Jun 6, 2017, 11:27 AM
San Francisco is one of the most competitive office markets in the country. Total vacancy has hovered around 8% since 2015, average asking rent is about $74.50 and construction costs for space build-outs are high. New office space is under construction, but it’s being preleased quickly and asking rent rates are averaging more than $87 per square foot. And, within the tech industry in particular, we don’t see demand dropping anytime soon.
Long story short, finding an office in San Francisco is challenging. So how can you find an office, and not just any office, but one that’s great for your company and your people? Start by knowing what you’re looking for—and what your competitors are.
What most San Francisco tech companies are looking for in an office
With VC funding down—and greater expectations for return if you’re funded or public—tech companies are increasingly conscious of operating costs. In the past, we saw companies renting warehouse-type space and building it out, but today they’re trending toward offices that are already furnished, wired and ready to go.
Another way to keep costs down is to limit the amount of dedicated space you provide to each employee. (This is why we see a lot of bench seating in tech.) But what about the newfound perils of open office design? That’s where the neighborhood mentality comes in.
In addition to open benching, we’re seeing a lot more integration of breakout/huddle rooms, phone rooms, quiet spaces, community areas, etc. The benefits of providing your people with the right space to do their work are well-documented. And there are plenty of ways to do this without dedicated offices—or even desks—for every employee.
Technology is the fastest growing business sector in the United States. Not always, but often, high-growth is the name of the game if you want to beat the competition. And though you can predict and manage your company’s growth to some degree, you never know when you need to pivot or go all-in.
That’s why traditional 10-year office leases aren’t very attractive for tech companies, and we’re seeing more people negotiate shorter (even only 2- to 5-year) lease terms. Additionally, no matter the lease length, lots of companies in the tech sector are demanding expansion rights or some form of flexibility within their building, which they can choose to activate at particular times throughout their lease.
How do you find the office space you need?
Our best advice for a tech company looking for space—particularly in a competitive market like San Francisco—is twofold: Think strategically and be flexible.
Finding the right space is about more than having an office. We’re in a hyper-competitive labor market; it’s not enough to host Taco Tuesdays. Your people need a place where they’ll be inspired, empowered and engaged.
Ask yourself: What are we trying to achieve in the next few years? What kind of culture do we want to cultivate? Where does growth come from? What’s important to us as a company?
Use those answers to find the place that’s right for you—and your people.
We often talk to people who really want to locate in a particular area—like the Dog Patch or Mission Street. Why? Usually it’s because other tech companies are there, or it’s a named hotspot. But it’s important to be open to other possibilities, and lots of solutions. You might be surprised to find a gem in another neighborhood that just feels like a better fit—and may even be available at a lower price.
Smaller companies and startups may be able to find office space for lease on their own online. Larger companies, or companies with very specific needs, aren’t as likely to be successful there.
No matter your size, there’s something to be said for tapping into the intelligence and experience of someone who knows the entire area: a commercial real estate broker. (I promise we aren’t going to get salesy here, just speaking the truth.)
Brokers consistently have boots on the ground, know what’s available where, and are up to date on market variances in things like rental rates across neighborhoods, property types, etc. Good ones have also established credibility in their area, and may have not-yet-public insight on companies that are shedding space that might be suitable for you. Sublease space is ideal, for example, for that plug-and-play space we mentioned earlier.
Planning for the long game
Part of looking for an office to suit your business today should be planning for the office you’ll need next. As a business leader, you’re already thinking about expansion and growth plans. Don’t forget about real estate as a key to the equation. Space and location options you’re open to in the future may impact the choice you make for your space now.
Ask yourself: Where do you want to be as a business 3, 5, 10 years from now? How do you want to get there? What kind of talent will you need?
Even if you’re not that big (yet), it can’t hurt to know what your options are, and what markets—both in and outside San Francisco—are worth considering. Careful real estate analysis paired with the right tools can help you assess and select ideal locations based on criteria most important to your business. (Think available talent, education level of area residents, real estate costs, local amenities and more.)
For larger companies with multiple locations, portfolio analytics software helps you look into the future to make smart, market-based, strategic decisions about your company’s growth. These tools can analyze your current state against market predictions to answer questions like: Of your leases up in two years, which are in rising markets ripe with tech talent? (Aha!) Now how can you grow your footprint there?
A strategic approach to your office and real estate portfolio—both now and in planning for the future—is a crucial part of your company’s success.
If you’re currently looking for office space in San Francisco and want a hand, drop me a line.
Author: Jak Churton