Salesforce Considered Only San Francisco For New Location
Submitted January 6, 2012, 8:05 PM
Salesforce.com Inc. never looked outside its home base of San Francisco as it searched for additional space to satisfy its blockbuster growth, the company’s vice president of corporate strategy said Jan. 6.
The city and its labor force are an integral part of the company’s history and corporate DNA, said Bruce Francis. A quarter of its headquarters workers live in the city, and San Francisco still represents its largest company cluster worldwide. The company’s San Francisco location also keeps it popular with its customers.
Salesforce announced Jan. 6 that it had leased just more than 400,000 square feet at 50 Fremont St. in San Francisco. The first floors are to be delivered less than three months from now and the agreement on the last will expire in April 2030. It has two five-year options to extend the lease.
Francis said the company was lucky to nab the space: “These large leases with 400,000 square feet of contiguous space don’t happen very often,” he said.
The agreement allows Salesforce six years from now to buy the more than 817,000 square-foot property, though Salesforce will occupy only about half its office space at the lease’s peak. The lease and potential acquisition further the company’s long-term growth strategy of having three Bay Area campuses—in downtown San Francisco, Mission Bay and San Mateo, a company spokesman said.
Located at the corner of Mission Street and Fremont, the building is immediately adjacent to the Transbay Transit Center, the redevelopment of which is now underway. It is in the heart of the city’s thriving South of Market district.
The agreement expands by nearly 50 percent the square footage that Salesforce already occupies in the city at The Landmark at One Market St. and elsewhere. The enterprise software company, which delivers its products online, also is seeking approvals to build two million square feet in Mission Bay, where it hopes to house 9,000 workers in what will become its headquarters campus. Its San Mateo offices are at U.S. 101 and state Highway 92.
50 Fremont is owned by New York-based Teachers Insurance and Annuity Association of America. The lease displaces Pillsbury Winthrop Shaw Pittman LLP from six floors. The law firm’s lease runs until the end of this year.
The lease grants Salesforce a tenant improvement allowance of $75 a square foot or more than $30 million in aggregate. It also extracts a $6 million security deposit from the cloud computing company in the form of a letter of credit. That amount rises to $12 million in the course of the lease and then falls back. Current operating expenses are $17.90 a square foot a year.
The landlord’s broker was the The CAC Group Inc. in San Francisco; the tenant’s broker was Cushman & Wakefield.
Even when the company announced it would buy and build in Mission Bay in November 2010, it knew that it would have to find additional space, Francis said. “Now we are comfortable that we have enough room to expand into as we continue to grow.”
Monthly rent begins in April at $275,670, according to a schedule filed by Salesforce with the Securities and Exchange Commission. By the end of the year, it ramps up to nearly $700,000. At its peak, in November 2024, the monthly lease amount exceeds $1.4 million.
By way of comparison, the 400,000 square-foot lease represents not quite a quarter of the 2.1 million square feet in net occupancy gain in San Francisco last year, according to preliminary leasing numbers from Colliers International—and 2011 was a banner leasing year.
The transaction represents the largest long-term lease signed in the city in more than a decade, according to the San Francisco mayor’s office.
When fully occupied, the space is expected to accommodate 2,000 employees.
