In an announcement made several months ago, and in anticipation of its move into its new home at Salesforce Tower, the CRM software behemoth announced its plans to sublease its space at 101 Spear Street in San Francisco, where the company had been leasing 259,416 square feet since early 2013. Stepping in to replace Salesforce is Twilio, another San Francisco-based technology enterprise in the cloud communications business, which has agreed to sublease the entire space.
The transaction was announced by Newmark Knight Frank in its third quarter of 2018 San Francisco Office Market Report.
Twilio is a public company that was founded in 2008, when it was based in both Seattle and San Francisco. Today, it has 1,100 employees and revenues approaching $400 million. The company is a cloud communications platform as a service (PaaS) company that allows software developers to programmatically make and receive phone calls, send and receive text messages and perform other communication functions using its web service APIs, according to the company’s web site.
Salesforce had taken on the space at 101 Spear as it grew around the South Financial District neighborhood of San Francisco. However, with Salesforce Tower office opening looming, it realized that it had to shed some of its space.
“With Salesforce Tower now open, we are thrilled to bring our San Francisco employees closer together in our world-class HQ urban campus,” the company said in a statement in April of 2018.
Beside its space at the Salesforce Tower, where the company occupies 714,000 square feet of office space, it also has space at 1 Market Street, which may also be subleased in the future, 50 Fremont Street, which it owns, and 350 Mission Street, which it leases. Salesforce also has space at 123 Mission Street, and CoStar estimates that the company has well over two million square feet in San Francisco.
101 Spear is owned by Hudson Pacific. The property is part of a two building mixed-use complex that totals 580,940 square feet. The buildings have a historic lobby, which is a converted art-deco post office listed on the National Register of Historic Places, according to the property’s web site. The property comprises an entire city block, bounded by Mission, Howard, Spear and Steuart Streets in the South Financial District.
Built in 1940 and redeveloped in 1989, the property is proximate to BART’s Embarcadero station, a variety of MUNI Transit options and the Bay Bridge/U.S. Highway 80.
AIG is another large tenant in the property.
Vacancy rates in both the North and South Financial Districts decreased in the third quarter, according to the Newmark Knight Frank report. North Financial District vacancy dropped to 4.9 percent from 6 percent last quarter, while Class A vacancy dropped to 4 percent from 5.3 percent. South Financial District vacancy is even tighter, as overall vacancy dropped to 2.5 percent from 3. percent, and Class A vacancy dropped to 2.4 percent from 3.1 percent.
Twilio’s was one of five leases in the city over 100,000 square feet, and it was also the largest one. Others included PricewaterhouseCooper’s new, 196,356-square-foot lease at 405 Howard Street; Amazon’s 143,168-square-foot expansion at 525 Market Street; Square’s 104,135-square-foot expansion at 1455 Market Street; and SoFi’s new, 100,800-square-foot lease at 1 Tehama Street.
Additionally, more space in the pre-leased new developments was occupied in the third quarter, driving absorption to 2.6 million square feet year-to-date, stated the report. Despite the low vacancy rate, Newmark Knight Frank expects absorption to remain strong for the remainder of the year.