Longacres is sold, alternative space is available not only in the office towers beside the widebody jet plant in Everett but also in vacant offices around Boeing Field, including the former Boeing World Headquarters building that the company vacated when it moved to Chicago.
And despite Boeing’s corporate assurances, a shrinking presence is a worrying sign.
Corporate filings show that in 1993 Boeing owned 45 million square feet of factory and office space in the Puget Sound region and leased a further 9 million square feet. Today, before the further shrinkage that’s coming, Boeing’s footprint here is already down to 38 million square feet.
The Boeing senior leader said that’s still a very large presence — and that looking to the future, the new remote work options will change how we think of a corporation’s “presence.”
“In what is looking like the new norm, we’ll have fewer people coming into the office,” he said. “We may have a smaller footprint, but the people aren’t going anywhere. The people will still be here in Washington state, some of them working out of their homes.”
An isolated corporate showcase
Boeing Longacres is a symbol of corporate power planted in an unlikely setting.
The sprawling suburban campus with 855,000 square feet of office space stands incongruously apart in an otherwise empty landscape — close to, yet separated from, the 737 factory and the Renton auto sales lots and fast-food joints down the road.
The impressive glass-walled buildings are surrounded by trees and manicured lawns. Limousines are often parked outside, having delivered VIP airline representatives from around the world to visit the leadership of Boeing Commercial Airplanes.
Inside, on the floors where the jet sales staff have offices, display cases and wall mountings show off exotic artifacts from far-flung cultures — a replica of an ancient suit of armor from Japan, an Arab sword from the deserts of the Middle East. These expensive gifts were given to mark the sealing of multibillion-dollar sales of jets around the globe and relationships forged through decades of deal-making.
Its out-of-the-way location often surprised airline leaders who came to Seattle to pick up an airplane and then found themselves miles from anywhere in a location with no resemblance to the global city they had heard about.
That’s why, after Jim Albaugh became Boeing Commercial CEO in 2009, he set up a lavish corporate office filled with global artifacts occupying two entire floors atop the Russell Investments Center in downtown Seattle.
But Chicago considered that an extravagance, and after Albaugh left on poor terms with then-company chair Jim McNerney, the downtown Seattle showcase office was closed.
No one could have predicted then that Boeing might close Longacres, too.
A strange realty market
The effects of the pandemic on the commercial real estate market certainly complicate the potential sale of the site.
The pandemic has put a big crimp in office transactions. By and large, businesses and investors, uncertain about the future of remote work and unwilling to commit until more companies signal they’ll be heading back to the office, have put office purchases on hold, according to research from local brokerages.
The sheer size of the Boeing complex, too, could make it hard to find a buyer.
That could mean Boeing is in for a rocky road if it tries to sell the Longacres buildings now, said Brian Clapp, a broker at Kidder Matthews.
On the other hand, some major Puget Sound companies have announced they plan to invest in regional satellite offices, potentially making the Longacres complex more attractive to tenants like Amazon and REI.
Both those companies have said they’re looking into buying space in the South Sound.
And Renton is a relative bargain.
In Seattle, office buildings sell for $414 per square foot; in South Lake Union, office buildings fetch a whopping $886 per square foot, according to Commercial Cafe.
By contrast, large office buildings and office parks in Renton sold for an average of $167 per square foot in 2019, according to King County Assessor data.
For the moment, Boeing said in its internal memo, “There is little near-term impact as most office employees continue to work virtually.”