Monday, May 10, 2021
May 10, 2021

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Boeing puts up for sale its Commercial Airplanes headquarters campus outside Seattle

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SEATTLE – Nearly six months after Boeing first acknowledged it might sell its local Commercial Airplanes headquarters building in Renton, it officially listed the Longacres campus for sale Tuesday – a move sure to intensify doubts about the aerospace giant’s long-term corporate presence in Washington state.

As Boeing seeks to drastically lower costs during the pandemic-driven aviation downturn, the 215-acre Longacres site joins five other Boeing properties in the Puget Sound region now up for sale – in locations from Frederickson in the south to Everett in the north, including other large office buildings in Renton and Bellevue.

The company aims to shed approximately 2.5 million square feet of office space – a 7% reduction in total Boeing office space in the region – plus more than 300 acres of unused land.

Chris Kagi, an office real estate broker for Savills in Seattle, said that in the aftermath of the pandemic’s impact on the workplace it’s a difficult moment to pitch large office buildings. He estimated the headquarters campus could fetch about $300 per square foot, or about $256 million total.

Conrad Chun, vice president of communications at the Commercial Airplanes division, denied that the sale of the headquarters and other sites indicates a gradual withdrawal of Boeing from its Puget Sound roots.

“Selling these buildings does not represent any change in our commitment to the Puget Sound region,” he wrote in an email. “Executives are still based here, living here, but their presence isn’t tied to a building.”

Chun said the sell-off reflects a reassessment of the aerospace giant’s office needs, given Boeing’s 15,000 jobs cut in the state last year and the experience during the COVID-19 pandemic that remote work is a viable option.

He said the Commercial Airplanes headquarters will still be here – just not in a building.

“We are going to be more flexible in where and how people work,” Chun said. “People will not be tied to large offices but when they need to be, they will be closer to where production and delivery occurs.”

That includes the boss.

Commercial Airplanes CEO Stan Deal has relocated to an office overlooking the flight line at the Boeing Field 737 delivery center in Seattle and will move around as needed to other sites in Everett, Renton and elsewhere in the region, as well as making regular visits to the Boeing complex in North Charleston, South Carolina.

“There is a headquarters but you have to think of it differently than a traditional headquarters building,” Chun said. “The flag is planted temporarily, as Stan and members of his leadership team move from location to location.”

It’s definitely a downsizing for the Boeing Commercial CEO. At 220 square feet, Deal’s new office is just a quarter of the size of his CEO office at Longacres, which had a view of Mount Rainier.

Other senior Commercial Airplanes leaders will also move around and work virtually depending on their schedules.

Chun has an office next to Deal’s, shared with Vice President of Human Resources Joelle Denney and Chief Financial Officer Stephanie Pope.

Also next to Deal’s office is a visitor office with three desks where Chun said sales chief Ihssane Mounir; Airplane Programs leader Mark Jenks; the vice president in charge of the 737 MAX return to service Mike Fleming; and other executives will often “touch down” to interact with Deal.

Yet those executives won’t be based there. Mounir and his sales team have moved out of Longacres and will have a base at a Boeing office building close to the Renton 737 assembly plant, as will Chun’s communications team.

Two other Boeing buildings on the same Renton street are among those up for sale.

So too are seven buildings at the Bellevue Eastgate office park that house the Boeing Archives and some IT support teams, among others.

Boeing already sold off four buildings in that park in 2017. The planned sale means Boeing will depart the Eastgate site completely, though for two years it will lease back some of the buildings.

A large warehouse on the Bomarc property in Everett is for sale. So too are 310 acres of unused land adjacent to the Frederickson manufacturing site in Pierce County where Boeing makes the 787 and 777 carbon composite tails as well as metal wing skin panels.

On Seattle’s Beacon Hill, a small, empty quarter-acre Boeing site that used to be a radio tower location is for sale.

In this same round of property divestment, last fall Boeing dropped its lease and moved 1,500 engineers out of its offices at Harbour Pointe in Mukilteo, near its Everett assembly plant.

Worries about the future

The property sell-off is part of Boeing’s effort to navigate through its worst downturn since the slump of the early 1970s.

The grounding of the 737 MAX for almost two years had already drained Boeing’s finances when the pandemic paralyzed air travel and the cash bleed became a gusher.

In response, Boeing had to shelve near-term plans to launch a new airplane, and instead cut jet production rates and slashed 20,000 jobs companywide last year, with 10,000 more jobs to go this year.

In this state, ongoing layoffs and buyouts saw Boeing cut just shy of 15,000 jobs last year.

Last month, Boeing consolidated assembly of the 787 Dreamliner in South Carolina – abandoning the original assembly line in Everett.

Boeing is also shuttering its manufacturing research and development center across from Boeing Field on Marginal Way – though that facility, in a complex that includes various defense production work, is not for sale.

In the fall, corporate CFO Greg Smith said the company was “reviewing every piece of real estate, every building, every lease, every warehouse, every site,” with a goal of shrinking the company’s total real estate by 30%.

Boeing CEO Dave Calhoun has several times reiterated that on the other side of the pandemic, Boeing will be a smaller company in a shrunken market.

“COVID-19 hit the commercial aviation industry hard, and this is a different time,” Chun said Monday. “Our business has changed and we are changing too.”

Yet however dire the current circumstances, there is an undeniable longer term pattern of Boeing shrinking its presence here.

In the last eight years, the Boeing workforce in Washington state has shrunk from 87,000 to less than 57,000.

That’s in part due to a deliberate policy of sending thousands of engineering jobs from the region to other Boeing sites in South Carolina, Missouri and California. After one of those moves shifted engineering support for airline customers to Seal Beach, California, Boeing in 2018 sold off the two big office towers in Tukwila that had previously housed that work.

And of course, the intense debate over Boeing’s future in Washington goes back to 2001, when the company moved its corporate headquarters to Chicago.

So it’s unsurprising many here doubt Boeing’s commitment to the region where it was born more than a century ago.

The reality is that the long-term future of aerospace in Washington state will be definitively decided by Boeing’s choice of a manufacturing location when it launches its next new airplane, probably in three to four years.

Regular statements by Boeing executives that they remain committed to this region fall short of full assurance without any indication of how that future airplane decision will go.

Yet Boeing repeatedly has declined, and did so again in exchanges on Monday, to offer its local employees and the broader community a morale boost with a firm commitment that it will build its next jet here.

The consensus among aviation experts and former Boeing executives is that the company’s leadership won’t ever make such a definitive commitment because it would mean giving up leverage over the local unions.

Boeing spokesperson Jessica Kowal noted the company’s $1 billion investment in the 777X composite wing center in Everett and the previous investments in new jet delivery centers in Everett and at Boeing Field.

And she pointed out that Boeing will be making the MAX in Renton at least through 2031, when Southwest Airlines will take the last delivery from its recent 100-plane order.

“This is evidence of our long-term commitment to the region,” Kowal said.

Goodbye to Longacres

Tuesday’s move to put the Longacres headquarters on the market was expected. Chun telegraphed the expected sale in October.

And last month, employees formerly based at the headquarters campus in Renton were instructed to clear out their stuff. Tuesday morning, they got a memo confirming what was already clear: They won’t be going back.

The spacious headquarters campus in Renton was built 30 years ago on the site of the former Longacres horse-racing track.

It has 855,000 square feet of office space in two big, glass-walled buildings – the Commercial Airplanes headquarters and the company’s even larger flight-training center – set amid landscaped lawns and a large lake, with sizable parking lots for each building.

Limousines often delivered VIP airline representatives from around the world to visit the Commercial Airplanes leadership and sales staff at the headquarters building.

This impressive corporate showcase stands incongruously apart and just out of sight of the nearby Southcenter mall and the sprawl of Renton auto sales lots, retail outlets and fast-food joints just down the road.

The site’s out-of-the-way location often surprised airline leaders who came to pick up an airplane in Seattle only to be driven miles through a down-market suburban landscape to meet Boeing’s leaders far from the downtown skyscrapers of the global city they anticipated.

Inside, Boeing displayed expensive gifts from Middle Eastern and Asian customers to mark multibillion-dollar jet sales and relationships forged through decades of deal-making.

Kowal said those corporate trophy displays will be parceled out to various sites: to the sales team’s new office in Renton, to the airplane delivery centers in Everett, Seattle and South Carolina, as well as to some of the company’s overseas sales offices.

The flight training center once hosted pilots from all over the world who came to train on full-motion flight simulators for Boeing’s jets – until Boeing moved the simulators to Miami in 2013.

Since then, various teams have moved into that building, which was still used also for classroom training of airline maintenance technicians.

Kowal said Boeing will continue that training elsewhere in its Puget Sound facilities and will also offer more virtual training.

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.

When this latest round of property divestment is complete, Boeing’s footprint here will be down to 35.5 million square feet.

Boeing is using commercial realty firm Cushman & Wakefield to sell all the properties.

Savills commercial realtor Kagi said the Longacres headquarters campus would most likely be purchased by an institutional investor intending to lease out the offices. But because any investor would have to take on the expense of renovating the interior and servicing the debt until it’s leased, that depresses the purchase price.

He estimated it could be 18 months to two years or even longer before it’s fully occupied again.

“There are significant large blocks of office space available within the metro area of Seattle and Bellevue,” Kagi said. “Having 855,000 square feet come on line for lease in the South End market is a difficult prospect in the near future.”

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