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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

 

 

Amid office space crunch, Google grows in San Francisco

As its fellow tech giants jockey for space in downtown San Francisco, Google has signed another office lease in the southern Financial District, The Chronicle has learned.

The Mountain View company is taking an additional 57,299 square feet at Hills Plaza at 2 Harrison St., according to real estate data company CoStar. That brings the total in the complex, where Google has had an office since 2007, to more than 400,000 square feet.

Google did not respond to a request for comment. Architecture firm Gensler occupied the space before recently moving to 45 Fremont St. A Morgan Stanley investment fund owns Hills Plaza.

Google is also in talks to sublease space from Salesforce, two sources said. The potential deal could be up to 228,000 square feet at Rincon Center at 101 Spear St. No contract has been signed.

Salesforce is one of the few large tech tenants vacating space as it consolidates workers into Salesforce Tower, which opened in January, and adjacent buildings. Salesforce, the city’s largest tech employer with 7,500 employees, is also subleasing space at the Landmark building at One Market Plaza.

Google’s expansion follows office leases by Facebook, Dropbox and other fast-growing tech companies, which have broken records for size and made San Francisco one of the priciest and tightest office markets in the country.

The office vacancy rate in San Francisco’s southern Financial District, which includes the area around the Transbay Transit Center, is 4.6 percent, down from 6 percent in the first quarter, according to CoStar.

“The new development has pretty much been snatched up,” said Jesse Gundersheim, CoStar’s San Francisco market economist. “Opportunity like sublease space from Salesforce is pretty rare.”

Read more on The San Francisco Chronicle

 

 

Silicon Valley growth spurs huge office, R&D building boom

A huge wave of commercial property construction is underway in the Bay Area, and Silicon Valley’s economic boom is fueling the growth, according to a report released Wednesday.

Construction of new buildings for offices, research and development and industrial uses is galloping ahead at a “feverish” pace, a report stated.

“This is a construction boom like no other,” said Russell Hancock, president of San Jose-based Joint Venture Silicon Valley, a private-public organization. “There is a lot of confidence in the Silicon Valley economy. People who are developing buildings are quite sure that they are going to get leased up. And they are getting leased up.”

Read more from The Mercury News

 

 

Google says it’s close to owning enough downtown San Jose properties for ‘viable’ development

Google is nearing ownership of enough downtown San Jose properties and parcels to create a “viable” transit-oriented development.

The development will take place near the Diridon train station, a top company executive told a key advisory group this week.

During a meeting of the Station Area Advisory Group, formed to gather and process citizen input about Google’s proposal to develop a massive transit village near Diridon Station, Google executives offered the company’s first major presentation of its development philosophies and plans for downtown San Jose. The search giant also indicated that it is creating a critical mass of properties where it could build a transit-oriented community downtown.

“Just to get the sites together by itself is obviously very complicated, and it’s not completed yet, and it’s taking a while,” Mark Golan, Google’s vice president real estate development, told the advisory group during its Monday night meeting. “But we are getting close to having a site that is viable.”

Mountain View-based Google and its development ally Trammell Crow have spent at least $221.6 million buying an array of properties on the western edges of downtown San Jose, within and near a one-mile stretch that begins north of the SAP Center and reaches south nearly to Interstate 280.

Among the major recent deals: The Google and Trammell Crow venture bought a large site that now is occupied by Orchard Supply Hardware, and the search giant has struck a deal to purchase a huge property from Trammell Crow that is approved for 1 million square feet, hundreds of residences and retail.

Despite the extensive work and investments that have occurred already, construction isn’t going to begin tomorrow, Google executives cautioned.

Read more from Santa Cruz Sentinel

 

 

San Francisco’s largest office landlord to break ground on $265 million Oakland tower

Boston Properties, San Francisco’s largest office landlord, will break ground on May 2 on a 402-unit apartment tower next to Oakland’s MacArthur BART station.

The 260-foot project at 532 39th St. will be the tallest building in North Oakland and the company’s first residential project on the West Coast.

The project in the Temescal district will be among a half-dozen Oakland towers to start construction in the last two years, an unprecedented real estate boom that’s drawing some of the country’s biggest developers to the city. Other developers include Lennar Multifamily Communities, Shorenstein Properties and Carmel Partners.

Read more from San Francisco Business Times

 

 

Facebook to move into big WeWork outpost as co-working company prepares to open largest-ever location

Talks between the two giants about WeWork’s new Mountain View location, its largest sublease to-date, have been ongoing for months. But this week the two finally struck a deal.

When WeWork this year opens its first Mountain View offices — its largest-ever lease — half of that space will be filled by Facebook.

Both companies told the Silicon Valley Business Journal about Facebook’s sublease which totals more than 200,000 square feet in one of two new office buildings at The Village at San Antonio Center. The deal comes after months of discussions between the two companies. The second WeWork office building on the site will be open to any company seeking co-working space.

Initially, the talks between the New York-based co-working company and the Menlo Park-based tech giant had been leading toward Facebook taking over both buildings at 391 and 401 San Antonio Road, which would total about 450,000 square feet, the Business Journal reported in February. But Facebook in recent months has rapidly snapped up huge swaths of office space in Silicon Valley — including about 1 million square feet in Sunnyvale — and its needs evolved quickly, two sources with knowledge of the discussions told the Business Journal.

Facebook will set up shop in the eight-story, approximately 225,000-square-foot office building at 401 San Antonio Rd., which is slated to be ready for move-in by early September, according to WeWork.

Read more from Silicon Valley Business Journal

 

 

Small tech companies finding niche in San Francisco office

Large blocks of space are in high demand among Bay Area tech companies expanding into and within San Francisco.

However, startups and small tech companies from outside of the Bay Area are carving a niche within the city as well. Some are taking advantage of leasing smaller office blocks or moving into co-working space as an entry into the city’s office industry.

“San Francisco continues to attract startups that are in hyper-growth mode,” Kilroy Realty Senior Vice President, Asset Management Rick Buziak said in a press release.

Tel Aviv-based AppsFlyer opened an 11K SF U.S. headquarters in mid-February at Kilroy Realty’s 100 First St., where Okta signed a 207K SF lease in December. The South of Market office offers capacity for further growth. The mobile attribution and marketing analytics company recently secured $56M in Series C financing. The office on the 25th floor offers an open-office plan.

Read more from Bisnow

 

 

 

San Francisco may ease up on allowing retail space to be converted to offices

As San Francisco landlords struggle to fill vacant retail space, city officials may allow conversions to office space.

San Francisco’s Planning Commission will discuss a plan tomorrow to ease up on retail-to-office conversions in downtown San Francisco. The idea is for the city to become more flexible as the national retail market grapples with huge shifts.

The move would help fill empty space and address the city’s huge office crunch, which has sent commercial rents skyrocketing, disproportionately hurting small businesses and nonprofits. The planning department currently has four applications on file — including the huge, vacant 6×6 retail center in Mid-Market — to shift existing upper-level retail space to office use.

The proposal came after planners rejected a proposal to convert the third floor of the former Loehmann’s department store at 222 Sutter St. to office space. Planners wanted to avoid losing sales tax that retailers generate for the city, but critics pointed out that vacant space doesn’t generate sales tax.

The importance of retailers for the city’s budget is clear: Union Square merchants generate more than 37 percent of the sales tax that the city gets from consumer goods. Those same retailers generate more than 15 percent of the city’s total sales tax funds, according to a new retail report from the Office of Economic and Workforce Development.

As part of a revised downtown plan, planning commissioners are considering loosening restrictions on retail-to-office conversions above a property’s third floor. Changes the planning department is recommending would still prohibit non-retail sales from occupying a building’s first through third floors. Above the third floor, however, offices would be allowed if the leases encompass 5,000 square feet or less. For offices that want to lease more than 5,000 square feet, the deal would require a conditional use permit.

Read more from San Francisco Business Times