To grab local talent and impress customers, Silicon Valley's tech companies are increasingly opening offices in the city by the Bay
Autodesk software engineer Hawkeye Parker would have to drive more than 20 miles north, crossing the Golden Gate Bridge into Marin County, if he worked at his company's headquarters in San Rafael, Calif. Instead, 37-year-old Parker takes a seven-minute train from his home in San Francisco's bustling Mission District to the design-software maker's outpost on the city's eastern edge. The dress is casual, the office plan open, and the commute quick. "It's an engineer's place to work," says Parker. "I want to live in San Francisco. So there's kind of a symbiotic relationship there."
Put simply, San Francisco residents "hate commuting," says Autodesk (ADSK) Chief Executive Carl Bass. The $2 billion-a-year company, which houses 275 of its 7,000 employees at One Market St. in San Francisco, thinks customers prefer the city to the suburbs, too. In September, Autodesk plans to open its flagship "customer briefing center" in the same building to court the engineers, architects, and IT executives who buy its software.
Can the commute
Autodesk is one among a raft of tech companies, including Google (GOOG), Microsoft (MSFT), and newer players like professional networking Web site LinkedIn, striving for that same San Francisco symbiosis. These companies have long occupied suburbs to the south, east, and north of the city. Now they see expansion downtown as a way to attract and retain some of the brightest talent, quicken the travel time to meetings, and impress customers from around the world. "There's a lot of talent we can attract" who don't live near Google's Mountain View, Calif. headquarters 36 miles south, says engineering manager Julie Pearl, who works in San Francisco. "It's very appealing for folks." Soaring gas prices have only enhanced the appeal of ditching a 40-mile commute.
Since October, Google has moved more than 600 workers onto three floors of an office near San Francisco's Ferry Building that used to belong to The Gap. Google plans to hold an opening event, featuring keynotes by executives and demos of new technology, to showcase the space in July. Several engineering teams, the Google.org philanthropic arm, plus workers in sales, PR, and other areas, have moved up from Mountain View. Though Google offers free shuttle buses from the city to headquarters, some workers don't want to commute, Pearl says. "It's a huge difference to be able to get off the Muni [train] right in front of the building," she says.
Microsoft, too, is widening its Frisco footprint to attract city-dwelling engineers. The company, which has long operated a satellite campus in Silicon Valley, in December more than doubled its main San Francisco work space, moving from 42,000 square feet at One Market St. (where Autodesk is moving in), to a nearly 92,000-square-foot office at the city's new Westfield Centre complex eight blocks away. Microsoft has nearly tripled its number of San Francisco employees in the past year, to 520, across four locations, a company spokesman says. It's also expanding office space near the city's downtown ballpark for Rapt, a maker of advertising software bought by Microsoft in March.
It's not just the tech industry's big guns that see having a stronger San Francisco presence as an asset. LinkedIn plans to open a small office in the city's financial district in late June as a convenience for workers but also to position LinkedIn sales staff near advertisers who buy space on its site, says CEO Dan Nye. Data-center software company VMware (VMW) of Palo Alto, which held one of 2007's most successful IPOs, has also been expanding in the city.
Silicon Valley, whose unique mixture of established computer companies and experimental startups congealed decades ago around the research communities spawned by Stanford University and early denizens like Hewlett-Packard (HPQ) and later, Intel (INTC), has long been the tech industry's hub. That's unlikely to change anytime soon. In fact, Valley companies have long maintained small San Francisco outposts to be closer to customers and young talent, and Intel and HP have also kept small offices in the city. Yahoo's (YHOO) Flickr team and other groups work downtown, and the company opened an idea incubator (BusinessWeek.com, 2/9/07) called Brickhouse in the city's South of Market district in 2007.
It's not that San Francisco real estate is cheap; the average asking price for office space in the city rose to $43.10 a square foot in the first quarter, compared with $42.02 at the end of the fourth quarter, even as vacancies rose 0.3%, to 8.7%, according to commercial real estate broker CB Richard Ellis Group (CBG). By contrast, rents in Silicon Valley averaged $36.24 a square foot at the end of the first quarter.
Flight from the Burbs
But the migration toward SF has sped up amid a pitched hiring battle among companies for technical talent, a desire to retain top employees who live in the city, and the advent of $4-a-gallon gasoline. The move also reflects a larger national trend toward urbanization that's seeing many workers in their twenties and thirties eschew suburbs for hubs like San Francisco, Boston, and Atlanta. While the overall economy is slumping, and industries like banking and auto making are cutting back on staff, tech companies are still hiring and competing for job candidates.
"Companies need to be where their talent wants to live, and in the Bay Area that means San Francisco," says Jim Zemlin, executive director of trade group the Linux Foundation, based in the city's Potrero Hill neighborhood. "Our staff values an urban lifestyle and a short commute. You won't catch us in San Jose anytime soon."
Yet even the most ardent proponents of San Francisco have to accommodate the Bay Area's suburban workforce. Salesforce.com (CRM), the San Francisco-based maker of customer-management software, leased a building owned by former competitor Siebel Systems in San Mateo, Calif., in 2006 to host meetings and house employees who live in the Valley.
But Salesforce.com is also growing quickly in San Francisco. In December, the company expanded from its One Market St. headquarters into a nearby office at 101 California St., where it's occupying two floors and leasing an additional six. The prime real estate affords CEO Marc Benioff a view of the Ferry Building and the bay from his window at One Market St. At the same time, it helps hiring managers woo staff and salespeople clinch deals, says Vice-President Bruce Francis. "This is a great place to bring customers from out of town," he says. Taking a jab at Benioff's former employer and competitor Oracle (ORCL), based in Silicon Valley, Francis adds: "We would not want to work in Redwood Shores."