Category: San Francisco Tech (6)

2017 is proving to be a banner year for large tech real estate transactions. From Facebook to Okta, “Bay Area tech companies are determined to grow in the city–whatever the cost.” And according to the San Francisco Chronicle, that cost is sky-rocketing. The Chronicle states that tech rents have increased “140 percent since 2010…and could go up another 10%.”

San Francisco continues to be the epicenter for tech and draws talent from all over the country–and that influx of workers to San Francisco is “not expected to slow.” Employment rates have always been associated with the health of the commercial real estate market. With workers tech workers streaming into the Bay, long established tech giants expanding and new start-ups popping up every year, office and flex space will continue to remain in high demand.

Source: San Francisco Business Times
By: Roland Li
Date Posted: March 3, 2016

Quantcast, a website analytics company, has leased three floors totaling about 95,000 square feet at 795 Folsom St., the former Twitter Inc. headquarters in South of Market, said two sources familiar with the property.

795Folsom

San Francisco-based Quantcast is replacing AT&T Inc. (NYSE: T), which vacated the space at the end of January, said a source. The swiftness of the deal is another sign that large chunks of office space are still being filled rapidly throughout the city, despite recent job cutbacks at prominent startups such as Zenefits and Surveymonkey. The asking rent in the building was in the mid-$70s, according to marketing materials.

Quantcast, founded in 2006, is also more established than many of the venture capital-fueled tech tenants that are growing rapidly. Quantcast was the 33rd-largest tech employer in the city with 385 employees as of January, up slightly from its 368 local employees in January 2015, according to Business Times research.

A Quantcast spokeswoman confirmed the lease and said the company will be relocating from its current headquarters about three blocks away at 201 Third St.

Steve Anderson and Bryan Ivie of JLL represented landlord ASB Real Estate Investments and asset manager Union Property Capital in the lease. JLL also represented the tenant. JLL declined to comment.

The six-story, 187,000-square-foot building at 795 Folsom St. is close to Yuerba Buena and Moscone Center. It was built in 1976 and renovated in 1999.

Twitter (NYSE: TWTR) moved into 795 Folsom St. in 2009, and then relocated to its current headquarters at 1355 Market St. in 2012. Current tenants at 795 Folsom St. include the real estate space provider Regus (LON: RGU) and gaming company Kabam Inc.

ASB bought 795 Folsom St. from Cornerstone Real Estate investors for $110 million in 2013.

Link to article: SF Tech Company Leases Three Floors at former Twitter HQ

Source: San Francisco Business Times
By: Riley McDermid
Date Posted: January 27, 2016

Landmark tech HQ building could fetch as much as $1,000 a foot in sale

The San Francisco landmark PacBell building could fetch as much as $1,000 square feet when it is sold, reports The Registry, a record price that points to how high office rents currently are – and the value they are bringing to commercial real estate sales.

At 286,092 square feet of office space and 9,000 square feet of retail, that could add up to $295 million for the building located at 140 Montgomery, which currently boasts tenants such as Yelp and Lumosity.

140 Montgomery

The Registry’s report posits those high rents that could drive up the sale price of the building, which Wilson Meany and Stockbridge Capital Group bought from AT&T in 2007.

“One of the reasons for the high sales price is the current condition of the rents in the property. The office building has rents that are closer to current market rents than any other office asset in the city at this time,” The Registry reports. “Should 140 New Montgomery achieve the $1,000 per square foot sale price, it would place the asset very close to replacement cost, which some sources in San Francisco have pegged to be close to $1,000 per square foot.”

“Yelp had signed an eight-year lease in 2011 to occupy nine floors in the building with an annual rental rate that began at $54 a square foot and is planned to increase to $66.41 a foot by the eighth year,” The Registry reports.

“The landlord granted an initial $5.8 million, or $60 a foot, tenant-improvement allowance, according to records filed by Yelp with the U.S. Securities and Exchange Commission. Lumosity signed a lease in 2013 to occupy 36,000 square feet, or three floors, in the building.”

Eastdil Secured, the listing agent for the property, didn’t return a request for comment from the Business Times. Wilson Meany confirmed to The Registry that the building is up for sale.

Link to Business Times Article: Tech HQ Could Fetch $1000 a foot in sale

Link to The Registry Report: 140 Montgomery

Source: San Francisco Business Times
By: Cory Weinberg
Dated Posted: December 10, 2015

An acre of warehouses, sheds and gravel bunkers near the base of Potrero Hill could become home to San Francisco’s next hub of “maker” and tech office space, according to city filings.

The San Francisco Gravel Co. is in early talks with the Planning Department about whether its sprawling South of Market property at 552 Berry St. would qualify for the city’s 2014 legislation incentivizing the new construction of manufacturing space by allowing more lucrative offices on underutilized land.

It would be the second project to take advantage of the legislation now that Kilroy Realty Corp. is starting to develop 100 Hooper nearby with two-thirds slated for office use and one-third for “production, distribution and repair.” That’s a zoning designation reserved in part for manufacturing and light industrial companies that typically can’t afford high rents.

The Berry Street property is zoned for PDR and could not see offices rise on the site without the 2014 legislation.

552 Berry Street

“Based on an investigation of the property’s permit history and informal interpretation by the Planning Department staff, this property does indeed qualify under the criteria for the legislation. Further, it meets the purposes of the legislation in that SF Gravel Company had a very low employment density,” according to a letter to the city penned by consultant Badiner Urban Planning.

The gravel company, which has inhabited the property for nearly a century, also has tapped developer SKS Investments to study the site, according to the “zoning determination” letter sent to the Planning Department. It’s unclear how large the development would be if proposed.

SKS is accustomed to turning former industrial spaces into tech office beacons. The San Francisco-based company recently redeveloped the historic McClintock building – formerly used to manufacture dresses – and leased it up to biotech firm Invitae for laboratory use. It also transformed the former jewelry at 888 Brannan St. into office space for Airbnb.

Dan Kingsley, a managing partner for SKS, said “our plans are not firm” and declined to comment further.

San Francisco’s South of Market area could begin to see several office developments attached to new manufacturing spaces. Not only is Kilroy building a major property, but the city is planning to require some PDR in new large office developments under next year’s Central SoMa rezoning plan.

Until now, new PDR space has typically been economically infeasible to develop because of the law rents it generates. However, the 2014 legislation permitting office development to help fund PDR space is starting to change that.

In addition, the city has seen the rise of manufacturing companies with venture capital backing – creating a class divide with more typical ‘makers.’ That trend has concerned the like of SF Made, the influential advocacy group that will develop ‘maker’ space at 100 Hooper.

Link to article: Maker Hub coming to Potrero Hill

New Owner of high-profile Peninsula Tower aims to take biotech to new heights

Source: San Francisco Business Times
By: Ron Leuty
Date Posted: November 19, 2015

Emerging biotech companies are fighting a losing battle for space against deep-pocketed, aggressive tech companies. But Neil Fox expects to deliver a new life sciences option by this time next year.

Fox’s Phase 3 Properties Inc. closed Tuesday on its acquisition of the high-profile Centennial Towers project, nestled between San Bruno Mountain and Highway 101 in South San Francisco.

The developer plans to immediately convert part of the existing 12-story tower for biotech companies by the third quarter of 2016, then start construction of a 21-story, 400,000-square-foot biotech-centric structure to the immediate north that would come online in the second half of 2017.

centennial tower

The overall 800,000-square-foot development’s sale price wasn’t disclosed.

In a tight market for biotech labs/offices, Fox believes Phase 3’s focus on ready-to-occupy highrise space will be a winner. The vacancy rate for new biotech space in South San Francisco is in the low single digits, not counting a half-million square feet of sublease space held by Amgen Inc. (NASDAQ: AMGN).

If nothing else, Phase 3’s timing is impeccable: Space in the two-building, 253,000-square-foot first phase of HCP Inc.’s (NYSE: HCP) The Cove at Oyster Point already is booked for its third-quarter 2016 opening.

By the time, Phase 3’s 150,000-square-foot south tower upgrades for biotech will be ready, Fox said, and construction will be under way on the north tower.

Two other South San Francisco biotech projects entitled for roughly 3 million square feet — BioMed Realty Trust’s (NYSE: BMR) Gateway of Pacific and Shorenstein/SKS Properties’ bayside project — haven’t yet broken ground.

Centennial Towers developer Jack Myers earlier this year considered building the planned north tower as condominiums. But Fox, whose San Diego company focuses exclusively on life sciences, said the future is in biotech.

“Our research says there’s a need across the board. That’s why QB3’s incubators (in San Francisco and Berkeley) are so full,” Fox said. “There’s no real second-generation space on the market right now.”

Indeed, a number of young and emerging life sciences companies — as well as larger, growing companies — are in a critical search for space.

Buoyed by a renewed interest by venture capital firms in early-stage drugs, those companies are bringing on more staff to push experimental treatments into studies in humans, but they often lose the space race to larger, established tech or drug-development companies that can lease floors at a time.

“We need the space last month, not a year from now,” said Ken Horne, CEO of Symic Biomedical Inc., a 17-person, two-year-old company with one potential treatment in an early-stage clinical treatment and another set to start in the first half of next year. “A year is hard for a high-growth, high-momentum startup.”

Symic is housed in the University of California-related [email protected] life sciences incubator in San Francisco’s Dogpatch neighborhood.

But Fox’s excitement about Centennial Towers isn’t based on timing alone: The development will offer biotech companies a high-rise option they don’t otherwise have in the Bay Area, he said, as well as space that needs a minimum of work for a quick move-in.

The Cove from HCP and the Gateway of Pacific project from BioMed, which is being acquired by Blackstone Group, have played up their tech-like campuses and amenities such as a bocce ball court and walking trails. But Fox said Phase 3’s differentiator with Centennial Towers is the high rise option that rarely is offered biotech companies outside of high-cost, high-density markets such as New York and Boston.

Working with San Diego’s McFarlane Architects, Phase 3 has floor plans that Fox said work for 95 percent of biotech companies. The space is a mix of 60 percent office and 40 percent general biology and chemistry labs — all with natural light.

Skidmore, Owings & Merrill LLP, the architect for Centennial Towers’ unique glass-facade south structure, also is designing the north tower.

“There’s no buried space in our buildings,” Fox said. “The quality of the project, the detail that went into it (by Myers), was something that was very attractive to us.”

Link to article: Peninsula Biotech

CompStak:  San Francisco Office Rents Continue Their Rise
Re-posted from:  The Registry Bay Area Real Estate
By:  Robert Carlsen
Date Posted:  August 30, 2015

Many brokers, appraisers and developers have experienced San Francisco’s strong first half of the year in commercial real estate, with demand for office space continuing to outpace supply and office rents increasing across all building classes and submarkets.

While Class A and B buildings in San Francisco both had quiet starts to 2015, they recently picked up to close the first half of the year in the black, according to CompStak Exchange, a New York-based commercial real estate database specializing in lease comparables.

Market-Street_FOR-WEB

CompStak’s second quarter 2015 effective rent report said that Class A effective office rents in San Francisco were up 6.6 percent to $65.29 per square foot over the previous six months and Class B buildings performed even better, with effective rents increasing 12 percent to $59.40 per square foot over the same time period.

And with the tightness of available office space comes the absence of perks. “Landlords who also own property in markets outside of San Francisco know how favorable market conditions really are,” the report said. “Concessions given in San Francisco are far below comparable markets like Los Angeles, Manhattan and Washington, D.C.”

“For example, tenants in Washington, D.C., and Los Angeles County receive, on average, twice as much in free rent and tenant-improvement dollars. The strength of the San Francisco leasing market is evident when viewed in this light.”

According to Blake Toline, a CompStak research analyst, most of the demand driving up prices in San Francisco is coming from technology companies, which has been a trend over the past few quarters. The north and south Financial Districts typically have more corporate tenants, such as law, finance and consulting firms, “but that is starting to change as space around the city becomes harder to find, forcing tech tenants that wouldn’t have normally looked at the central business district to sign space there,” he said.

CompStak said that Class B buildings offer space with more character, unique interiors with exposed brick, operable windows and open floor plans, which makes them more attractive to tech tenants.

Toline provided some recent submarket tenant rent increases over the past six months.

In the lower South of Market area, Class B space is up 3.8 percent to $67 per square foot. Recent lease deals in the region include Elance at 475 Brannan St., which featured an 18,000-square-foot expansion, resulting in an effective rent in the mid-$70s; Hipmunk at 434 Brannan St., which included a 17,000-square-foot short-term renewal and saw effective rents in the high $60s; and HoneyBook at 539 Bryant St., which included a 15,000-square-foot rental in the low $70s.

In the south Financial District, Class A space is up 3.5 percent to $69.80 per square foot. Recent lease deals include WeMo Technologies at 555 Market St., which rented 172,000 square feet in the high $60s; Instacart at 50 Beale St. has 56,000 square feet of lease space in the high $60s; and Intercom at 55 2nd St. has 23,000 square feet of space in the mid-$70s range.

Additionally, in the north Financial District, Class A space is up 5 percent to $65 per square foot. Recent deals include a Sheppard Mullin Richter renewal at 4 Embarcadero, with 72,000 square feet of space in the high $70s; Sentient Technologies at 1 California St., with 17,000 square feet going for the low $70s; and HIG Capital at 1 Sansome, with its 11,000 square feet priced in the low $70s.

Link to article: SF Office Rents Continue Their Rise