A Valley Grows Wider by the Bay

535a5 MI CD373A DWEEK G 20140610140701 A Valley Grows Wider by the Bay

A rendering of Ericsson’s mixed-use complex currently under construction in Santa Clara, Calif.
Irvine Co.

As technology companies seek bigger and better offices, property owners have been closely tracking which ones are moving to cities versus the suburbs. In the San Francisco Bay area’s tech corridor, a pattern is crystallizing: Even as they expand their urban presence in pursuit of younger employees, tech giants are doubling down on their Silicon Valley campuses with an eye to both space and the lifestyle of maturing workforces.

Two such examples have appeared in the past two weeks. Telecommunications giant Ericsson announced in late May that it will lease 410,000 square feet of space in a suburban campus under construction in Santa Clara, which is about 45 miles from San Francisco. Ericsson, which will lease from the Irvine Co., expects 2,000 employees will begin occupying the space by the fall of 2015.

Then on Monday,


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said it is purchasing a 10-building, 59-acre campus in Menlo Park, where it already has more than 430,000 square feet under construction. Facebook bought the property from Switzerland-based TE Connectivity, which owned 1 million square feet of office space. A spokesperson called the property “an investment in our future.”

Other big companies creating more space in Silicon Valley include Samsung, which is building 680,000 square feet in San Jose, and Apple, which is working on a 2.8 million-square-foot campus in Cupertino.

For real-estate developers, the news is reassuring. According to JLL, developers currently are building 7.5 million square feet of office space in Silicon Valley. At 9.7% of existing inventory, the region is adding new office space at a higher rate than any other in the country, JLL says.

Meanwhile, many smaller and newer companies, especially those with younger workers, are expanding their urban footprints. Twitter, DropBox and Uber Technologies Inc. are among the companies that have built bigger San Francisco headquarters after running out of space in the city.

The Valley-based companies have expanded their presences in San Francisco and other cities, too. But many remain strongly entrenched in suburbia.

That the Bay area technology corridor is sorted by the young vs. not-so-young, creative vs. technical workers and software vs. hardware firms isn’t new. “But we’ve seen it ramp up dramatically,” says

Sean Randolph,

chief executive of the Bay Area Council Economic Institute.

Mr. Randolph says the young, creative and social-media-focused are living in San Francisco while older, more-technical workers, especially those in hardware, are living in the Valley.

“The Valley is segregated by lifestyle,” says Vivek Wadhwa, a Stanford University Law School professor.

As a board member of Humin, Mr. Wadhwa says he tried to convince the app-maker to move to the South Bay when it was considering relocating from Los Angeles. But younger board members prevailed and the company moved to San Francisco.

“They insisted on it,” Mr. Wadhwa says. “It was really [the] lifestyle. They liked the city atmosphere… The young like cities. They don’t like cars.”

While some brokers contend that larger companies are picking the suburbs because space is abundant, almost all acknowledge that the age of workers they are recruiting also is a big factor. “It’s all about the war for talent,” says Jeff Cushman, managing broker of Cushman Wakefield’s Silicon Valley office, which represented Ericsson in its lease.

Younger workers—those under 30—don’t like the way existing Silicon Valley offices are designed.

“Creative types won’t get near ‘dropped ceilings,’ ” which are often seen in suburban buildings, says

Jason Freedman,

co-founder of 42Floors, a commercial real-estate-focused site based in San Francisco. Instead, he says, they want open spaces, exposed timber beams and ducts.

“Once you’re old enough to want a house, you have to leave to the Peninsula,” Mr. Freedman says.

Still, even for older workers, “Silicon Valley can sometimes feel like it’s out in the middle of nowhere,” says Amber Schiada, research manager for JLL’s Northern California region.

That has encouraged developers to design new campuses that serve as mini urban centers. Cafeterias, indoor collaborative spaces and outdoor work areas are typical features, according to Ms. Schiada.

Ericsson, too, is guarding against the monotony of suburbia. Design firm Gensler is creating an open, flexible workspace where yoga balls will be encouraged, according to Ericsson spokesman Dwight Witherspoon.

And when all 1.2 million square feet of Santa Clara Square—the mixed-use complex Ericsson will inhabit—is eventually completed, it will house retail shops, restaurants and work-out facilities.

Says Mr. Witherspoon, “It’s going to keep everyone together.”

Write to Max Taves at max.taves@wsj.com

Article source: http://online.wsj.com/articles/bay-areas-widening-lifestyle-gap-1402444418

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