In Menlo Park, Calif., Facebook employees are reporting to work in a massive new headquarters with a 9-acre roof park. Sixteen miles southeast in Cupertino,
Office building is back—and on the West Coast, tech companies are playing a sizable role.
“Tech-related firms right now have the money and they have the desire to go ahead with these signature projects,” says Robert A. Murray, chief economist at Dodge Data & Analytics. “We’re seeing a market which continues to benefit from improving market fundamentals and a lot of investor interest.”
After peaking at 218 million square feet in 2007, starts on new office construction in the U.S. slumped to 57 million square feet in 2010, according to Dodge. (Starts are defined as groundbreakings on new office buildings and additions to existing buildings.) Since then starts have been steadily inching up to reach 106 million square feet in 2014, with 129 million square feet projected for 2015. In dollar terms, new office starts peaked at $32.6 billion in 2007, bottomed out at $16.9 billion in 2010, and are expected to overtake the 2007 high by the end of this year.
Technology companies aren’t the only ones building—the largest project in the last decade, in terms of square footage, is the 3 million-square-foot One World Trade Center, America’s new Freedom Tower, followed by Apple, then by the 2.35 million-square-foot One Bryant Park office building, also in New York City. But tech companies are behind some of the most distinctive projects rising right now—both in terms of their architecture as well as interior décor. They are also inciting a backlash, as they gobble up what little remains of land in Silicon Valley--especially Mountain View and Palo Alto--and drive up office rents, as the Wall Street Journal recently reported.
Apple’s new headquarters, designed by Pritzker Prize-winning architect Norman Foster, will be about 40% of the size of the Pentagon. The iPhone maker is turning parking lots back over to nature, planting thousands of oak trees, and creating an enclosed network of running and biking trails for its 12,000 headquarters employees to enjoy. Costs have been reported to rise to as much as $5 billion (Dodge estimates just $2.5 billion). If that higher figure is reached, Apple would claim the dubious honor of having constructed America’s most expensive office building—second only to One World Trade Center, which cost a whopping $4 billion to erect.
Ten miles to the northwest of Apple's new home, Google’s proposed new Mountain View headquarters would be as transparent and open as Apple’s new complex is closed off. Designed by rising star architect Bjarke Ingels and Thomas Heatherwick, the plans look like a futuristic mini-city. "The idea is simple. Instead of constructing immoveable concrete buildings, we’ll create lightweight block-like structures which can be moved around easily as we invest in new product areas," David Radcliffe, Google's vice president of real estate, wrote on the company’s blog. "Large translucent canopies will cover each site, controlling the climate inside yet letting in light and air. With trees, landscaping, cafes, and bike paths weaving through these structures, we aim to blur the distinction between our buildings and nature." Because the project is still in the early stages, a cost estimate is not yet available, a Google spokesperson said. If approved as proposed, the project would bring Google’s Mountain View home to 3.2 million feet.
While many Silicon Valley tech companies are bifurcating their campuses, adding outposts in San Francisco where many of their workers live, Facebook has fully committed to Menlo Park. Designed by famed architect Frank Gehry, Facebook's West Campus expansion is still not fully completed, though many employees have moved in. The expansion, known as MPK20, is covered in a 9-acre rooftop park. The company has revealed few photos of the 434,000-square-foot building on its 22-acre West Campus known as MPK20, but employees have been posting images on Facebook and Instagram (which Facebook owns). The LEED-certified building boasts underground parking, and bursts of beautiful, colorful art. MPK20, located at 1 Facebook Way, is the second phase of Facebook’s two-part expansion; the company already spread into 1 million square feet across nine buildings at its 56.9-acre East Campus on 1 Hacker Way, in a site formerly occupied by Sun Microsystems. In order to get the campus approved by the city of Menlo Park, Facebook agreed to build 15 low-cost homes or contribute $4.5 million to affordable housing, and to set up a job-training program and local environmental education program.
“In the Valley companies have been able to complete very insulated, self-contained campus environments,” says JD Lumpkin, a leasing broker at Cushman & Wakefield who focuses on San Francisco. “Apple and Facebook for cultural reasons--and certainly with Apple for secrecy reasons--they’ve never looked in the city.”
Tech companies taking the opposite tack include Salesforce, which has close to 2 million square feet in San Francisco, counting the space it will acquire as the anchor tenant at the new Transbay Tower, where it will lease about 714,000 square feet for 15 years for $690 million. The new Salesforce Tower will be the tallest office building on the West Coast, and is adjacent to the company's existing offices at 50 Fremont St. and 350 Mission St. Google has leased about 1 million square feet in San Francisco, scattered across three sites. Sunnyvale-based LinkedIn has leased all 452,000 square feet of a new 26-story tower going up at 222 Second Street. Trulia, Microsoft, and Twitter all have San Francisco offices.
“New towers are being built to meet tech demand but most of them are being built on a speculative basis,” says Lumpkin. “We’re a little more than 55% pre-leased for all new construction in San Francisco, and virtually all of that is tech.”
In addition to new headquarters and second office sites in California, the industry has been building large data centers across the nation. Microsoft broke ground on a 1.16 million-square-foot data center in West Des Moines last year; Apple started construction on a 500,000-square-foot data center in Maiden, N.C., in 2009. Google broke ground on a 100,000-square-foot data center in Pryor, Okla., in 2010, and a 210,000-square-foot data center in Council Bluffs, Iowa, in 2012. Facebook broke ground on a 476,000-square-foot data center in Altoona, Iowa, in 2013, and a second data center of the same size in Altoona just last year.
Though there is certainly a lot of activity, new construction is still relatively low by historical standards: about 60% of the 2007 peak and well below the all-time high of 350 million square feet in 1985, when office construction boomed in large part due to tax incentives related to accelerated depreciation. Of course, the recovering economy has also brought with it plenty of construction projects outside of the technology industry, including the new 2.2 million-square-foot Goldman Sachs World Headquarters Office in New York, as well as three towers (1.7 million, 1.3 million, and 2.6 million square feet) at Hudson Yards, the new Manhattan neighborhood being developed by billionaire Stephen Ross.
“There’s a recovery underway,” Murray says. “Tech firms are helping keep it going.”
