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San Francisco landlords warm to the power of pop-ups

As San Francisco rents continue to soar, retailers have become hesitant about committing long-term to brick-and-mortar space. One solution: popping in temporarily.

Landlords once scoffed at the deals shorter than the typical 10-year term. But as tenants become increasingly wary of San Francisco’s rising rents and shifting retail climate, many are realizing the benefits of shorter leases may outweigh the drawbacks.

The Bay Area has been a landing pad for tenants looking to test the market, but hesitant to commit to long-term deals.

Union Square in particular has been home to temporary deals with online luxury consignor the RealReal, the Kylie Jenner cosmetics pop-up and the Museum of Ice Cream, which recently decided to make its temporary installation a permanent San Francisco fixture.

 

 

 

Full article on San Francisco Business Times

 

 

Co-working space costs nearly 15% more than office space, study says. Is it worth it?

More than 1.7 million people will work in co-working spaces by the end of 2018, according to the Global Coworking Survey, and a staggering 29 percent of such spaces were opened over the last year.

Growth of this new workplace trend is most impressive in San Francisco, the city of seemingly infinite startups, many of which aren’t large enough to warrant an office space, but too big for the CEO’s living room.

San Francisco has 51.45 co-working spaces for every 100,000 people — more than any other city in the country — according to a new survey from business development tool SimpleTexting. The study compiled data from Yelp, the U.S. Census Bureau and multiple office-space rental websites.

The cost of co-working space for a single employee is actually more expensive than traditional office space, by about $400 a year in San Francisco, the study found. A years-long co-working pass in the city is about $4,572, compared to $4,200 in an office. Nationally, co-working rent costs an average 14.8 percent more per employee than traditional office space.

 

 

 

Read more on SF Gate

 

 

Facebook is bingeing on Bay Area real estate

As Wall Street frets over a slowdown, the social media giant’s expanding property empire suggests Mark Zuckerberg has few doubts about the future.

Since Facebook Inc. arrived in Menlo Park, California, seven years ago, the town has been overrun by construction cranes, orange safety cones and truckloads of building materials to transform a former industrial area into a sprawling campus that can support a $500 billion tech giant.

So big are the ambitions that the company plans to redevelop whole swaths of the land it holds in the Silicon Valley city, potentially doubling its workforce there over the next decade to 35,000 people—more than Menlo Park’s current population.

Even that won’t be enough for its expansion plans.

“We continue to grow,” John Tenanes, the company’s head of facilities, said in a conference room overlooking a salt marsh in Facebook’s newest Menlo Park office, a Frank Gehry-designed building called MPK 21 that opened last week. “We’re at a point where we needed more space, and this area couldn’t keep up.”

For all the turmoil surrounding Facebook and investor concerns about a slowdown, the company’s gone on a real estate binge that suggests that its optimism about its future knows no limits. Menlo Park is just the start. In the past year alone, the company has signed agreements that could vastly expand its footprint in the San Francisco Bay Area. It’s been one of the most active leasers in the region’s already hot office market, spurring brokers and analysts to do math on just how it will fill so much space.

 

 

Read more on Bloomberg

 

 

 

Exclusive: Amazon adds more space in 525 Market St. in San Francisco

E-commerce giant Amazon continues expanding its San Francisco footprint with a lease for space in a Financial District tower. 

After taking a big chunk of office space in 525 Market St. last year, Amazon plans to nearly double its footprint in the building.

The ecommerce behemoth added 143,000 square feet of office space in the tower after grabbing 176,000 square feet in 2017, according to sources familiar with the deal.

The building, owned by the New York State Teachers’ Retirement System affiliate, consists of about 1.1 million square feet in 38 stories with about 28,500-square-foot floorplates. Other tenants include Wells Fargo Bank, Zurich North America Insurance, and cosmetics retailer Sephora, which has a lease expiring in 2021.

 

 

Read more on San Francisco Business Times

 

 

 

Facebook breaks ground on community hub devoted to nonprofits

Facebook will soon break ground on its latest development, but this time the social media company isn’t building offices — it is creating a nonprofit community hub.

The 12K SF community hub will provide much-needed space for nonprofits educating the community and youth about tech and coding. It is expected to open in early 2019.

Large tech companies and organizations have been devoting community spaces for nonprofits and events as part of their campus or office developments. Salesforce has devoted the top floor of Salesforce Tower, the ohana floor, for community and nonprofit events after hours. Google opened a free 8,500 SF workspace for nonprofits at its Embarcadero office in 2017.

Large tech companies and organizations have been devoting community spaces for nonprofits and events as part of their campus or office developments. Salesforce has devoted the top floor of Salesforce Tower, the ohana floor, for community and nonprofit events after hours. Google opened a free 8,500 SF workspace for nonprofits at its Embarcadero office in 2017.

Facebook’s Menlo Park Community Hub will be for local nonprofits focused on internships and workforce training, coding and technology courses and community development. The space is reservable for nonprofits, entrepreneurs and community events when not used for classes.

 

 

Read more on Bisnow Silicon Valley

 

 

Get ready for a big fight over California’s property taxes in 2020

A big battle over property taxes in California is shaping up for the 2020 ballot.

Supporters of a bid to increase taxes on commercial land announced Tuesday they’ve collected more than 860,000 signatures to force a vote on the issue in two years.

“This is a defining moment for California,” Fred Blackwell, CEO of the San Francisco Foundation, said in a statement. “Closing the commercial property tax loopholes is important to our state.”

Backers, including the California Federation of Teachers, the League of Women Voters and community organization California Calls held news conferences Tuesday in Los Angeles, Berkeley, Fresno, San Diego and San Bernardino to demonstrate support across the state for the idea. Of the signatures turned in to the Secretary of State’s office, 585,407 must be deemed valid for the measure to qualify for the November 2020 election.

The initiative would make dramatic changes to the tax system established four decades ago by Proposition 13, which capped how much property tax bills could increase every year. The proposed measure would boost property tax revenues from commercial and industrial properties by assessing them at their current market value. Property tax protections would remain unchanged for residential properties.

The changes could net $6 billion to $10 billion annually in new property tax revenue statewide, according to an estimate from the state’s nonpartisan Legislative Analyst’s Office. The analyst’s office also warned that the measure could have significant downsides for California’s economy by causing businesses to leave or opt against relocating to the state.

Business groups are girding for the fight over the tax hike, known as “split-roll” because it assesses residential properties different from commercial and industrial properties.

“California already has the worst climate for business and job creation in the country,” Rex Hime, president of the California Business Properties Assn., said in a statement. “A split-roll property tax will just increase pressure on many businesses that are already finding it hard to make ends meet.”

 

 

 

Read more on LA Times

 

 

 

Tech tenants continue to compete for limited Silicon Valley office space

The Silicon Valley office market continues to perform well, with tech tenants quickly grabbing up space, particularly larger blocks that are hard to come by in the tight market.

The recent 274K SF lease by Roku at Coleman Highline reflects the strength of the San Jose market. Google’s plans for an 8M SF campus in San Jose have driven a lot of activity in that city’s downtown.

But even beyond a bustling San Jose, the greater Silicon Valley office market has had strong fundamentals for the first half of the year, according to Savills Studley.

In Q2, there was more than 2.6M SF of office leased in Silicon Valley, adding up to 5.8M SF leased in the past 12 months, Savills Studley reports. Availability in the core markets of Menlo Park, Palo Alto and Sunnyvale/Cupertino remains in the single digits, while the region’s overall availability has decreased to 15.8%, down 130 basis points from a year ago.

At the same time, rents are rising, reaching $50.94 overall asking rent for the region in Q2, up 4%. Class-A rents were up 1.7% to $52.51. Tech tenants continue to drive the market.

 

Read more on Bisnow Silicon Valley

 

 

 

Square Inc. expands Mid-Market headquarters office in one of San Francisco’s biggest office leases this year

Payments processing company Square Inc. added another 104,135 square feet to its Mid-Market headquarters in San Francisco.

The company will now occupy a total of 469,056 square feet in 1455 Market St., a 1 million-square-foot office building.

The deal was one of the largest of the second quarter for landlord Hudson Pacific Properties (NYSE: HPP), which reported earnings Wednesday.

“We had a strong second quarter, particularly in terms of leasing,” said Victor Coleman, Hudson Pacific Properties’ chairman and CEO, in a statement. “Already standout West Coast market fundamentals continued to improve.”

Twitter co-founder Jack Dorsey started Square in 2009 with 10 employees. The company’s technology enables business owners to process credit card payments and makes a credit card reader for cell phones. The company reported revenue of $809 million in 2017 and now has about 2,300 employees in San Francisco, Canada, Japan, Australia, Ireland, and the United Kingdom.

Square first moved into 150,000 square feet in 1455 Market in 2012 with plans to expand into 327,423 square feet over time. The company was among a wave of tech companies that flooded into Mid-Market during a revitalization of the area that is still in process.

Read more on San Francisco Business Times

 

 

San Francisco delays decision on retail-to-office conversions

The owners of 220 Post St. spent $75 million to buy the Union Square property in 2016. The goal: to attract a luxury tenant to the five-story building. Too bad few of those exist.

City Center Realty Partners shelled out nearly $75 million for Union Square’s 220 Post St., the former Saks Fifth Avenue Men’s Store, with the goal of attracting a luxury tenant to the five-story space. That goal has been more difficult than expected.

Nearly as difficult for the owners has been convincing city planners that retailers are no longer interested in space above the ground floor.

Seven proposals to convert upper-level retail into office space have been filed with the San Francisco Planning Department, including 220 Post’s. Most of those properties are in Union Square. Earlier this year, the city decided to freeze those applications for 18 months. That meant that 220 Post, which was supposed to be heard by the planning commission this month, is waiting indefinitely for a decision pending the creation of permanent rules.

What’s at stake is the future of the city’s retail heart. City officials are hesitant to give up the sales tax revenue and jobs that retail generates, but landlords say empty space accomplishes nothing. Instead, landlords argue that adding more office space would not only help them fill buildings, but alleviate the extreme shortage of office space that is sending small businesses and nonprofits to Oakland.

San Francisco’s Board of Supervisors unanimously approved a resolution by District 3 Supervisor Aaron Peskin in May that imposed temporary rules banning conversions for an 18-month period. Planning Department spokesperson Gina Simi said the department has postponed hearings for properties located within the city’s downtown retail area.

The controls don’t apply to properties located south of Market Street or for applications that have already been approved, such as the former Macy’s Men’s store.

 

 

Read more on San Francisco Business Times

 

 

Mall tenants had an out when giants like Macy’s left. Now landlords bar the door

The only thing more dangerous for America’s malls than a string of apparel-chain bankruptcies is when the trouble hits department stores.

Retailers like J.C. Penney Co. and Macy’s Inc. are considered “anchors” that keep malls humming and foot traffic flowing. They’re so important to the ecosystem that smaller tenants may refuse to set up shop without a promise that the anchors will stick around: Many leases include so-called co-tenancy clauses that let them cut and run or pay less if those key tenants depart.

Now, many landlords are pushing to eliminate or narrow the escape clauses in the wake of mass department-store closings. That means less flexibility for the remaining tenants.

 

Read more on Bloomberg