One Kearny: In the Middle of It All

A grand design to redevelop One Kearny is realized

THIS ARTICLE WAS PUBLISHED IN THE ‘Q’ – THE REGISTRY’S PRINT PUBLICATION – IN APRIL 2012

| By Sharon Simonson |

[dropcap]W[/dropcap]hen Herman Miller began the search in 2008 for a new San Francisco showroom, company leaders knew they wanted something radically different from the North Waterfront location they had occupied for 32 years. Though the site had served the company well for many years, the address felt increasingly remote from the South Financial District and surging business activity south of Market Street—the exact locations that Herman Miller’s own clients also wanted to be. When the furniture maker selected the ninth floor of One Kearny Street in 2010, they chose a natural showroom with floor-to-ceiling windows in one of San Francisco’s first skyscrapers on one of the city’s most important commercial blocks. Today, Herman Miller fills the 9,400 square-foot space as though the 1902 French Renaissance-style building had been designed with the 106-year-old American icon in mind.

“We went through an elaborate charting process, and this site is within a block of our perfect place,” said PJ Anderson, director of learning for Herman Miller’s North American sales organization and its former Northern California regional director. By Herman Miller’s calculations, a thousand architects and designers work within a 10-block radius of One Kearny—putting Herman Miller at the center of their world. “We looked for space for two years until we found historic significance and architectural interest, ” Anderson said.

By the end of the second quarter, One Kearny, a building that has survived earthquakes, fire, threatened demolition and a hundred years of economic cycles, should be nearly fully leased. More exactly, the 115,000 square-foot building tryptic, which includes the original and two additions, will be home to nine tenants, each occupying a single floor across all three buildings. The ground floor, home to a branch bank, is somewhat smaller. With a $30 million modernization and 60,000 square-foot add-on finished in 2009, the building’s triangular floor plates have more than doubled in size, introducing new operating efficiencies and leasing opportunity.

On the eleventh floor is a richly decorated executive board room and lounge, commercial kitchen and terrace that set the tone for the caliber tenant the owners seek, said Deborah Quok, a partner with San Francisco’s QAV Realty Services, the landlord’s leasing agent. Interior design was done by architects Page & Turnbull, who also helped the property gain federal historic tax credits. The boardroom and lounge now are available for private engagements and are intended as a building and public amenity.

QAV had no role in bringing Herman Miller to One Kearny, but the furniture maker was a crucial first tenant, Quok said. The Herman Miller brand captures the dual qualities of creativity and Class A tenant, the exact attributes that One Kearny seeks to embrace as a landlord. The furniture company also has improved its space to high standards, with interiors work done by San Francisco-based BCCI Construction Co. Based on its status as a showroom, Herman Miller spent $160 a square foot. The company signed a seven-year lease with a three-year extension.

[pullquote_left] “We want to have this real estate work hard. We need for it to work hard.” Herman Miller A+D Associate Cecilia Lyra[/pullquote_left]She repeatedly took tenants interested in the building to the Herman Miller space, Quok said. The furniture company was the first company to occupy, in February 2011. “It was a huge alignment of interests,” she said. “They wanted people to come through, they helped bridge this full gamut of prospective tenants, and they had a gorgeous space. You could not have asked for a better first tenant.” Herman Miller also furnished the 11th-story lounge, boardroom and terrace, giving it three additional settings in which to embellish its brand.

Despite their already long journey and the difficult leasing environment in 2009, the owners sought only high-quality tenants drawn by One Kearny’s architecture, history, location and reconstruction “There were no fire sales in leasing up this building. A lot of the early tours [were] before the market picked up, and we were quoting over market; there was a lot of sticker shock,” Quok said.

The eclectic tenant roll now includes ultra-cool Hakkasan, the London-originated Chinese restaurant, which has leased the building’s second story. With sleek, professionally designed interiors at restaurants worldwide, Hakkasan has its first U.S. outlets in Miami and New York and is now coming to Las Vegas and San Francisco.

On the 10th floor is Comcast Ventures, the venture-capital arm of Comcast Corp., the cable television, Internet and telephone giant. Justin.tv, the venture-backed live video Internet startup founded in 2006, is on the eighth. Justin.tv users now watch more than 300 million videos a month in over 250 countries. Global architects Perkins Eastman are on the fifth floor and ramping up work on a four-million square-foot hospital in Saudi Arabia. Software security and media-technology company Irdeto is on the seventh floor. Co-headquartered in Amsterdam and Beijing, Irdeto’s customers include pay TV operators, mobile providers, consumer-device makers and content creators, owners and distributors.

“The selling points for me were the high ceilings, the views, the roof-top garden, and having prime shopping in the area doesn’t hurt,” said Amy Banse, managing director and head of funds for Comcast Ventures. Banse first saw the One Kearny space in early 2011. “I liked the unusual shape of the floor. I liked the bright open space. I liked the views from all directions. I liked the history of the building, and the fact that we could have the entire floor, and there were no weird hallways.”

Comcast’s headquarters are in Philadelphia, and Comcast Ventures already had an office in New York. But Banse believed the venture capital arm needed to relocate to the San Francisco Bay Area. It also is opening a small office in Palo Alto. Banse says she selected One Kearny because nice space attracts good talent, pleases clients and helps portfolio companies, whose leaders can use an area at Comcast’s One Kearny offices that the company calls an “innovation lab.”

Leslie Moldow, managing principal for Perkins Eastman in San Francisco, said a lease expiration on space the architecture firm previously occupied in Oakland prompted her to consider the city and ultimately to land at One Kearny. “I think there is a real positive for our clients in that we can draw from a wider range of talent—architects and designers who like working in the city,” Moldow said. “Some of our clients themselves are in the city.” The existing staff also was taken with the idea, requesting to be near public transit, which One Kearny is; everyone in the office now takes it. The company has 23 people in San Francisco but expects to grow.

“We wanted a building where we would have a sense of identity, when you got off of the elevator, there was no maze of corridors,” Moldow said. “There was also the funk factor. We don’t need anything corporate, in fact quite the opposite, which is what you see the start-up tech companies want. I think this building has those qualities, but it is not an old warehouse with exposed brick.”

When the current owners bought the building in 1993, it had been for sale for a number of years and was vacant. They saw commercial potential in its beauty and location, including its proximity to Union Square. The owners, who described their experience and thinking to The Registry, requested to be identified only by their corporate name, One Kearny LLC. The building, one owner said, also “has incredibly good feng shui.”

From the beginning, they knew they wanted to buy a neighboring, three-story branch bank building—they did so in the early 2000s—and to replace it with an addition complementary to the existing historic structure and the 1964 Charles Moore annex. They also conceived the executive boardroom and lounge and targeted a high-end Chinese restaurant for the second floor. Of the country’s large cities—those with more than 250,000 inhabitants—San Francisco has the largest Chinese population in America by percentage, 21.4 percent, according to the U.S. Census Bureau, but the owners say the city lacks a good, upscale Chinese restaurant.

The owners build on a long history of commercial activity and prosperity at the juncture of Geary, Kearny and Market streets. In 1900, when the board for the Mutual Savings Bank selected the northwest corner for their new office building and banking hall, it was to be the third tall building at the intersection. The Call Building on the southwest corner and the Chronicle Building on the northeast already had been built. One Kearny would be followed soon by the Hearst and Examiner Building on the fourth corner, according to Page & Turnbull. At a time when newspapers were commercial powerhouses that wielded business and political power, it was a telling choice that the bank’s board located as they did, said Richard Sucre, a preservation architect at the city of San Francisco. “One Kearny was the only non-newspaper building at what you could argue is San Francisco’s most important corner in terms of its early commercial development,” said Charles Bloszies, the shell and core architect who designed the building’s award-winning second addition. “Third Street is still one of the most important arteries in the city.”

Besides doubling the property’s space available for lease, Bloszies’ addition opened views along Market Street toward the bay that had been obscured by the 1964 annex. Bloszies removed the impediments by shifting the building’s core to a different location, revealing spectacular vistas of the Palace Hotel and Market Street through grand windows. Someone standing at the center of an upper floor now gains near panoramic views of the city and an abundance of natural light. In Herman Miller’s space, the street life on Third and Market is an integral part of the experience. Looking north, one gains glimpses of both Coit Tower and the Transamerica Pyramid.

Herman Miller believes it has increased its market share since opening the showroom. The company had a soft opening in February 2011, lived with the space for nine months, then closed for a week or so in November 2011 to make final improvements, then re-opened. While visitors rarely travelled to the North Waterfront location and never came uninvited, planned and unplanned visits to One Kearny have skyrocketed, said Herman Miller A+D Associate Cecilia Lyra. “We needed to make a powerful point about our ability to make great places to work,” Lyra said. “The building manifests why it was a wonderful place to move.”

The company is ramping up the number of organized events taking place in the space from book signings to meetings of the American Institute of Architects and the U.S. Green Building Council. It is reaching out to tech entrepreneurs at nearby co-working and incubator spaces. “We feel the showroom is an enormous resource with enormous potential,” Lyra said. The company’s mission and intent is to leverage the real estate to the fullest of its potential. “We want to have this real estate work hard,” Lyra said. “We need for it to work hard.”

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