So who’s to thank for surging rents in San Francisco’s Mid Market corridor? The technology sector, naturally, whose epicenter has steadily been migrating from Silicon Valley to downtown San Francisco. Operating the business to be closer to the tech talent pool is a trend that represents a shift in the thinking behind where a company decides to set up shop.
The Bay Area’s talented engineering and programming labor pool doesn’t live in suburbia – they live in San Francisco. So to attract and retain this highly sought after demographic companies have been migrating to or launching in SoMa, Mid Market, Yerba Buena and the Financial District. Now the City is in the throws of a commercial real estate boom that’s being fueled by technology tenants (who were single-handedly responsible for leasing over 1/2 of the 10.9 million square feet leased in 2012).
As SoMa quickly began filling up, developers and landlords set their sights on the short stretch of Market Street from 5th to Van Ness, and began to buy. What kicked off “The Twitter Effect”, however, was Shorenstein’s purchase of 1355 Market and their following announcement of Twitter’s relocation to their new acquisition. The eponymous technology company also took advantage of an attractive rental rate and the Board of Supervisors’ 6-year payroll tax exemption. They now call 215,000 SF at Market Center their home and have invoked “The Twitter Effect” by attracting many other notable tenants to the area such as Square, Call Socket, Dolby, Pinterest, One King’s Lane and Yammer (who signed a 79,000 SF lease at $48.00 per foot – 60% higher than Twitter’s $30.00).
Other San Francisco tech leases tightening the market include:
- Salesforce.com – 440,000 SF at the upcoming 350 Mission St.
- Square – 327,432 SF at 1455 Market St.
- Meraki – 110,000 SF at 500 Terry Francois Blvd.
- Yelp.com – 98,144 SF at 140 New Montgomery St.
- Splunk – 92,000 SF at 250 Brannan
So what’s an existing San Francisco tenant to do when their occupancy costs could potentially double upon their lease renewal?