Tech's center of gravity shifts north to San Francisco

Fast-growing tech firms are shunning Silicon Valley for San Francisco to help them attract new talent

By Cameron Scott, IDG News Service |  Software, Silicon Valley, startups

With its cavernous lobby and exposed brick walls, Zynga's office exemplifies the type of warehouse and loft-like spaces that young tech companies are drawn to in San Francisco, particularly in the South of Market (SoMa) district.

"Tech guys want open ceilings with all the exposed wires and pipes," according to David Phu, director of information services at TRI Real Estate.

Some of the young Internet firms can locate in San Francisco because they don't need big industrial spaces, said Colin Yasukochi, director of research and analysis at the commercial real estate firm CBRE. And outsourcing means some companies require less space for engineering staff.

Pinterest's new headquarters are just around the corner from Zynga. Dropbox, which offers cloud storage, opened its doors in April five blocks away. Home vacation rentals provider Airbnb will expand next year into a cavernous building down the block from Zynga that now houses a Diamond Exchange.

Yammer, which was recently acquired by Microsoft, leased a spot nearby in early 2011.

Klout, a social-networking status ranking service that launched in 2011, set up shop in SoMa specifically to be close to Twitter, said Lynn Fox, a spokeswoman. Twitter founder Jack Dorsey's latest project, Square, has its offices in the privacy">San Francisco Chronicle building. And Yelp, which went public earlier this year, already has its offices in SoMa, but will move next year into a larger space in the same area.

Following Twitter to mid-Market are cloud-based help desk software vendor Zendesk and dating site Zoosk, who will also benefit from city tax incentives. Storify, maker of a social-media curation tool that launched last year, is among tech companies with offices nearby.

The boom in San Francisco has been influential enough to reverse some long-standing commercial real estate trends. Prices in the SoMa district have risen to meet, and even briefly exceed, those of the more traditional business district on the other side of Market Street, according to TRI Real Estate data. The mid-Market area has drawn so much rental activity that TRI will introduce the neighborhood designation for the first time in its next quarterly report on real estate trends in San Francisco, Phu said.

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