San Francisco Commercial Real Estate
Silicon Valley’s tech firms migrate north
Companies move to San Francisco or open satellite offices
500 Terry Francois Blvd
Silicon Valley companies moving to San Francisco over the last year have absorbed 700,000 square feet, as tiny startups as well as mature tech firms decided that they need to be in the city to attract top talent.
Twenty-four companies relocated from the Peninsula and Silicon Valley in 2012 and 2013, according to a Jones Lang LaSallereport. Those tenants include 2,500-square-foot users such as Gigwalk, Detercon, and Seal Software as well as larger users such as Cisco-owned Meraki Networks, which leased 111,000 square feet at 500 Terry Francois Blvd. The JLL list includes four companies that came from Mountain View, nine from Palo Alto and six from San Mateo.
In addition, another 500,000 square feet has been absorbed by out-of-town tech firms that have not moved to the city, but have notably increased their presence here. These include Amazon, Microsoft, Yahoo, eBay and LinkedIn.
“You really only think about the big ones like Pinterest and Kabaam — you don’t realize it’s the little startups, too, that are becoming increasingly attracted to the city,” said Amber Schiada, research manager at JLL. “They are following the talent as are the VC firms, like Benchmark Capital, that are setting up shop.”
While San Francisco’s rents are still double those in the East Bay, many of the firms moving to the city are actually saving money.
“There are pockets of Silicon Valley, like downtown Palo Alto and Stanford Research Park, that are way more expensive than San Francisco,” she said. “Places with asking rents starting at $72 to $84 a square foot, triple net.”
For the Bay Area’s larger tech companies, it’s vital to be in both places. LinkedIn is building a new campus in Silicon Valley, but just expanded at One Montgomery St. in San Francisco, where it now has 93,000 square feet. Salesforce is obviously a San Francisco company, but has recently renewed its 150,000 square feet in San Mateo. Google, too, is expanding its San Francisco presence — it is now over 300,000 square feet at Hills Plaza.
Dan Harvey, a managing director with Cushman & Wakefield who represents Salesforce, is seeing an increase in the velocity of three related trends: companies locating here from the get-go — “saying I want to be in San Francisco from day one;” companies such as Pinterest, relocating here from the Valley and elsewhere; and companies like LinkedIn that are still based in the South Bay but establish a significant presence in the city.
“The building blocks of why we are successful here cannot easily be duplicated — it’s too hard. There are too many unique things happening here in the near term, in terms of talent and culture and world-class universities, in terms of engineering, social media, mobile, cloud and big data.”
Harvey predicted that 65 to 70 percent of the new office space coming on line will be absorbed by current San Francisco tenants — some growing — while 30 to 35 percent will be “new names.”
“We continue to see the FIRE (finance, insurance and real estate) firms downsizing — every time a law firm does a lease, on average they are downsizing by 20 to 30 percent, whereas tech firms are expanding exponentially more than that. We will continue to transition from FIRE to a market very much dominated by a social, mobile, cloud and big data.”