1455 Third St. (Approved) – San Francisco – 94158 – 13/20
SF MARKET OVERVIEW
Prepared by Kathryn Driver, Market Researcher
The San Francisco market is making a strong showing this quarter after
hitting a two-quarter leasing slow down following the record-breaking
activity of 2012. With three of the top fi ve leasing deals exceeding
100,000 rsf, the third quarter is the strongest quarter for leasing activity
that the market has seen since Q4 2012. The South Financial District saw
the most leasing activity with the completion of the largest deal of the
quarter, the Bechtel renewal for 141,639 rsf at 50 Beale Street.
Leasing activity will remain strong as several companies are expanding
their presence in the San Francisco market. StubHub, an eBay company,
nearly doubled their headquarter space with a 140,356 rsf renewal/
expansion at 199 Fremont Street, while Neustar, a Virginia-based
communications company, recently signed a 138,574 rsf deal to be the
anchor tenant for the new Foundry III Building at 505 Howard Street.
This trend is expected to continue into the next quarter with Google’s
renewal/expansion at 345 Spear Street set to close and Dropbox
expecting to double in size in the South of Market (SOMA) submarket
by year’s end.
With the strong leasing activity of Q3, absorption remains positive.
Non-CBD submarkets were key contributors to the occupancy growth,
headlined by both Uber’s 88,135 rsf deal at 1455 Market Street and
Zendesk’s 72,933 rsf renewal/expansion at 1019 Market Street. This is
the fourteenth consecutive quarter for positive absorption, a feat never
before seen on record in the San Francisco market.
Rental rates, at historical highs, have seen minimal increases this
quarter and are expected to remain stabilized through the end of the
year. Construction continues to thrive with 222 Second Street and 181
Fremont Street breaking ground, 350 Mission Street and 535 Mission
Street well under way and 505 Howard Street being delivered by years
end. Salesforce, Bare Escentuals, Dropbox, KPMG and Demandforce/
Intuit are all in the market and expected to take some of these large
blocks of brand-new, Class A space.
New 88,134 Square Foot Lease at 1455 Market Street Property in San Francisco
Hudson Pacific Properties, Inc. (the “Company") (NYSE: HPP) today announced it has signed a new lease at its 1455 Market Street property with Uber Technologies, Inc., a leading provider of affordable luxury transportation through an efficient technology-centered approach.
The new ten-year 88,134 square-foot lease encompasses the entire fourth floor of 1455 Market and backfills space currently occupied by the property’s largest tenant that was scheduled to expire in 2017. Commencement of the lease with Uber is scheduled for first quarter 2014.
“I am pleased to welcome Uber Technologies, Inc. to the Hudson family at our 1455 Market Street property," said Victor J. Coleman, Chairman and Chief Executive Officer of Hudson Pacific Properties, Inc. “This lease represents a long-term commitment from a very successful San Francisco-based technology company at starting rents above our underwritten and expiring rents for this same space. We are quite happy to have Uber as a tenant and very pleased with this transaction."
1455 Market Street is a 1,012,012 square-foot, 22-story, Class-A office building situated on 3.01 acres and located in the dynamic Mid-Market submarket of San Francisco, which has emerged as one of San Francisco’s technology and business hubs. 1455 Market is already home to Square Inc. and is in close proximity to Twitter’s new corporate headquarters and to some of San Francisco’s largest government and cultural institutions.
An office shortage in San Francisco’s traditional technology district is aiding the revival of a blighted neighborhood known as Central Market, as young companies migrate to a new hub with fast-growing rents.
Asking rates on Market Street between Fifth Street and Van Ness Avenue — northwest of the popular technology area called South of Market — jumped 18 percent in the second quarter from a year earlier to an average of $46.48 a square foot, data from brokerage CBRE Group Inc. show. Internet firms have driven gains, with mobile-payment service Square Inc. moving this month to a converted bank data center.
The once-bleak stretch of empty buildings has had $2.4 billion in development and property sales since 2011, including projects by Hudson Pacific Properties Inc. (HPP), AvalonBay Communities Inc. and Shorenstein Properties LLC, according to CBRE. San Francisco’s surging job growth and scant new office supply sparked the renewal, along with a 4.4 percent vacancy rate in South of Market that constrained growth there.
“We knew there was going to be overflow, but nobody thought it would be like this,” said Victor Coleman, chairman and chief executive officer of Los Angeles-based Hudson Pacific, the landlord at 1455 Market St., the 1 million-square-foot (93,000-square-meter) data center that lured Square as an anchor tenant. “This situation is pretty unique.”
Uber Technologies is dispatching its headquarters to 1455 Market St., the latest in a procession of well-known San Francisco technology companies trading the trendy South of Market for the emerging Central Market Street enclave.
Uber, the mobile device limo dispatching service, has signed an 88,000 square foot lease at 1455 Market St. Uber will occupy level four in the building. The deal represents the second major technology lease in the building. Square, which is moving from 901 Mission St., has leased 327,000 square feet in the former Bank of America data center.
Uber is currently housed in 26,000 square feet at 405 Howard St., space that the group subleases from Kabam.
The Market Street building is owned by Hudson Pacific Properties, which declined to comment through a spokesman. Uber is represented by Jenny Haeg of Custom Spaces Commercial Real Estate. J.D. Lumpkin and Zach Siegel of Cushman & Wakefield represent the landlord. None of the brokers involved would comment.
Uber, which offers a mobile device dispatching service for limos, black SUVs, and other vehicles, currently has 22 San Francisco job openings.
The new space will be 70 percent larger than Uber’s current home.
Over the last two years tech companies have leased or bought over 1 million square feet along the Central Market corridor. In addition to Square and Uber, firms that have moved into the neighborhood include Twitter, Spotify, ZenDesk, Zoosk, Dolby, Yammer, and One Kings Lane. Housing developers have also flocked to the area, with builders like Emerald Fund, Crescent Heights, Trinity Properties, MacFarlane Partners, and AvalonBay building thousands of rental housing units.
The lease comes as San Francisco, which is one of the strongest commercial real estate markets in the country, has seen a slowdown in leasing deal. For the first six months of 2013 tenants have taken 415,000 square feet more than they have given up. While the trends are still positive, leasing is down 40 percent compared to the first half of 2012 when tech companies like Square and Yelp made huge commitments to grow in San Francisco.
There have been no leases over 100,000 square feet this year, compared with seven inked in the first half of 2012, JLL wrote in a report.
The biggest deals of the quarter included Illumina, which leased 97,700 square feet at 499 Illinois St. in Mission Bay, and solar energy giant SunRun, which took 43,400 square feet at 595 Market St. The SunRun deal was a sublease from Visa, according to JLL.
Tenants currently looking for space in San Francisco include: Google (300,000 to 350,000 square feet), UCSF (100,000 to 300,000 square feet), KPMG (125,000 square feet), and Bechtel (120,000 square feet), the brokerage said.
J.K. Dineen covers real estate for the San Francisco Business Times.
Uber Technologies, the venture-funded San Francisco-based technology company behind the popular on-demand driving service available for hire by passengers using their mobile devices, agreed to lease the entire fourth floor at Hudson Pacific Properties’ 1455 Market Street in downtown San Francisco.
The tech firm signed a new 10-year lease for 88,134 square feet, and plans to relocate from its current location at 405 Howard Street when its new lease commences in the first quarter of 2014.
The 21-story building was built in 1977 and totals 1,012,012 square feet in San Francisco’s Mid Market district, an area that has recently emerged as one of San Francisco’s emerging technology and business hubs. Square Inc. leased space in the building for its headquarters and Twitter’s new corporate headquarters is also located in the same area.
Cushman & Wakefield’s J.D. Lumpkin and Zachary Siegel represent the building for Hudson Pacific with Uber technologies represented by Jenny Haeg of Custom Spaces Commercial Real Estate. The same three brokers were involved in negotiating mobile shopping device maker Square, Inc.’s 246,078-square-foot lease at 1455 Market Street last fall.
UBER-SIZED OFFICE LEASE Property_1455MarketStreet.jpgUber Technologies, and its taxi-frustrating business model, are jumping on the Mid-Market bandwagon and moving shop to 1455 Market Street. The tech company has inked a lease for 88,000 sq. ft. in the former Bank of America data center, joining Square as future tenants. Tech companies “have leased or bought over 1 million square feet along the Central Market corridor" in the last two years, along with the development of residential properties such as 55 9th and Nema.
MOVING TO CENTRAL MARKET 1455market-main.jpegMayor Lee and Square head honcho Jack Dorsey announced today that Square, the creator of that nifty credit card reader for your company’s iPhones, iPads, and Android devices, will be moving its corporate headquarters from the San Francisco Chronicle building on Fifth and Mission streets to 1455 Market Street. Square had ten employees when the company opened its first office in the the San Francisco Chronicle building. Now Square has more than 400 employees, and plans to employ nearly 1,000 by the end of 2013. Building renovations will occur, including creating an open, collaborative space, a roof deck, chef’s kitchen and other amenities.
About Hudson Pacific Properties
Hudson Pacific Properties, Inc. is a full-service, vertically integrated real estate company focused on owning, operating and acquiring high-quality office properties and state-of-the-art media and entertainment properties in select growth markets primarily in Northern and Southern California. The Company’s strategic investment program targets high barrier-to-entry, in-fill locations with favorable, long-term supply-demand characteristics in select target markets, including Los Angeles, Orange County, San Diego and San Francisco. The Company’s portfolio currently consists of approximately 5.5 million square feet, not including undeveloped land that the Company believes can support an additional 2.0 million square feet. The Company has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Hudson Pacific Properties is a component of the Russell 2000® and the Russell 3000® indices. For additional information, please visit www.hudsonpacificproperties.com.
Uber Technologies, Inc., is a venture-funded technology company based in San Francisco. The Uber mobile platform connects passengers with drivers of luxury vehicles for hire, delivering the elite transportation experience in an on-demand service. The company was founded by Travis Kalanick and Garrett Camp in 2009, was rated Fast Company’s “2013 Most Innovative Company in Mobile,” and has rapidly expanded to more than 29 cities internationally today. For more on Uber, visit www.uber.com.