More Signs of Shrinkage at Microsoft?

A couple more notes on Microsoft before we get to our big year-in-review / 2009 forecast post tomorrow.

First off, for those that didn’t catch it, this is worth mentioning: Microsoft forgoes South Lake Union lease

Microsoft Corp. has put on hold any interest in further expanding its operations in Seattle because of the deteriorating economy, a spokesman said Tuesday.

For months, the company had been considered to be in the market for additional real estate in the city, and Microsoft had been in negotiations to lease all 300,000 square feet of office space at 2201 Westlake, a mixed-use development under construction at the southwest corner of Westlake Avenue North and Denny Way.

But spokesman Lou Gellos said in a statement that the company “decided not to continue negotiations because of the (national) economic situation and the changing market conditions.”

The loss for now of Microsoft as a potential tenant will put additional downward pressure on office rental rates in Seattle, according to Kip Spencer, the co-founder of and an executive at JE Dunn Construction Co.

2009 looks to be a great year to get a steal on downtown and South Lake Union office rents, if your company is looking to move or expand. Tons of supply with rapidly shrinking demand = great deals, just like residential real estate. Go figure.

Also, revisiting the whole layoffs rumor, I thought I would share this tip from an anonymous Microsoft insider:

…there will indeed be some layoffs at Microsoft, but not nearly to the degree of the rumors we’re heard so far. It will be more along the lines of the standard “repurposing” of jobs they do periodically, and some much needed belt tightening. … Personally, I wouldn’t be surprised if MSN, Windows Mobile, or Internet Explorer got some deep cuts, but that’s just my opinion – nothing was specifically said about them from my manager.

That sounds pretty much along the lines of the less sensationalist reports we’ve been reading elsewhere, and sounds more believable. Also, for what it’s worth, I know that some departments at MS are actually still hiring, because a friend of mine has an interview with the Xbox group this week.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1
    Charles Malby says:

    I was in the pool!

  2. 2
    Tim says:

    There won’t be an official layoff, but I suspect there will be a lot of FTE’s over the next few months who come to find out that they suddenly are having performance issues. Unfortunately, there won’t be much they can do to avoid being shown the door at that point. Stealth layoff.

  3. 3
    Matthew says:

    Commercial RE is going to be the next 2-ton bomb to explode. Load up on SRS while you can.

  4. 4
    buystocks says:

    I predict official layoffs. They have too much to lose from their stockholders if they don’t announce official layoffs to offset their decreased revenues. What do they have to gain by not announcing layoffs (from a stockholder perspective)?

  5. 5
    EastSideRenter says:

    What will happen to Eastside rentals? When I was looking, no one was willing to deal. Basically, “if you don’t take it, someone else will” when MS was hiring 1k people a week. Prices are still insane. I know people at MS that are paying > 50% of their take home salary as rent.

  6. 6
    Sniglet says:

    What will happen to Eastside rentals?

    Actually, rents are really starting to soften. In the last few months I have noticed the volume of Bellevue rentals on craigslist to have ballooned. Moreover, a huge number of the ads are offering all kinds of inducements, ranging from 2 rent-free months to no credit checks. I am just stunned to see the rental ads even say “reduced” price. This is a BIG change from just 6 months ago.

    Something has definitely changed.

  7. 7
    WaileaKid says:

    >50%?? Are you kidding? I am renting near microsoft at walking distance and I am paying under 900 for a 2 bed 1 bath condo. My friend is staying in bellevue downtown in 1b/1bath apartment for 1050 and it is close to the bellevue office as well. If you know anybody paying >50%, they must be renting some luxury homes in medina.

  8. 8
    b says:

    I agree about rentals. We are looking right now and most complexes have 1-2 free months rent, and home rentals seem to be about $300-500/mo cheaper from when we looked last year for the same type of place (3/2 rambler or similar on the eastside). I am going to try my hand at, for the first time in a while, asking for a rent decrease on my next lease or else I will move to the plethora of cheaper units than when I signed.

  9. 9
    Pegasus says:

    I agree Sniglet. I track listings on the Eastside and South King County on Craigslist(not scientific). The home listings for rent have doubled in the past 12 months and are triple from about three years ago. Some of this is the increase in “Rent to Own” houses that no realtor can sell so they try to sucker in some renter with poor credit to support their coming decline in home prices. Most are just the sign that the worm has turned and as real estate declines so will rents no matter what the real estate industry tells us. I am seeing many homes listed for months and months…even those with what seems reasonable rents. Tim could do all renters a great service in exposing the drawbacks in “Rent to Own” scams in this environment and why they are the “new” rage(for suckers). Some of these people really need to go to jail.

  10. 10
    anony says:

    Maybe you could post something in the forums. I’m curious to find out what these rent to own deals are. I see a lot of them on craigslist lately, in every neighborhood.

  11. 11
    Jonness says:

    It looks like jobs in Washington are generally going by the wayside. Even so, we still have a long ways to go until we reach peak unemployment levels.

    “State unemployment claims set new records

    OLYMPIA – Despite snow-related closures and overloaded telephone systems, the Employment Security Department took in a record number of new unemployment claims in December.

    Some 90,331 people applied for regular unemployment benefits in December, an increase of about 75 percent over December 2007. The previous record was set in December 2001, when 72,942 people filed initial claims.

    The week of Dec. 21-27, 2008, which included the Christmas holiday, also set a one-week record, taking in 25,687 new unemployment claims, nearly twice as many as the same week in 2007.

    Employment Security Commissioner Karen Lee said the record numbers of applications are especially staggering, considering that the department’s unemployment call centers were closed or understaffed for several days in December due to snow and the offices were closed on Christmas Day.
    “We knew the workload was skyrocketing, but were surprised when we saw the final numbers for the month,” said Lee. “We’ve been increasing our phone capacity as fast as possible in order to help people with their unemployment claims.”

    In addition to adding phone lines, the department has doubled staff at its unemployment call centers since last summer and is working to hire and train additional staff.

    At the end of 2008, more than 136,000 Washingtonians were receiving unemployment benefits, compared to 72,910 at the end of 2007.
    Unemployment benefits are paid out of the state’s unemployment-insurance trust fund. The trust fund has a current balance of more than $4 billion and is considered to be one of the healthiest in the nation.

    By law, the maximum weekly unemployment benefit is $541 and the minimum is $129. The average weekly payment in 2008 was about $350.”

  12. 12
    rentalbliss says:

    We moved to our new rental in Nov. at the time we thought we were getting a great deal and were’nt even in need of moving. We found a 3/2 tri-level with family room and 2 car garage in Queensgate/totem lake for $1495 a month. The leasing agent told me at the time it was reduced from $1595, still cheaper than most I have seen for the same size location closer to 2k. But we were the only people that even called to inquire about the house. I still think we have a good deal compared to what I am still seeing and to what a mortgage would be for the same house. It’s no wonder I see the same rentals listed over and over for months and the owner/agent will not reduce the price, they are living in 2006 just as the sellers are. When will people get a clue the tide has turned.

  13. 13
    jimmythev says:

    MS is infact starting stealth layoffs (aka getting rid of the bottom 10%). I saw it happening today… 3 people in my area were pulled into managements offfice and told they have 2 weeks to improve things or they’re gone. The funny thing is, they were given no specific goals or areas to improve on…

    Isn’t there some law that if MS does have “layoffs” they have to unload the H1B’s before US citizens? If that’s the case, you probably won’t hear of official layoffs.

  14. 14
    Chris says:

    MS cannot touch much of H1Bs as they were the ones asking for higher H1B quota from government. If they lay them off now, they can’t come back and ask for it later when things recover.. H1b hiring has many legal restrictions for companies..

    Inside MS, first offs would be green card holders and citizens. All major tech companies do the same. But many contractors are holding h1bs and i don’t think these small consultant companies sourcing MS will take care of h1b status for these fellas…

  15. 15
    Charles Dean says:


  16. 16
    RT says:

    I heard Boeing is going to start layoffs with the 1st round of pink slips coming within a week

  17. 17
    Brian says:

    Last night I hung out with a friend who is a recruiter at MSFT. He said they are still hiring people, but are doing so at about 50% of the pace it was before.
    He also said that mass layoff are not on the horizon, but that upper managment was reiterating the mantra that managers need to do a better job of weeding out the bottom performers. Nothing drastic.

  18. 18
    Jen says:

    Boeing is announcing layoff (likely 4500 or so folks) today.

  19. 19
    patient says:

    4500?! That would be a bomb. I hope it’s not true.

  20. 20
    John says:

    Here’s a sign of coming Microsoft shrinkage:

  21. 21
    b says:

    Unfortunately its true:{76BBBF46-1D97-415B-B94D-5F03F90E6242}&dist=hplatest

  22. 22
    Magnolia44 says:

    Seattle bubble you got great news with the Boeing layoff. You may see an additional downturn in prices , just what u wanted right.
    Now I am sure we will see people say we wanted layoffs but not this bad, can’t have it both ways. For some cheer on and enjoy others pain.

    And please don’t try and back pedal the tone of some posts in the past has been waiting or wanting something like this so you can say “see I was right” and “homes have top drop even more now”.

    Like I have said in the past be careful what you wish for. But for now enjoy and speculate on the next layoff bomb…. The term “pigs” comes to mind.

  23. 23
    Yesler Hill says:

    Boeingm MSFT dropping employees, and reducing vendors and contractor; rents have to keep coming down. I also use the unscientific craigslist method to track Capitol Hill rents. The $900-950 slot has gone from 30-50 in August to 130-160 this month. And with all the buildings still coming online, this rental decreasing trend will continue through this year, imho.

  24. 24
    LeftOverpricedSeattle says:


    Layoffs can be a big surprise, but if you are prepared financially for it, then it’s not a big deal.

    If, on the other hand, you work at Boeing, a company that frequently has to lay people off in bad times, drive a brand new car you are making payments on, along with a boat, in the driveway or garage of the home you paid more than you really could afford to in 2004, 2005, 2006 or 2007, then yeah, it sucks to be you.

    Layoffs only suck for those who are not prepared financially for that possibility.

    But hey, when you don’t work for yourself, these things can, and do, happen!

    You should ALWAYS have an exit strategy that will leave you with money in your pocket when working for “the man”.

    Personally, if layoffs lead to drastic price reductions in Seattle, the realization of Seattle residents that Seattle just isn’t THAT special and a massive reduction in the amount of debt people are “preapproved” to take on, then you will hear no complaints from me.

    I will be more than happy to move back to Seattle when blood is running in the streets and won’t feel sorry for those that feel they were blindsided by it.

    If you didn’t see it coming, you weren’t paying attention.

    But I think there are going to be better deals to be had in places far more desirable than Seattle.

  25. 25
    Jonness says:

    “Like I have said in the past be careful what you wish for. But for now enjoy and speculate on the next layoff bomb…. The term “pigs” comes to mind.”

    Magnolia: I don’t mean to be critical, but IMO believing that people at this website’s desire for layoffs is causing the massive downturn in the U.S. economy is quite a stretch of the imagination. There is a big difference between an optimist like yourself and a realist like myself. It’s not that I want layoffs. It’s that I want to follow the truth and prepare myself as best as possible for what is real in the world.

    What is happening is quite interesting; thus, I do take joy in better understanding it. Part of that joy is predicting the next stage of the correction and then testing later to see if my prediction holds. Please understand, this process of analysis, prediction, and testing helps me to better understand the cycle that we are in. The better I understand this situation, the more I can prepare for it and protect myself and my family from the wrath of economic damage that’s occuring around me. So far, my observations have led me to not buy a house at the peak of a massive asset bubble right before it crashed. I came close to selling my current home at the peak, but due to family matters, I elected to hang on to it for another decade or so. However, I did choose to close out my long positions in equities and bet money on shorts. I’ve also been hoarding cash in the midst of the worst deflationary period since the Great Depression.

    It’s important to note, If I hadn’t been paying attention, I would have been cleaned out like so many other unfortunate people around me. The damage is real, and I feel terrible for what has happened to others. However, I can’t say I’m sorry for having spent the time it took to become informed about the future so that I could protect myself and my family.

    It’s fitting that you liken bubbleheads to “pigs,” because I feel like the member of the 3 little pigs that built his house out of brick right before the Big Bad Wolf came to knock on the door. The desperation in your tone leads me to believe you built less of a fortress and are concerned about the power of the wolf.

    IMO, it is much better to become informed about what is taking place around you than to simply allow yourself to become a blind cheerleader of optimism and hope since you closed your eyes that it will become somebody else’s problem or that someone else will come to your rescue. I would warn such people to “be careful of what they DON’T wish for.” Because if they don’t keep their eye on the game, their worst fears could sneak up behind them and be upon them like a thief in the night.

    What is occuring is due to macroeconomic forces in the global economy. Within this larger picture, Seattle’s part is a grain of sand on the overall beach. Seattlebubble is no more than a grain of sand in Seattle, and what is said at this website has very little to do with what’s occurring. You have to expect that in the worst economic crisis since the Great Depression, groups of people will form to discuss in a realistic manner what is occuring. And in other places, groups will form to try and stop the damage by collectively closing their eyes and cheering.

  26. 26
    Crocomire says:

    I agree with Magnolia. It’s if the blogger and the comments here are cheering for mass layoffs so they can swoop in and buy a house at a 50% discount. If you’re not “pigs” then what are you?

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