Dropbox, which is currently headquartered at 333 Brannan Street, has inked a record-setting lease for all 736,000 square feet of future office space at The Exchange on 16th which is currently under construction in Mission Bay.
The 15-year lease, which doesn’t include the development’s 14,000 square feet of future retail space, represents the single largest Class A office space lease in the history of San Francisco and is slated to commence in the fourth quarter of 2018. Dropbox will take possession in three phases over the subsequent year.
The Dropbox lease for 333 Brannan, which totals 182,000 square feet, was inked in 2014 with a 12-year term commencing in 2015 and was subsequently expanded to include all 110,000 square feet of space at 345 Brannan Street as well.
For context, the Facebook lease for the tower at 181 Fremont Street totals 432,000 square feet.
This is the changing of the blood. The less paying, old jobs are moving out, the new ones move in. The cycle continues.
Exactly what old jobs are being displaced at this address? You mean the construction workers?
No jobs are lost.
Dog patch was predominantly blue collar for a long time. I’m just saying that the newer, higher paying, skilled jobs are coming and the rising rents in the neighborhood as a result of those in-demand locations and high salaries are going to push them out.
I, personally love gentrification. And judging by your name, you do as well. <3
Notice how “Dave” never shows up in the “entire office building leased” articles…
Well, there WAS a flight to Seattle leaving @ 12:38 🙂 Anyway, the claim isn’t true: when Uber sucked up space @ Chase Center he had this to offer: “One wonders what kind of a break, if any, Uber got on the 290K feet it plans to occupy?”
Sub “Dropbox” for “Uber” and the respective space amounts, and you’ll have the same observation…unsubstantiated, tho it may be.
A few remarks:
Commercial real estate:
Despite recent reports that the market is softening (or “prices nearing negative growth”), large tech players are eager to lock-in large leases at current rates. Neither Facebook nor Dropbox will need all the space right away, but they prefer to lock it down now and sublease rather than wait-and-see where commercial real estate prices will be a few years from now.
Residential Real Estate:
More jobs in the East of the city means more price pressure on single family homes in that area. Especially the South East neighborhoods should see more demand.
Location & Infrastructure:
While high-way access is excellent, this corner of Mission Bay is actually not that well connected to public transport. The T-line is a few blocks away and the Muni bus to 16th Street BART remains small and infrequent. I’m sure improvements will happen. Besides that, wouldn’t a rapid bus line from City Center down 7th street and along 16th street to the new Chase Center make too much sense? City Center is one of the less busy BART stations and Mission Bay will need better links to BART (other than the Central Subway) once thousands new office workers and NBA fans start travelling there. Also, 7th Street is relatively less travelled and there is quite some new construction happening around it.
Muni has already created the 55 line connecting BART (16th Mission) to the T-Third, which does essentially what you suggest along 16th instead of 7th
Yes, the 55 line is definitely helpful and I’m sure larger busses will be employed once Mission Bay is built out. At the same time, if you live anywhere North of Market Street, the connection to 16th Street won’t get you any closer to home. On the other hand, a link to City Center could be further stretched to Van Ness and all the other public transportation links that go North from there. Anyways, these are just my 2 cents.
The 22 Fillmore (runs down 16th, including a stop at 16th St Bart) was/is supposed to be getting overhauled with better transit platforms and supposedly better service, and will be realigned to end at the Chase Center. Not sure where the project is schedule wise, but hopefully it helps.
I didn’t know that. This will definitely speed things up. I took the bus a couple of times between 3rd street and Mission Street along 16th and it felt very long. Lot’s of cross streets, stop signs etc. I’m convinced a link up 7th street to City Center would be a faster option.
The 22 is a trolley coach line (and really has to be because of the hills along Fillmore). The trolley overhead cannot cross Caltrain tracks (bus poles wouldn’t reach the wires if they were high enough to clear the double-deck Caltrain cars). And Caltrain electrification would make it even harder. So there has to be a grade separation of some sort at 16th and Caltrain for the 22 to be rerouted along 17th. And that’s probably 15-20 years away (if it ever happens at all).
@Pero “City Center” just sounds so un-SF. It’s actually Civic Center Station.
Orland, you’re 100% right, my mistake
Certainly there’s an easy solution for trolley buses crossing caltrain–the busses can operate off their lines for short durations. BRT down second/16th makes so much sense!
Close but not quite. The large tech players aren’t “eager to lock-in large leases at current rates…rather than wait-and-see where commercial real estate prices will be a few years from now.”
The large tech players with plans for growth are paying a premium to secure large leases and effective urban campuses which are in short supply in San Francisco. But you are correct, office rents in the city have been nearing negative growth.
I fully agree. Tech companies are paying a premium for urban campuses. This is a departure from a more opportunistic wait-and-see approach most large companies took in the past and still take today. E.g. how many different Wells Fargo building are scattered across downtown?).
Further, the urban campus approach could lessen downward price pressures on office space in a downturn, as large tech companies are reluctant to sublease space within their campus.
Anyway, it’s a very strong sign of confidence in the SF job and housing market.
This seems likely. There is not a huge addition of jobs with this lease, it is not a major relocation of a company to SF. It is what it is. This type of large block “campus” will increasingly be in short supply as the M caps have been hit – the backlogged pool used up. With 850K square feet/year going forward and assuming that is split between more than one development, large 750K blocks in a single development may not be approved or seen for a long while The Park being the last such.
Kilroy’s proposal for the Flower Mart would eat up several years of allocation and it’s doubtful planning will give Kilroy a multiple year chunk. That project will have to be approved in phases over years and built in phases – meaning no sudden availability of a million square foot campus.
What’s the status of the 4.3 million sq ft in the Shipyard in Bayview HP? Isn’t all of that exempt from Prop M now?
It is but, by some accounts, Lennar is having trouble leasing the space. it’s not a marquee location I guess and Baylands (or is it Badlands) may be a better bet for tax reasons. They were pursuing Google at one time but nothing seems to have come of that. In fact, a large chunk of the space may go to educational organizations including a K – 12 academy.
Heard recently, few months back that Google is taking space in the Shipyard. Don’t know how much
Jake,
Where did you hear that Google is taking space at the Shipyard?
“There is not a huge addition of jobs with this lease, it is not a major relocation of a company to SF.”
Dave, the Dropbox’s lease at the exchange is 4x their current office space. What do you think they plan to do with the extra square footage if not add more workers/jobs? Play golf?
As the moderator surmised – IMO they are locking up large campus-like space which, aside from HP/CP, there may not be too much more of going forward. Assuming they relocate from Brannan, the net increase in space would be about 300K. The Exchange gives them room to grow their force over time.
They are growing from about 180k sqf at Brannan to about 740k sqf at the Exchange. The increase is around 560k sqf rather than 300k sqf as suggested by Dave.
Once again, not quite. Dropbox currently occupies around 300,000 square feet of space on Brannan Street as outlined in our second to last paragraph above.
My mistake, I counted only one of two Dropbox buildings on Brannan. 300k sqf is right
It’s worrisome (hell, maddening) that damn relic M from last century could mess up the planning and implementation of what should be an excellent development. Maybe Kilroy should seek an exemption with a campaign of “Save the Mart!”
Besides the Mart, there is that twisty office tower adjacent to 80 – over 1 million feet of office space. And 700K with 5M Those alone are 4 million plus feet and would take up about 5 years of allocation. There are other projects too including the eastern waterfront proposals. IMO, planning probably will approve in small chunks. 2 projects/year at about 400K. If Kilroy and others are willing to break their projects into multiple sub-projects approved over 4, 5 or 6 years it will work for them.
Short of that, it becomes a ballot box thing. HP/CP set an unfortunate precedent. Kilroy, given how massive Flower Mart would be, might go that route. They have deep pockets. But they would have to add a lot of sweeteners. As in housing, as in BMR housing, as in open space.
One thing about Kilroy – their projects pop. Their Bush Street glass tower, just finishing up, is pretty solid.
There should be a serious effort to repeal M outright and address development issues as they should be — on an ad hoc basis giving due consideration to planning/zoning guidelines.
definitely time to get rid of prop M
It’s not a major relocation of a company to SF, true.
It’s planning for enormous growth at an indigenous SF company, which is even better. There has been plenty of commentary by some people (cough cough) about the long term growth of the tech industry in SF. This plus the big new FB lease point to the strength of that industry.
Great points Pero. Unfortunately we are centralizing office construction on the east side where it will maximize displacement pressure on some of the last working-class areas of SF: Bayview, Portola, Visitacion Valley, Silver Terrace, etc.
Out of curiosity I looked up transit commute times to the Exchange from the Mission, uptown Oakland, and downtown Redwood City, and compared them to travel times to Stonestown Mall, on 19th Avenue across from the L train. All three transit commutes are comparable, with Stonestown actually quicker to reach from the Mission than this site. Redeveloping Stonestown Mall into a giant office complex would be no less transit-oriented than it was to build one here.
But the complaints would be louder, and they’d be coming from richer, whiter neighbors. So as usual, it gets built on the east side and nothing happens on the west side. A perfect example of how we don’t have transit-oriented development in SF, we have NIMBY-oriented development.
Two points why ‘displacement’ will be less painful for working class residents in the South East neighborhoods:
1) home ownership rates are much higher in his part of the city than in the Mission. This means less forced evictions. If homeowners decide to sell, pocket massive price appreciations and move elsewhere, than his is hardly a negative experience.
2) One also has to take into consideration that the vast majority of new residential construction is happening in the South East. Therefore it makes sense that jobs and housing are being build in proximity. HPCS, Schlage Lock, Indian Basin, Pier 70, Potrero Power Plant will deliver 10-20k new units over the next 10+ years. Again, this further decreases pressures on displacing current residents.
Why did you put displacement in quotes?
There are plenty of renters in southeast SF, many of whom are living in single-family homes, where they do not enjoy rent control due to Costa Hawkins. The new housing being built is a small fraction of what’s needed to house employees starting work on the corridor.
I put it in quotes because displacement can mean many different things. People getting force-evicted and people selling their homes at a huge gain and moving elsewhere are often mixed together under the displacement term.
I’m sure there are a renters that will be negatively impacted in southeast SF, but their number will be LESS than in the Mission.
I’m not sure the displacement will necessarily be less and even if it is, that doesn’t negate the inequity of concentrating development on the east side when west side locations that would be just as transit-oriented are ignored.
Unclear whether Dropbox will retain or sublease the Brannan St. properties which are very nice buildings themselves.
I’m assuming Dropbox moves from the Brannan location over time – the move in here is supposed to take a year which sort of suggests that.
The Brannan building is quite handsome and it’s a Kilroy project as is The Exchange – which itself is a great example of how to do something really interesting with an office project that takes up the whole block. The courtyards, water features, roof open space, trees and shrubs as well as the variety architecture makes me want to go and check the building out once it’s done.
The Exchange is going to be a great place to work and addition to the City (apologize in advance for the music).
For some reason, the link did not appear in the above post.
I want to know who thinks dropbox will succeed as a company?
They have a billion dollars in annual revenue. That’s a good start, no?
I was thinking the same thing. I don’t see how what is essentially file storage company is competitive in a world of IaaS/PaaS/SaaS – AWS, Google Cloud, and cloud app companies (sfdc, workday, etc). It’s a feature for all of them. Cheaper storage? floppy disks, hard drives, next… maybe they get acquired. Merge w/ Box then get acquired?
They will, and have definitely succeeded. All the start ups that become giant over time, ALL use drop box. They are at the peak of the spear. They fill an amazing gap from personal use to 500 person companies.
UCSF uses dropbox extensively. You can bump that number up to 20K+ person companies.
actually UCSF uses Box, but your overall point is correct – large companies definitely have a use for these services.
Yes, my error, I foolishly thought Box was part of DropBox.
Well thats kinda my point. Box is dropbox competitor. And btw, box has lots of revenue too!!! Profit on the other hand….
“Yes, my error, I foolishly thought Box was part of DropBox”
Selling a commodity at a loss with no clear brand identity to separate you from numerous competitors. Losing control of the front end UX on mobile vis-a-vis the Files app in iOS 11. Looks more like getting the shaft than the tip of the spear.
Dropbox is planning to IPO next year, so there should be plenty of financial disclosure and analysis coming our way in 2018. To a certain degree, I’m sure this lease is also part of the ‘growth story’ they aim to tell investors. So if the company’s business consisted of only “selling a commodity at a loss”, I doubt their Board of Directors (=VCs) would approve of such a large lease.
There are numerous competitors, but there are in most business arenas. I don’t know if dropbox is making money – do they have public financial statements?
Box (Redwood City) is publicly traded and loosing money. How long will Google and MS stay in a money loosing business, or have they found a way to make money of the cloud storage?
MS and Google stay in the storage business b/c it’s a loss leader for their other products, not because they make money on it.
File storage may be a commodity business but it’s a nascent business. There are still many companies and businesses which attempt to manage their own file storage technology and do it badly or not as efficiently as dropbox or others can. It’s not as simple a technology as people think it is. The entire pie keeps growing and probably will for the foreseeable future.
Because nothing spells success like selling a service that large deep pocketed companies provide as a loss leader. I hear Netscape might move in here next to Dropbox.
Google would have cloud storage as a loss leader because it brings them so much PR or brings income to other parts of their business? Sorry, but cloud storage is about as exciting as a self storage unit.
For those who are convinced it’s a failing business, you’ll get the chance to put your money where your mouth is and short their stock after their IPO.
But don’t be wrong!
(I don’t know if they’ll be successful in the long term or not. But this lease is a good sign for SF real estate)
I pay for Dropbox and it’s a great service, but I have stuck with it mainly out of laziness, since Microsoft and Google now offer basically the same thing for free. I will definitely be looking into those services before I renew again.
No new parking? I do not know how many people fit in a 736,000 gsf building but it will be entertaining to see them try to fit on the T-line or the 55. Time to buy stock in bicycle manufacturing . 🙂
The rule for office space is, give or take, 220 feet/worker. That comes out to about 3,345 employees in The Exchange when fully occupied.
The Exchange site has more visuals but, even apparent in the photos here, are the broad sidewalks with buildings set back from the lot lines. There is room to walk, passageways, water features and garden areas – at street level. It can be done – this is so much preferable, in general context, to the lot line to lot line housing and office blocks proposed for the Central SOMA. This block will be very intimate and engaging for pedestrians – quite Pearl-like.
Your quoted ratio is way off the mark when it comes to contemporary tech space with open floor plans. See: Twitter Shedding Space for 1,400 Employees (at which point Twitter’s revenue was running around $2.5 billion a year).
I said give or take 220 feet/worker. I’ve heard anywhere from 190 feet to 250 feet. It certainly depends on the business type. Tech workers are crammed into smaller spaces, but 128 feet/worker at Twitter. That sounds like an unusually low number even for a tech company.
Exactly!!! They have revenue so they must be on the road to be a successful company!!!
this is good news because when dropbox gets obsoleted by the big boys or the recession hits, the furniture will sell for cheap! and all those people will have no money because they spent it all on avocado toast and expensive rents! boo hoo!
Maybe you will be right, but I wouldn’t base real estate policy on it.