Microsoft looks across the lake

Microsoft, the software giant whose growth has consumed a huge chunk of Redmond, said it will "unveil future plans" about a Seattle expansion at a news conference in South Lake Union this morning.

It would be the company's first significant presence on the west side of Lake Washington, not counting office space it gained by acquiring Visio in 1999 and, more recently, Pioneer Square-based aQuantive.

A Seattle presence for Microsoft would begin to address one of the biggest headaches facing employees who live in Seattle and work in Redmond — the often-brutal Highway 520 commute over Lake Washington — and might help it compete for talent with other tech companies including Google.

In a brief statement Wednesday, Microsoft said it will talk to the media at the South Lake Union Discovery Center, the showroom for Vulcan Real Estate's extensive condominium developments in the neighborhood.

Vulcan, the multifaceted investment company of Microsoft co-founder Paul Allen, has at least 764,000 square feet of office space either completed, under construction or contemplated in the burgeoning neighborhood.

Several commercial real-estate executives, who asked not to be named while repeating rumors, pointed to two Vulcan projects as potential sites for Microsoft.

Microsoft has long been a looker in the Seattle market. The latest buzz had the company seeking about 100,000 square feet of space, one source said.

That would suggest the recently completed Westlake/Terry Building, at 320 Westlake Ave. N., where Group Health has its new corporate headquarters. About 100,000 square feet of office space is still available on the top three floors of the west side of the development, according to Vulcan Real Estate's Web site.

Other developers suggested that 100,000 square feet would be a relatively small chunk for Microsoft, which owns or leases 11.2 million square feet in the Puget Sound region.

The second potential Vulcan site is substantially larger.

In November, Vulcan began work on a 12-story office tower at the intersection of Westlake Avenue and Denny Way that will have 302,200 square feet of "sustainable, productive office space" when it is completed in 2009, the Vulcan Web site said.

Vulcan has not announced a tenant for the office building — which will eventually be complemented by 135 condos and 25,000 square feet of retail — a risky proposition in the real-estate business known as building "on spec," a reference to the speculative nature of the investment.

Longer term, Vulcan has plans for more projects along Terry Avenue North. Contemplated as life-sciences or office buildings, these have the potential for a combined 342,000 square feet of rentable space.

Microsoft and Vulcan had no comment ahead of the announcement.

Microsoft's appetite for real estate has seemed insatiable lately.

With more than 35,700 employees in Washington — up 7 percent from a year ago and not including temporary and contract employees and vendors — space on the company's Redmond campus has been uncomfortably tight for several years.

In 2006, the company embarked on a three-year effort to expand the main campus' office space by 3.1 million square feet.

Microsoft announced in April another huge real-estate deal that will gobble up 1.3 million square feet of top-flight Bellevue office space in two high-profile projects under development by Schnitzer West.

Its real-estate strategy unfolds against the backdrop of a battle with Google and other tech companies for talented workers in the region.

Google, which is expanding its offices in the Fremont area of Seattle and in Kirkland, offers employees in the region a choice of destinations. Those living in Seattle can dodge the twice-daily crawl across the lake.

Jim DeLisle, director of the Runstad Center for Real Estate Studies at the University of Washington, said Microsoft would benefit by offering its employees a similar option — and it would fit with a national trend of bringing homes and workplaces closer together.

"It creates better alignment between jobs and housing for a number of employees who chose the Seattle lifestyle but the Microsoft culture," DeLisle said, adding that it could take pressure off the 520 commute.

When Microsoft announced its Bellevue expansion plans, Chris Owens, the company's general manager of real estate and facilities, said "the weight of our population is in Redmond first, then Seattle is second in terms of rank, but then Bellevue and Kirkland, right behind."

That's part of why the company decided to grab such a big chunk of property on the Eastside, rather than in downtown Seattle.

"If we were to move any group into Seattle, 80 percent of the people would be Eastside residents and would be faced with a markedly more demanding commute and we would worry about attrition," Owens said at the time.

Regardless of where in Seattle Microsoft ends up, real-estate observers agreed its expansion would bode well for the city.

Patrick Callahan, chief executive of commercial real-estate firm Urban Renaissance Group, said Microsoft would diversify the economic base of downtown Seattle and reinforce the area's expanding boundaries — particularly if the company becomes a major presence in South Lake Union.

"Downtown is going to be a place that essentially goes from Safeco Field to South Lake Union," Callahan said.

Times business reporter Amy Martinez contributed to this report.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com