Amazon-Owned Gaming Site Nears Huge S.F. Expansion In Unlikely New Tower

October 20, 2015

Amazon.com Inc. (NASDAQ:AMZN) decided last year that Twitch – a website where mostly young male gamers live-stream their peers playing video games like “League of Legends” – was worth a nearly $1-billion cash buy.

The e-commerce giant now is said to be paying up for Twitch to have prime San Francisco office space.

Twitch is nearing a large deal to move into several floors at 350 Bush St., a future 370,000-square-foot tower, according to three people familiar with the negotiations. The tower, which started speculative construction earlier this year, is one of the last buildable sites in the North Financial District.

If completed, the lease would likely be for at least 150,000 square feet in the 19-story tower, which is slated to open in the first quarter of 2017.

The developers, Dallas-based Lincoln Property Co. and China-based Gemdale Corp., were also rumored to be in talks with co-working company WeWork for a big deal there. (The builders are also under construction on the 55,000-square-foot 500 Pine St. across the street, which will open next year.)

John Herr of Lincoln Property didn’t return requests for comment. Twitch declined to comment.

“We feel this location will be attractive to technology tenants,” Herr, executive vice president of Lincoln Property, told the San Francisco Business Times earlier this year.

Those fast-growing technology tenants don’t have many other choices. Half of the 4.9 million square feet of San Francisco office space under construction has already been scooped up by Dropbox, Salesforce ( NYSE:CRM) and Linkedin (NYSE:LNKD).

Feeling the Twitch

This would represent a major expansion for the four-year-old Twitch, which has racked up a huge portion of U.S. Internet traffic and the advertiser-coveted young-male demographic.

The company now appears to be in a 21,600-square-foot space outfitted with exposed brick, a virtual fireplace and beers on tap a couple blocks away at 225 Bush, originally known as the Standard Oil Building. Greg Flynn, who owns 225 Bush, said he couldn’t comment.

The current office footprint at 225 Bush is enough space for about 150 employees. The potential expansion space at 350 Bush could be enough for at least 1,000 employees. Twitch’s web site currently lists more than 50 open positions in San Francisco.

By pre-leasing so much space at 350 Bush, Twitch would be betting on future growth. More young startups are taking bigger bets recently, most notably payments startup Stripe with its 300,000 pre-lease deal at 510 Townsend– an eye-popping expansion from its current 27,000 square feet in an old trunk factory in the Mission District.

But most technology companies have committed to major pre-leased space south of Market Street, usually in mid-rise buildings with massive floor plates like 510 Townsend. Major lease deals from Fitbit (NYSE: FIT) and Lending Club (NYSE:LC) this year have also centered on the South Financial District where companies like Google (NASDAQ:GOOG) and Salesforce have set up shop.

It’s also worth noting that last year’s acquisition by Amazon could have triggered a Twitch move to Seattle, where its now-parent company is headquartered and where office space is cheaper. Instead, it is doubling down (well, decoupling down) on San Francisco.

Tech companies look up

Somewhat surprisingly, the new home looks to be in the North Financial District, traditionally home to law firms, financial firms and brokerages of all sorts. The submarket, north of Market Street, has started getting a bigger slice of the technology tenant pie lately.

Tech companies occupy just 1.8 million square feet of the Class A occupancy in the North Financial District, according to Eastdil Secured. That represents just about 10 percent of the occupied space there, but recently big names like Microsoft (NASDAQ:MSFT), Samsung and SuperCell have moved to the submarket.

And if tech companies need space, they increasingly have to look for it in towers instead of low-slung buildings. The North Financial District and South Financial District – where most towers in the city sit – have the most space available – about 3 million, according to Cushman & Wakefield.

The amount of San Francisco highrise space occupied by technology companies has ballooned by 145 percent since 2010, according to CBRE. They now make up nearly 19 percent of the highrise inventory in the city. One big driver of that trend? Salesforce’s big decision to create a highrise campus instead of setting up shop in shorter Mission Bay buildings.

“It’s not necessarily tech companies’ first preferences to take highrises, but given how tight the market is here, they have to gravitate toward where the available space is,” said CBRE (NYSE:CBG) research director Colin Yasukochi. “Most of the highrise buildings are in the best locations regarding proximity to transit and amenities.”

That would also justify the bet made by Lincoln Property and Gemdale. Lincoln Property bought the land in 2007 before the financial crisis and sat on it before capitalizing the project last years. Major developers like Shorenstein Properties, the Swig Co. and Weiler & Arnow Management Co. failed to get the project going for decades.

The historic Beaux-Arts Mining Exchange Building will be preserved as the front entrance of the building, which will require extensive restorations.

The office space is being marketed by CBRE’s Bill Cumbelich, who didn’t return requests for comment.