Tech Companies Grow Node by Node; Campus May Be Thing of Past

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The son of an Irish Catholic father and a Buddhist Chinese mother, Walsh is a lawyer who has spent much of his business life in Asia Pacific including work for Rupert Murdoch’s News Corp. where he was involved in digital strategy.

His “nomadic” life hopping from New York to Hong Kong to Istanbul mirrors that of the emerging modern executive, Walsh said. “I have set myself up to work anywhere. My entire business is in the cloud. I can access my invoices, CRM, documents—everything from anywhere. I have a network of professional support. I know that I need to do this as a global business, and this is the new model that global companies have to adopt,” he said.

“It is really hard,” he added.

No matter the market, tech companies are demanding the brick-and-beam creative space epitomized in the Bay Area by the building stock south of Market Street in San Francisco, the panelists said. Conscious of the stress that their densely populated workplaces put on building systems and electronic infrastructure including electricity supplies, tech tenants have grown sophisticated about vetting such qualities. As a consequence, so have landlords.

If a building doesn’t have the horsepower in place, “you need to show a roadmap that this building can get additional power and has the roof space,” Hermann said. If a building lacks such attributes, “it will struggle.”

At the same time, the definition of a “core,” or low-risk building investment has changed for the institutional buyer. Historically, tenant quality and the terms of a lease were assessed to determine risk. Now such investors are focused on buying in locations favored by technology companies. In the Bay Area that means places such as Mountain View, Palo Alto, Cupertino and South of Market Street in San Francisco, Hermann said. “That is considered core even if the asset isn’t core.”

And no longer is the corporate real estate director the only executive along for a look-see. Today, not only are corporate real estate divisions involved in location decisions, but so are the human resource officer, the chief investment officer and the chief technology officer, said Peter B. Hennessy, Cassidy Turley president of the New York Tri-State area.

Historically, when companies grew they simply grew bigger in their hometowns, said John J. Boyle III, senior managing for Cassidy Turley in Boston. That is no longer true. Growing companies now may expand regionally but then move immediately around the globe. “That is a big shift,” he said.

The links between the Bay Area and Boston are strong and growing stronger, Boyle said. “Adobe has a significant presence in Boston. Oracle is a huge Boston user—over 750,000 square feet,” he said, and over 1.5 milion square feet in greater Boston. “Shorenstein [Properties] has been a huge owner in Boston for years, and they just made a huge acquisition in Seaport Center. Spear Street Capital is a significant owner in Boston and Divco [West] is, too.”

Shorenstein is San Francisco-based. Spear Street and Divco have San Francisco offices.

Yet, the tech sector’s ability to meet its need for skilled workers not only in Palo Alto and South of Market but also Boston and New York City, not to mention Bangalore and Hyderabad, means landlords now face competition globally rather than just next door, Boyle said.

“We can’t take for granted that we have the pole position. Companies are pretty fluid these days. They are willing to go where the talent and the resources are,” said Mike Kamm, president of Cassidy Turley and former chief executive of Cassidy Turley Northern Calfornia. “We have to be constantly vigilant that our position in the universe [in the Bay Area] is always being challenged when politics and economic policy create barriers to innovation and growth by raising costs, and that there are lots of great ideas.”

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