San Francisco Office Market: A Tale of Two Cities

The office market in San Francisco is beginning to look like a tale of two cities: a thriving life sciences sector is filling up office space in South San Francisco, while the city’s Mid-Market District struggles to bring back workers as the pandemic wanes.

Block Inc., the payments processing company formerly known as Square, disclosed this week that it won’t renew its lease next year for 470K SF at 1455 Market St. after it transitions to a “more distributed” workforce model, according to a report in the San Francisco Chronicle.

Block said in a statement this week that it has given the majority of its employees the option to work from home, reiterating a previous notification that the company would no longer have a designated headquarters location, removing that designation from its offices at 1455 Market.

The fintech player said in its statement that it remains committed to the Bay Area and will keep another Market Street location it acquired with the purchase of e-commerce company AfterPay, along with smaller spaces on Mission St. and in Oakland.

Kastle Systems’ weekly 10-city report of office occupancy, based on its surveys of entry-card swipes, on June 8 had San Francisco registering a 35% occupancy level, the lowest among the largest city markets.

The San Francisco Business Times reported last week that cloud communications player Twilio plans to consolidate its Financial District office space as part of a transition to a “remote-first” company. PayPal Holdings is closing its Market St. location, according to reports.

The office picture is much brighter In South San Francisco, where a burgeoning life sciences sector is bringing in major occupiers.

California-based Eikon Therapeutics announced this week that it has signed a long-term lease with Alexandria Real Estate Equities for 285K SF of office and lab space for its new headquarters, which will anchor a new life sciences campus under development by Alexandria in Millbrae.

“We look forward to working with Alexandria to create an inspiring space where our multi-disciplinary teams can even more effectively pursue our mission of delivering therapies that will improve and extend life,” said Roger Perlmutter, Eikon’s CEO, in a statement.

Upon completion, the Alexandria Center for Life Science—Millbrae campus will include four buildings encompassing approximately 637K SF of office and lab space, as well as a 16K SF amenity center, in proximity to the Millbrae Transit Center, served by the BART light-rail system as well as Caltrain.

The new campus will be built in adherence to Alexandria’s “stellar reputation for the operational excellence of our complex mission-critical laboratory infrastructure,” said Terezia Nemeth, executive VP of the Bay Area region for Alexandria.