Having long since conquered SoMa and spread into Mid-Market, San Francisco’s high-octane technology boom is changing the face of another territory: the Financial District.
Nondescript office towers that have traditionally provided 9-to-5 shelter to the city’s bankers, lawyers and insurance executives are increasingly filling up with app developers, coders and social media managers.
Since 2010, the amount of space that tech companies occupy in San Francisco towers over 12 stories has jumped from 3.5 million square feet to 7.2 million square feet, according to the commercial real estate brokerage CBRE. That’s the equivalent of more than 14 Transamerica Pyramids and enough space to house about 35,000 workers.
And much more is coming. Of the eight office buildings under construction in the city, 100 percent of the space has been pre-leased to technology companies. Uber, LinkedIn, Dropbox, Salesforce and Splunk have combined to take 2.5 million square feet in buildings that have not yet opened.
“The reality is that big finance is contracting, and law is contracting, while tech continues to expand,” said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. “The tech guys can pay the most. They can’t find what they are looking for South of Market, so they are more open to traditional office towers.”
The tech invasion is accelerating the cultural shift in downtown San Francisco away from a formal suit-and-tie business environment, said Meade Boutwell, senior vice president at CBRE. Boutwell points to One Sansome, long home to an army of Citibank employees in dark suits. Over the past two years, the 600,000-square-foot building has gone from having no tech tenants to about one-third tech tenants.
“At One Sansome I am watching the culture of the lobby change — how people are dressed. On the one hand it’s superficial — the whole world is getting more casual. But at the same time it’s a fundamental shift that is changing the fabric of the city,” Boutwell said.
The first office high-rise to open in San Francisco since 2008, the new tower at 535 Mission St., looks like what it is: a glassy, blue-chip corporate tower smack in the middle of the southern Financial District. It happens to be adjacent to the last downtown high-rise office building completed in the city: 555 Mission St., which opened in September 2008.
But a look at the tenants occupying those two buildings, built six years apart, shows how the demographics are changing. When 555 Mission St. came online, it filled up with the sorts of tenants that had always occupied the city’s latest and greatest buildings. Two big law firms, Gibson Dunn and DLA Piper, grabbed space, as did finance groups like Sequoia Capital and Silicon Valley Bank. Deloitte, a large consulting company, became the anchor tenant, and CNA Insurance also leased space.
Nothing but tech
In contrast, so far 535 Mission St. has been all tech. The first group to sign a lease there was Trulia, a real estate-focused technology firm, which took six floors and moved in earlier this month. And now a tech co-working group, WeWork, is negotiating a 100,000-square-foot lease in the building, according to real estate brokers familiar with the negotiations.
And the types of tenants shape the way people work in these buildings.
Instead of adapting to traditional office layouts — with private offices, drop ceilings and big, formal conference rooms — tech companies are remaking these spaces.
While getting a space near the windows in buildings like 535 Mission St. has always been the payoff for successfully climbing the corporate ladder, Trulia doesn’t have any private offices. Instead, the window line, with its views and ample natural light, is common lounge areas. The space designer, Rapt Studio, planned for multiple lounges and libraries on each floor, where workers can huddle or get away from their desks.
“Our CEO has always been in a cubicle — and not just in a cubicle but the same size cubicle as all the other employees,” said Elizabeth Brown, Trulia’s vice president of human resources.
For the tech migration into downtown San Francisco, the crucial turning point may have occurred in 2011, when Salesforce made the abrupt decision not to build a new campus in Mission Bay, instead committing to grow downtown. While the cloud-computing giant said the move was driven by the fact that the Mission Bay campus couldn’t be built fast enough to meet its growth needs, there were widespread reports that Salesforce employees had made it clear they preferred working in the heart of the city to Mission Bay.
Instead of building a Silicon Valley-style campus, Salesforce signed a lease for all the space at 350 Mission St., which is under construction, as well as 50 Fremont St. and the Transbay Tower, now known as the Salesforce Tower. Earlier this month, the company agreed to buy 50 Fremont for $640 million.
“Our employees have shared that they want to be in the city, and having an urban campus that is located close to public transit and local amenities is a key part of our real estate strategy in San Francisco,” said Ford Fish, senior vice president of real estate for Salesforce.
In addition to Salesforce, Google has been growing downtown, taking 250,000 square feet at One Market St., and buying 188 The Embarcadero, an 85,000-square-foot building. Other companies gobbling up high-rise space include Amazon, eBay, Cisco, Docusign, Yelp, AppDynamics and Rocket Lawyer.
But it’s not just that technology companies are hiring and growing; it’s that other economic sectors are not. San Francisco added 25,500 jobs in the past 12 months and 4,300 in October alone. The city, which has an unemployment rate of 4.3 percent, has added 74,200 jobs since January 2010.
More than 60 percent of the growth has been in tech, with the health care and tourism sectors also strong. With average office rents up to $65 a square foot, more than double what they were in 2010, typical law firms are scrambling to save money by squeezing into smaller, more efficient spaces.
Rents will hurt
“In some cases people are going to see their rents double,” Boutwell said. “Without a doubt it’s not an easy pill to swallow. In 2000, we saw the traditional businesses rise right alongside the tech businesses. That is not the case this time. Very few of those firms are growing.”
The danger is that the tech wealth is creating an uneven playing field, said Rosen of UC Berkeley — not just for office space but also for housing. “Are we becoming too expensive for traditional industries because of the high cost of housing?” he asked. “Tech seems to be immune to it because of the tremendous wealth created through the capital markets and stock IPOs.”
J.K. Dineen is a San Francisco Chronicle staff writer. E-mail: email@example.com