Square Takes Oakland’s Largest Office Lease as Businesses Bypass San Francisco
Digital Payments Company to Become a Major Tech Business in City
BY RANDYL DRUMMER (via CoStar)
Oakland, California, is attracting technology companies that are bypassing more costly San Francisco. Photo: Wanderer’s Photos, flickr
Digital payments company Square Inc. has leased all 356,000 square feet of office space in CIM Group’s Uptown Station office-retail development in Oakland, California, setting a modern office lease record for the city and positioning itself to become its largest major technology company as businesses seek space in San Francisco’s suburbs.
The lease, at a 1920s-era former downtown Sears department store at 1955 Broadway, is an expansion for the San Francisco-based company, which provides credit card readers and billing systems to individuals and companies, and creates room for up to 2,000 employees. It is the largest single office lease ever signed in the Oakland and East Bay area, according to CoStar records that date back at least four decades. It surpasses the previous record of 311,000 square feet signed by Bay Area Rapid Transit in 2010.
Companies are turning to Oakland and other East Bay cities search of more affordable office space as an alternative to the sky-high rents across the bay in San Francisco, which has rates about 25 percent higher. While rent growth has slowed closer to the national average of late, demand remains high as San Francisco office rents have more than doubled since 2010, according to CoStar Analytics. Oakland office landlords have plenty of flexibility, with limited construction and a healthy roster of tenants set to take space in coming quarters and office buildings selling at record levels.
“We’ve been waiting for a major tech tenant to move to Oakland for a long time,” said Jesse Gundersheim, market economist at CoStar Group in San Francisco. “Now the biggest questions is: Will other tech tenants follow them?”
Oakland also is notably not subject to the recently passed Prop C legislation, which increases San Francisco’s gross receipts tax by an average of half a percentage point for large corporations to fund homelessness services. Square Chief Executive Jack Dorsey, who also leads Twitter, was a vocal and financial opponent of the measure, which kicked off a high-profile feud between chief executives at major tech companies including Salesforce, which was a corporate proponent of the measure.
Square said it expects to begin moving late this year into the building, which Los Angeles developer CIM Group is converting to an eight-story office building with 35,000 square feet of ground-floor retail at Broadway, Telegraph Avenue and 20th Street above the 19th Avenue BART station in Oakland.
CIM bought the project from Uber Technologies Inc. for $180 million in one of the largest real estate sales of 2017 after the ride-sharing company reversed its high-profile decision to relocate its headquarters to the property. Uber bought 1955 Broadway from Walton Street Capital and Lane Partners for almost $124 million in 2015 but put the building on the market last year after deciding to consolidate its workforce in San Francisco.
The city is home to a few tech companies, the most notable of which is music streaming company Pandora Media, which leases about 127,000 square feet of office there, according to CoStar. But the area’s tech presence pales in comparison to nearby San Francisco and Silicon Valley, where most of the nation’s major tech companies are headquartered.
Square, however, has said the decision to expand outside of its headquarters city was made before the legislation was passed.
Square plans to keep “a significant presence” in San Francisco at its headquarters offices at 1455 Market St., the company said in a statement. The decade-old company said it is evaluating how to use its space at Uptown Station to create “a supportive environment for local businesses and entrepreneurs,” in part through a marketplace for local restaurants and shop owners rather than a corporate cafeteria.
“We’re excited to join the Oakland community as a partner, an advocate, a neighbor and a customer of local businesses,” said Dorsey in a statement. “As we continue to grow, we want to support our employees wherever they are so they can work and invest in the communities in which they live.”
The city, which is dealing with the effects of spillover gentrification from San Francisco and Silicon Valley, appears to be ready to embrace Square as it finds its footing in the area. Many residents had raised concerns last year about the effect Uber may have had on the neighborhood, particularly in pushing residential rental rates up even further, if it had moved in.
Oakland Mayor Libby Schaaf said she plans to work with Square to “ensure a demonstrated plan for economic empowerment, form partnerships with our local organizations and build a diverse workforce that will serve our city and small businesses well.”
She added in a statement that “Oakland is committed to attracting businesses whose values align with our community, whose workforce reflects our inclusivity, and whose greatest priority is the long-term prosperity of every Oakland resident. With their proven commitment to empowering new and local entrepreneurs, I believe Square can be that company.”