We are seeing an enormous boom in San Francisco from the tech industry. It’s really nothing less than the transformation of an entire city by one office sector. The impact is much greater even than during the dot-com era. For example, it is mirrored by a housing boom, which has developers building residences in neighborhoods considered undesirable five years ago. This may result in a lasting transformation because housing remains for many years. The run-up in housing is good news for property owners, but some are concerned about over-gentrification.
In terms of tenants, of course, the larger campuses of Facebook and Apple remain in Silicon Valley, while San Francisco has seen a huge influx of firms downtown: Twitter will lease approximately 600,000 square feet; Square Inc. approximately 300,000; Amazon approximately 200,000; Ebay approximately 160,000; and PayPal is reportedly in the market for about 70,000.
San Francisco is home to more social media, gaming and application, and startup companies than Silicon Valley. The rest of the San Francisco Bay Area caters to software, hardware and biotechnology/life sciences firms, as well as a generally older workforce. For instance, the average age for employees in Google's Silicon Valley headquarters is now 40 years old. However, Google's smaller San Francisco hub is a more unique business line that requires new, fresh talent coming out of college. The workforce in San Francisco is a much younger generation that prefers the urban lifestyle of San Francisco versus Silicon Valley. This trend isn't being seen only on the West either — other metropolitan hubs like New York, Raleigh's research triangle and Chicago are seeing similar patterns.
Looking ahead, a portion of these firms may ultimately decide to relocate some back-office staff to less expensive areas. Any large company such as Salesforce might want to keep its engineers happy in the city, while their accounting team can work from anywhere. Many such companies that are being priced out of the popular areas within city are looking to more undesirable areas within the city or areas just outside the city so that they are still within a short distance of the larger firms. Technology companies synergize off of each other, so the closer a company is to the buzz, the better. Tech companies will purposefully locate near competitors to steal their talent.
As senior vice president with Transwestern, Markus Shayeb
specializes in tenant advisory services in the San Francisco area. With more than 24 years of experience in the commercial real estate industry, he has successfully closed more than 400 transactions ranging from 4,000 square feet to more than 150,000 square feet.