Activity in other cities may show State Farm’s intentions

Staff writerMay 5, 2013 

What we know: Starting this summer, State Farm will hire hundreds of people to open offices in downtown Tacoma, filling a long-empty signature building and bringing hope to surrounding businesses.

What we don’t know: What role the company will play in the long-term health of the city? Will it stay for five years, or decades? Will it replace the number of employees who left with Russell Investments, or bring even more? Is it planning something bigger?

State Farm has leased the entire former Russell Investments building and four floors of the Columbia Bank Center, with plans to hire an initial 300 people this summer. The operation will be a claims call center, the place policyholders call after, for example, they’ve wrecked their car or had a fire in the kitchen.

Typically, commercial leases have 10-year initial terms, with options to extend five years at a time. But the terms of State Farm’s leases have been described as atypical and designed “to allow for future growth.” The agreements themselves are private, but commercial brokers say some of the terms would be reflected in parking agreements with the city of Tacoma, which found spaces for the company.

Notably, those agreements are short. They give State Farm two 5-year terms, with an early-out provision in October 2016.

If the leases are structured similarly, that raises questions about what State Farm ultimately has in mind. Company officials have been mum about future plans, not only in the Puget Sound region but in other major metropolitan areas where State Farm is making similar short-term agreements.

Last week, a senior vice president for State Farm accepted a proclamation from the City Council, welcoming the company to Tacoma. She congratulated the city on creating “an attractive presence for State Farm,” and her remarks hinted at a broader strategic decision.

“Tacoma certainly was in competition with several other communities as we were looking for a West Coast presence for this claims call center,” Arlene Dresch-Hogan told the council Tuesday. “Because of Tacoma’s great reputation of having a highly skilled pool of candidates, its educational opportunities and its light rail, Tacoma won out over many cities along the West Coast.”

Since the leases were signed, the only public description of them has been that they’re structured to allow the company flexibility in future growth.

No one will say exactly what that means. But over several months, multiple sources with knowledge of the State Farm negotiations have pointed to the company’s moves in Dallas and Tempe, Ariz., for clues to what might happen next in Tacoma.

In the past year, the company has signed several short-term leases while awaiting construction of new buildings by private developers.

In Dallas, State Farm signed short-term leases at the end of last year for almost 600,000 square feet and followed them with an agreement to anchor a developer’s $1.5 billion mixed-use project with a 1.5 million-square-foot lease.

In Tempe, the company is doing almost exactly the same thing. It made two short-term leases for about 360,000 square feet and is reportedly planning a 1-million-square-foot presence as part of another developer’s project.

Rumors have swirled for months that the Tacoma leases are just the first phase, with the second involving construction of a new building. The “build-to-suit” idea has come up dozens of times in interviews with The News Tribune since December.

The initial employment number several sources have cited for downtown — 2,000 people — is based on the idea that the leases at Russell, 909 A St., and Columbia Bank Center, 1301 A St., are only the beginning.

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