In the strongest signal yet that the AI tech boom is a rising tide that will lift the Bay Area’s struggling office sector, a rapidly expanding cloud-based data platform has signed the largest office deal in the region in nearly 15 years.
Snowflake, which has more than doubled the size of its workforce in the past two years, has inked a deal to sublease a 773K square foot campus in Menlo Park from Meta.
The company will take over a four-building campus at 125-135 Constitution Drive and 100-150 Independence Drive, part of the Menlo Gateway project owned by Bohannon Cos.
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Snowflake’s lease with Meta dwarfs, the largest Bay Area office deal of the post-pandemic era, beat OpenAI’s sublease late last year of 486K square feet from Uber in San Francisco. According to the San Francisco Business Times, Snowflake’s deal is the region’s largest office lease since Bank of America signed an 836K square foot lease at 1455 Market Street in San Francisco in 2010.
Snowflake, which began in San Mateo and still leases more than 200K square feet at its former HQ at 450 Concar Drive, made headlines in 2021 when it announced that it would no longer be based in California.
The company said it would have a “globally distributed” workforce and no corporate HQ, designating Bozeman, Montana, where then-CEO Frank Slootman was based, as its “principal executive office.”
Sridhar Ramaswamy, a former Google exec and AI expert, became Snowflake’s CEO in February. In announcing the sublease of the Meta campus, Snowflake said the expansion in Menlo Park was driven by the Bay Area’s status “at the heart of technology and innovation.”
Warrick Taylor, Snowflake’s VP of workplace and real estate, said in a statement that “the most data-driven enterprises, leading startups, and the best talent in the world are based here, so it’s a natural fit.”
Snowflake, which held its four-day Data Cloud Summit event in Las Vegas in 2022 and 2023, brought the event back to San Francisco in June, generating 18K hotel rooms and nearly $21M in direct spending, the San Francisco Chronicle reports. The event will return to San Francisco in 2025 and 2026.
While San Francisco is the epicenter of the AI office boom, Silicon Valley also is aiming to become a major AI hub. San Jose has an aggressive program aiming to lure AI companies to its downtown.
Mayor Matt Mahan is working with real estate developers, tech companies and San Jose State University on the creation of AI incubators to breed startups in the city. Mahan has sent a memo to city agencies urging them to make it easier for AI companies to set up shop in San Jose, with discounted utility rates and faster permit processing.
In the memo, the highest-ranked official for the municipal government said that San Jose’s long-standing expertise in tech hardware and chip manufacturing makes it a conducive environment for an AI hub.
“I think there’s going to be plenty of growth in AI for everybody,” he said. “I really see us as living in a regional economy. I think San Francisco’s success can be San Jose’s success.”
The Silicon Valley office market, which has struggled this year with hefty office vacancy and availability rates, experienced a huge surge in leasing activity in the third quarter.
Leasing activity jumped to 1.7M square feet in Silicon Valley in Q3 2024, rising by 1M over the previous quarter's paltry total of 700K, the first time in eight consecutive quarters the total has risen over 1.1M and the highest level since Q3 2022, Savills reported.
The office availability rate in Silicon Valley decreased by 110 bps to 27.6% in the third quarter, down from 28.7% in Q2 2024. The level in Downtown San Jose ticked down slightly to 35.2% from the 35.7% reported the previous quarter.
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