In November, Lookout Mobile Security relocated into an office building near San Francisco’s South Park, snagging a bigger space that could accommodate the company’s swelling ranks.
Six months, millions of new users and a doubling of its staff later, the smart-phone security company is already on the hunt for additional real estate, with the hope of moving in the second half of the year. By the end of 2011, the company expects to double its staff again, to about 100 employees.
“Every person who is buying a smart phone today has a computer in their pocket and they realize they need to keep it safe,” said John Hering, chief executive officer and co-founder of the firm. “That has created a major opportunity for Lookout.”
This growth story is playing out repeatedly in the Bay Area, pushing tech sector jobs near the all-time highs set during the dot-com boom – if they haven’t already surpassed them. Niches that hardly existed a few years ago, like mobile apps, social media and cloud computing, are now driving the region’s economic recovery.
Near peak levels
By the end of last year, San Francisco had an estimated 30,700 tech jobs, just shy of the 32,800 around the peak in early 2001, real estate firm Jones Lang LaSalle found in an analysis of state employment data. In Silicon Valley, tech positions reached 106,300 in the fourth quarter, nearing the 112,700 crest.
Figures for the first three months of the year aren’t yet available, but it’s clear the numbers have continued to rise. Tech companies like Facebook, Motorola, VMware, Hewlett-Packard and Google have leased 3.5 million square feet of space in Silicon Valley this year alone, Jones Lang LaSalle said in its report. That’s the equivalent of filling the Transamerica Pyramid seven times.
“Silicon Valley really caught fire,” said Colin Yasukochi, director of research at Jones Lang LaSalle. “The economic recovery here is being led by technology.”
San Francisco had 2.5 million square feet of tech leasing since the beginning of 2010, and has 90 firms scouting the market for another 2.3 million square feet.
The recent growth in the industry is single-handedly transforming the conditions of the commercial real estate sector in key tech markets. In Palo Alto, Cupertino and San Francisco’s South of Market district, office rents increased by 10 to 25 percent in the last year, as vacancies dropped by half, according to Jones Lang LaSalle.
For the most common type of office buildings in SoMa, average rents climbed 16.4 percent to nearly $33.50 per square foot, as vacancy plummeted from 17.4 percent to 8 percent.
It’s become the place many tech companies want to be, with Zynga, Google, TechCrunch and Mozilla leasing significant space in the district during the last year. Hering said it’s the only place Lookout plans to search for its new space.
“There’s a huge advantage of being in SoMa, in terms of being surrounded by great resources and great minds,” he said.
But the tech sector represents a large and growing part of the Bay Area’s economy overall.
Jobs in the industry now account for 16.6 percent of private-sector employment in San Francisco, up from a low of 12.5 percent in September 2003, according to data from the Fisher Center for Real Estate and Urban Economics in Berkeley. Tech represents 25.2 percent of employment in Silicon Valley, up from 24 percent in December 2006.
Still, in an area badly burned by the last technology-sector meltdown, concerns have already begun to surface about the sustainability of the new boom.
Yasukochi took a hard look at this issue in the first-quarter report, and concluded that there’s “no bubble in sight.”
He noted that price-to-earnings ratios, which represent the amount of money investors are willing to pay for every dollar of company profit, are far more reasonable today than they were in 2000. At the time, the P/E ratio for the SP Information Technology Index stood above 70. Today it’s just more than 16.