Boeing 737 Max
Representational image | Boeing 737 Max planes are seen at the company's manufacturing facility in Renton near Seattle in the US state of Washington | David Ryder/Bloomberg
Text Size:

Washington: Boeing Co. is weighing whether to jettison the Seattle-area headquarters of its commercial-airplane division as it cuts costs and stockpiles cash.

A sale of the Longacres industrial park would also include an adjacent building once used to train airline pilots. Boeing converted the wooded suburban campus from a horse-racing track in the 1990s, and the property has 855,000 square-feet (79,400 square-meters) of office space. The buildings are in Renton, Washington, separated by a hill from Boeing’s 737 factory.

Leaders of the jetliner unit would move to vacant offices in Boeing’s nearby Plant 2 complex or its Everett campus to Seattle’s north, people familiar with the matter said. Many employees would continue to work from home — as they’ve done during the coronavirus pandemic — while sometimes sharing communal work stations on a temporary basis, said the people, who asked not to be named as the plans are confidential.

The study is part of a broad, systemic review of all of Boeing’s real estate holdings, even its Chicago headquarters, Chief Financial Officer Greg Smith said. Boeing is already slimming down its century-old manufacturing base around Seattle, where it is preparing to close a production line for the 787 Dreamliner to contend with an aircraft market gutted by the pandemic.

“We’re evaluating all real estate across the globe,” Smith said in an interview. “But no decisions have been made other than what we’ve announced.”

Smith is spearheading a five-pronged assessment of Boeing’s infrastructure, overhead, operations, investments and suppliers.

Boeing jumped 5.5% to $173.21 at 9:35 a.m. in New York. The gain was the sharpest on the S&P 500 after Bloomberg News reported that European regulators had determined that changes to the 737 Max made it safe enough to return to service.


Also read: Almost entire Boeing 787 Dreamliner fleet under scrutiny now for defect in tail wing


Global Portfolio

Boeing has already decided to shift its product development organization back to Everett, clearing out a 338,577-square-foot office tower that it leased in nearby Mukilteo. That move was reported earlier by the Puget Sound Business Journal.

Globally, Boeing is reviewing a portfolio that spans 2.4 million square feet of office space and 124 million square feet of factories and warehouses, one of the people said.

The effort encompasses every property the U.S. manufacturing giant owns or leases around the globe, with teams updating Smith and Chief Executive Officer Dave Calhoun on a weekly basis. They’re digging into how well the properties are used today and accounting for longer-term trends such as reduced demand for jet sales and the shift to home offices that was spurred by the pandemic.

The overarching question is “how do we set up the company to be leaner and more competitive on the other side” of the crisis, Smith said. He also serves as Boeing’s executive vice president of operations.

There are risks to consolidating operations, from distracting workers to damaging the company’s culture, and the rewards aren’t always clear cut. With the 787 program, the supply chain accounts for about 70% of costs and the magnitude of the benefit from shifting to a single final assembly line in South Carolina is unclear, JPMorgan Chase & Co. analyst Seth Seifman said in a report this week.

Suburban Space

In real estate, the same trends driving Boeing’s review are weighing on the pricing of the space it’s thinking about vacating.

The rise of remote working has the potential to decrease office demand, said Danny Ismail, an analyst at real estate research firm Green Street. That makes it difficult to tell how much Boeing could get for Longacres and could complicate a sale.

In general, offices have fetched around $175 a square foot in Renton, Ismail said. But there’s a wide variation and not that many transactions for comparison.

Some buildings in the Seattle suburbs have fetched premium prices during the pandemic, though. In September, Facebook Inc. agreed to buy outdoor retailer REI’s never-used corporate headquarters in Bellevue, Washington, for $368 million.

“The signs of life that are there are in the suburban markets,” said Chris Kagi, an office broker for Savills in Seattle. – Bloomberg


Also read: Why Boeing’s 737 Max will take longer to fly in skies outside the US


 

Subscribe to our channels on YouTube & Telegram

Why news media is in crisis & How you can fix it

India needs free, fair, non-hyphenated and questioning journalism even more as it faces multiple crises.

But the news media is in a crisis of its own. There have been brutal layoffs and pay-cuts. The best of journalism is shrinking, yielding to crude prime-time spectacle.

ThePrint has the finest young reporters, columnists and editors working for it. Sustaining journalism of this quality needs smart and thinking people like you to pay for it. Whether you live in India or overseas, you can do it here.

Support Our Journalism

Share Your Views

LEAVE A REPLY

Please enter your comment!
Please enter your name here