On Monday, Pulse will have its first day at our brand new office in San Francisco - our fifth office. We started in Palo Alto coffee shops - where I was “interviewed” for about 30 minutes and then officially started working later that night.
We then graduated to a co-working space. It held us until we were a 5 person team.
We then made it to our own office in the fall of 2010.
Soon after, we grew out of that space and up to a larger office in downtown Palo Alto.
About six months ago, we hit 20 people and knew we wouldn’t have enough space for interns during the summer. So we began the search for our fifth office space…
If you take one look at office space in downtown Palo Alto, you’ll notice that there is a serious crunch. According to 42Floors, which combines commercial real estate listings from brokerages, landlords and Craigslist, there is currently not a single office space available in downtown Palo Alto over 1000 square feet.
If you do the same search for San Francisco, you’ll have many more options.
When I was taking a look at office space in April of 2010, I was seeing about $33 per sqft/year in downtown Palo Alto. Today, I’m seeing about $54 per sqft/year. Contrast that with prices for San Francisco office space within a mile of the Caltrain station and you’ll find you can get space for about the same price you could get in Palo Alto two years ago. Not only are there very few spaces in Palo Alto within walking distance of public transportation, but the spaces that are available are small and expensive.
Why is this happening? It’s no secret that more startups are getting funded and can afford office space, which makes for a crowded commercial real estate market. It certainly doesn’t help that Palantir Technologies controls a significant share of the market for larger space with offices at 151 University, 156 University, 101 Forest and 100 Hamilton (and those are just the ones I know of). The larger problem remains that while startups have been growing faster than ever, the Palo Alto real estate market hasn’t kept up. Buildings that could add a second, third or fourth floor have remained unchanged. There are several store-front spaces that have been sitting empty for years, but they’re zoned for retail space and startups can’t legally take them over.
So while some may think that “all the startups are moving to San Francisco because it’s cooler/hipper/younger”, it’s just not true. Making the move to San Francisco is not a matter of preference for a more lively scene or exposure to more technical or design talent. It’s a matter of necessity - there is simply no more room left to grow in Palo Alto.