San Francisco’s Mid Market and the “Twitter Effect”

twitterSo 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?

Read: “Help! My Landlord Wants to Double My Rent!”

The Death of the Cubicle, and Other Workplace Trends

Twitter’s San Francisco HQ, designed by Interior Architects

As tenants transition from hard-lined telephones to VOIP, abandon private offices for open areas and clamor for “brick and timber” creative spaces versus “view space”, demand for less traditional office space is on the rise.

Sure, it didn’t take a futurist to figure out that fax machines would soon be nothing more than an ancient office relic, but the cubicle?  Along with the coffee maker and printing room, cubes are the last bastion of the traditional office, and according to workplace strategist Mary Lee Duff of Interior Architects, who recently completed the design of Twitter’s new San Francisco headquarters, demand for them is waning.

The traditional concept of the high panel Dilbert cubicle has definitely been diminishing.  The drive today is for workplace settings to be more open and collaborative with a strong emphasis on flexibility.  For some clients that means going into benching systems, for others it is simply lowering the panel walls and being able to offer greater control over how to reconfigure one’s own space.

Configurability of the office space is paramount to tenants’ desires; something cubicles do not intrinsically lend themselves to.  Tenants are increasingly demanding fluidity and flexibility in almost a minimalist fashion.  Big clunky cubes that cannot be reconfigured or moved without contracting a furniture installer are more frequently being replaced with workbenches (sometimes on wheels) and demountable partitions so as to encourage collaboration.  Ms. Duff continues:

With the rise of open collaborative planning there is a need to evaluate the right balance of both focused, contemplative spaces alongside the energetic buzz of open teaming areas.  This is one of many challenges faced by design firms today in planning appropriate space that aligns workspace with the business, culture, and aspirations of each client.

But foregoing cubicles for more flexible furniture options do not come without their challenges.  Furniture on wheels can easily accommodate a quick reconfiguration due to a change in headcount or department consolidation, but where is the power and data going to come from?  Interior Architects overcame this hurdle during a recent assignment by utilizing a raised floor that could accommodate multiple power and data plan configurations in a myriad of locations.

Twitter Headquarters
San Francisco

External influences to workplace design such as globalization, increased demand for sustainability and a changing demographic are also altering the face of the modern office.  With employees regularly engaging customers and colleagues around the globe in different timezones, video conferencing and work/life slicing is gaining popularity.

Age, gender and ethnic diversity is also affecting the way offices are being built out and configured.  I know of at least one tenant that has a prayer room for their muslim employees, and a “wellness” or “mothers’ room” for new mothers is fast becoming the norm in newly-built offices.

Several other trends that appear to have sticking power are the “work anywhere” mentality, increased importance of having face-to-face meeting areas, highly configurable or “hackable” walls and partitions, small and agile workgroups, and increased transparency whereby an employee can do a 360° spin in their chair and literally see the entire office.

For further insight into workplace trends and to reach Ms. Duff:

Mary Lee Duff, Assoc. IIDA, LEED® AP | Principal
IA INTERIOR ARCHITECTS
m.duff@interiorarchitects.com