The Building That’s Already There

Building, Colliers, CBRE, San Francisco, Landmark, Union Square, Phelan Building, Thor Equities, Silicon Valley, SoMa, South of Market, Mid-Market

760_Market_Credit Roger Bensel

Landmark buildings’ unique features draw tech companies.


By Nancy Amdur

[dropcap]C[/dropcap]reative office space with features such as exposed ceilings, brick walls and an open floor plan is common among technology firms. But some companies are making their office stand out even more by moving into historic landmark buildings with built-in unique architectural details like cornices, wood beams or arched windows.

“There is strong demand for creative office space, and historic buildings are even more sought after because the aesthetics of those buildings lend themselves to making the space feel creative and more collaborative,” said Tyler Hogan, a commercial real estate broker at Colliers International in San Francisco.

Tech companies signed 14 leases for office space in San Francisco landmark buildings in 2013 and 2014, according to a report by CBRE Group, Inc.

[quote]“With older buildings, companies have to do less, because a lot of those unique characteristics are already built into the space.” Colin Yasukochi, director of research and analysis for CBRE in San Francisco[/quote]

Many of these leases were for space in the Phelan Building, built in 1908 at 760 Market St. The triangular-shaped property, located in the city’s Union Square district, features 52,000 square feet of ground-floor retail and 231,000 square feet of office space.

For most of its history, the Phelan Building housed dozens of smaller spaces occupied by jewelers. But New York-based Thor Equities purchased the 11-story property in 2008 and renovated and repositioned it with tech tenants in mind. The company updated the interior with open floor plans while maintaining the building’s historic exterior.

“With the explosion of Silicon Valley, many technology firms were looking for large open work spaces in San Francisco. The Phelan Building represented great potential for these companies,” according to a case study about the project by Thor Equities, a real estate development and investment firm.

Thor Equities eliminated the small offices, and the building “began to gain the attention of corporate offices for retailers, designers and technology firms,” the case study said. The Phelan Building is now fully leased with tenants taking full floors. Leasing space in a property designated as a historical landmark can make the office more desirable and help attract top talent—especially if it is an iconic building, Hogan said.

“The most important thing for tech companies is being able to hire the best people, so they want to have their space very nice and very attractive to win the best talent,” he said.

Social networking service Nextdoor, which occupies 25,000 square feet in the Phelan Building, finds that its space helps draw potential employees.

“Being able to say that you work in a San Francisco landmark building is pretty rare,” said Kelsey Grady, a Nextdoor spokeswoman. The building’s history “makes us feel intertwined in the fabric of San Francisco,” she said.

The company retained the office’s historical features such as exposed brick walls and green-and-white tiled hallways and modernized it with conference rooms, kitchens and showers. Nextdoor also likes the building’s many windows, atrium and location, which is convenient to public transportation and downtown amenities, including restaurants, Grady said.

“People’s space is super important to their happiness, their ability to innovate, [and] even how they can communicate with others given the space’s architectural features,” said Eliot Buchanan, CEO of online payment provider Plastiq Inc., which leased 3,800 square feet in the 108-year-old landmark building at 1475 Folsom St.

The company’s space features brick-and-timber construction, large windows and abundant natural light.

“It balances old and new,” Buchanan said. “It feels small and intimate and the natural light and brick makes it warm.” The building, located in the South of Market district, also offers unobstructed views from most directions, he added.

Plastiq chose its space in part because of the building’s historical significance.

“Having a space with meaning and value reflects how we also want our brand viewed,” Buchanan said.

Tech companies tend to cluster around each other, so once one tech company moves into a building, others might soon follow. “[If] you have one tech company in there, it raises the attention of others,” said Colin Yasukochi, director of research and analysis for CBRE in San Francisco.

Also among the Phelan Building’s tenants are The Obvious Corp., a collection of tech companies overseen by Twitter co-founders Evan Williams and Biz Stone; credit and financial management platform Credit Karma; software company Opower; and mobile application development company Crittercism, according to the report by commercial real estate brokerage CBRE.

Other landmark buildings also host tech tenants. For example, the eight-story 45,000-square-foot mixed-use property at 944 Market St., built in the city’s Mid-Market district in 1907, is home to programming bootcamp Hack Reactor and market intelligence provider InsideView. The Mills Building at 220 Montgomery St. in the city’s financial district hosts native advertising platform Vibrant Media, and mobile messaging service CoTap leased space in the historic property at 55 New Montgomery St. Although nearly every office building in the city now includes at least some creative office space, demand is so strong that it is leased “very quickly,” Hogan said.

“Tech companies or companies that want to foster a creative or collaborative environment want to be in historic buildings, but there is a much smaller supply of historic buildings, [and] the buildings themselves are smaller,” Hogan added.

Some tech firms adapt interiors of traditional high-rise properties to provide “their own creative environment,” Yasukochi said. But “with older buildings, [companies] have to do less, because a lot of those unique characteristics are already built into the space.”

Photo by Roger Bensel

West Coast Commercial Real Estate News