San Franciscos Tech Frenzy Reaches Biggest Bank Tower

An iconic San Francisco office property in the heart of the financial district is poised for a makeover as surging technology firms squeezed out of the popular South of Market area migrate to other neighborhoods.

The complex at 555 California St., once Bank of America Corp.s world headquarters and the citys biggest office building, has about 200,000 square feet (18,600 square meters) available for the first time since its 1969 opening, said Bill Cumbelich, the listing broker at CBRE Group Inc. New York-based Vornado Realty Trust (VNO) has hired an architect for a revamp of the property and is seeking more technology tenants following leases with Microsoft Corp. and Supercell Oy.

Were introducing the location to tech and entrepreneurs who never thought of working here, Cumbelich said as he showed off Clash of Clans game maker Supercells penthouse office on the 52nd floor, above where Goldman Sachs Group Inc. (GS), KKR & Co. (KKR) and Morgan Stanley (MS) lease space. Every building needs a tech strategy.

San Francisco, the best-performing U.S. office market, has absorbed hundreds of software, mobile-application and data-storage tenants since 2010, with many clustering in the converted warehouses and brick buildings of South of Market, or SOMA. Thats forced newer and expanding firms to go where space is more plentiful. Towers under development just outside SOMA have attracted some of the spillover, heightening the challenges for landlords with vacancies farther from the technology hub.

Citywide, technology firms led four years of record leasing that pushed San Franciscos office occupancy to an all-time high of 70 million square feet in the first quarter, according to CBRE. SOMAs 5 percent vacancy rate and 844,000 square feet of available space compared with 7.4 percent and 3.1 million square feet in the financial district, about 10 blocks to the north.

Online retailer Stitch Fix Inc. and Credit Karma Inc., a credit-tracking service, both leased space last month in Union Square, the citys marquee shopping district.

Technology demand is so fierce that medical-device maker Invuity Inc. lost out on potential office leases four times in the past two years to software and social-media firms willing to pay more or complete deals with fewer contingencies, Chief Executive Officer Philip Sawyer said. Job growth and venture funding of startups has depleted the supply of coveted workspaces with horizontal layouts, high ceilings and large, open floors, he said in a telephone interview.

Our competition was well-funded, Sawyer said. You have to move quickly because the environment is so hot.

Invuity finally found offices in Potrero Hill, south of SOMA, in a building thats also home to First Look Media Inc., a news organization backed by EBay Inc. founder Pierre Omidyar. Invuity last month leased 38,000 square feet, triple its former space in SOMA, according to Sawyer.

San Franciscos prime office rents jumped 81 percent since 2011, the biggest advance of any U.S. market and almost four times the 18 percent gain for second-place Bellevue, Washington, another technology-driven city, according to a report by brokerage Jones Lang LaSalle Inc.

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San Franciscos Tech Frenzy Reaches Biggest Bank Tower