Tech IPOs add fuel to San Francisco’s office boom

Next to the Warriors’ new arena in San Francisco’s Mission Bay, Uber’s four new headquarters buildings are rising. The ride-hailing giant, which has filed to go public this year, plans to move 7,000 employees there starting in 2020.

About a mile west, Airbnb transformed a 1917 battery warehouse in Showplace Square into a gleaming headquarters with four glass-wrapped floors surrounding an atrium with a three-story living wall. The vacation-rental marketplace will reportedly go public by late next year.

And a few blocks away in the South of Market area, Pinterest, the image-sharing service that had its initial public offering Thursday, recently signed a 490,000-square-foot lease — San Francisco’s largest this year — at 88 Bluxome St., a project that hasn’t yet been approved by the city. The company already leases three offices nearby along Brannan Street.

 Tech IPOs add fuel to San Francisco’s office boom

The boom in initial public offerings coincides with an increase in hiring and follows record-setting years in office leasing. Uber, Airbnb and Pinterest are now among San Francisco’s 10 largest private tenants, according to real estate brokerage Cushman Wakefield. Uber rival Lyft and messaging software maker Slack, both of which expanded their offices in the past year, are among the top 40 largest tenants. Lyft (in the South of Market district) went public last month, and Slack (in China Basin) has filed to go public.

Office rents have recently reached record highs. And the scale of tech growth in San Francisco outpaces even the original dot-com frenzy two decades ago. That’s when Silicon Valley’s tech scene was just starting to spill over into San Francisco and online retailers like Pets.com and internet consultancies like Organic and Scient were snapping up offices — often near the same spots where today’s tech leaders are building real estate empires.

Between 1995 and 2000, tech leases accounted for 36% of the 3.6 million square feet leased in San Francisco, according to brokerage CBRE. Last year, tech accounted for 62% of all San Francisco leasing activity. Tech companies signed 8 of the 10 biggest deals.

The biggest San Francisco lease during the first dot-com boom didn’t belong to a tech company: It was JPMorgan Chase’s 650,000-square-foot lease for a new tower at 560 Mission St. (However, Chase had recently acquired Hambrecht Quist, a tech-focused investment bank that underwrote initial public offerings for Apple, Adobe and Amazon.) Levi Strauss, Charles Schwab and the Gap also had big expansions around the turn of the century.

“Tech is the growth engine today,” said Robert Sammons, Cushman Wakefield’s Northwest research director. The boom 20 years ago, he noted, was more diversified.

The high cost of real estate has pushed many non-tech companies to expand elsewhere. Corporate titans like McKesson and Bechtel are moving their headquarters out of San Francisco. “Those companies can spread to less expensive markets,” Sammons said.

The biggest tech leases at the turn of the millennium were signed by newly public companies that mostly faded away.

Organic, which went public in 2000, signed a 212,000-square-foot deal that year at 601 Townsend St. After the dot-com crash, it was taken private in 2001 and is now part of Omnicom Group.

Scient went public in 1999 and signed a 166,600-square-foot lease at the Landmark at One Market that year, what would become Salesforce’s longtime headquarters before that company moved into its eponymous tower. In 2002, Scient filed for bankruptcy and was sold to SBI Group.

MarchFirst, an internet consulting firm that was formed in 2000 by the merger of San Francisco’s USWeb/CKS and Chicago’s Whittman-Hart, signed a 270,000-square-foot lease at 500 Terry Francois Boulevard in Mission Bay. The project hadn’t started construction, and a year later, MarchFirst filed for bankruptcy.

After the economy crashed, 500 Terry Francois went into foreclosure and wasn’t completed until 2008. It wouldn’t attract a tenant until 2014. The building is just a block from Uber’s future headquarters.

 Tech IPOs add fuel to San Francisco’s office boom

Airbnb’s headquarters and a Pinterest office are on the same block as Pets.com’s onetime office South of Market — a three-story building at 945 Bryant St. which, according to the landlord, Bridgeton Holdings, is fully leased.

Roland Li is a Chronicle staff writer. Email: roland.li@sfchronicle.com Twitter: @rolandlisf

Article source: https://www.sfchronicle.com/business/article/Tech-IPOs-add-fuel-to-San-Francisco-s-office-13781937.php

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