San Francisco Chronicle - (Sunday)
Politics, prices, real estate could drive job boom away
If Salesforce seems to be everywhere, you’re not imagining things. The software company is now San Francisco’s largest private employer.
But its ebullient chief, Marc Benioff, sees a ceiling to the growth that led his company to overtake Wells Fargo, San Francisco’s last big bank. It now has 8,400 employees in the city. With three skyscrapers clustered in the southern Financial District, he anticipates Salesforce adding thousands more — though he worries about where he’ll put them.
“They’re not creating more San Francisco,” he said.
So the company is growing elsewhere, too. In Indianapolis, it has 1,700 employees in the state’s tallest building. That edifice,
too, is called Salesforce Tower. Glass and steel can’t feel, but if it did, you’d think the original would feel jealous. London has a Salesforce Tower, and a New York one opened last year. More are on the way: Salesforce won’t say where, but Chicago and Atlanta are logical spots, based on where it’s adding employees. The unemployment and office vacancy rates in San Francisco are near historic lows, while tech stocks, including Salesforce, have set new highs. Housing prices continue to soar, with few homes coming on the market. For San Francisco’s fastest-growing businesses, there are two places to put employees: up or out. The answer is often both, with software engineers more typically getting the pricey space in new towers at headquarters and support and sales going to cheaper, roomier cities. Zendesk CEO Mikkel Svane tried Boston before settling his support-software company int San Francisco in 2009. In 2011, Zendesk moved to an office at Sixth and Market streets. It is now overflowing; having just acquired Base, a sales-software startup, and picked up an additional 125 employees, it’s rearranging its 900 San Francisco workers among five Mid-Market buildings and just signed a lease for 52,000 square feet in the area, a 30 percent increase in space, a company spokeswoman said.
Svane’s affection for San Francisco aside, though — he wrote a book, “Startupland,” praising the city as a mecca for entrepreneurs — Zendesk is hedging its bets. In 2014, it opened a small office in Madison, Wis., after Svane visited and found the town reminded him of his hometown of Copenhagen.
“We’re definitely hiring faster in other cities than in San Francisco,” Svane said.
The company has just signed a new lease for a 60,000-squarefoot office in Madison — four times the size of its first outpost, with room for more than 300 employees. United added a nonstop flight to the city in January, making it even more attractive.
Lyft has found similar success in Nashville, a hub for the ride-hailing company’s customer service operations. It now has more than 750 people in the city fielding rider and driver complaints — double what it originally envisioned, General Manager Sam Nadler told the Nashville Business Journal in August. A WeWork building downtown accommodates an overspill of employees.
Slack, the communications software company whose new offices look up at Salesforce Tower from across Salesforce Park, has signed a lease on a building in Denver, a spokesman said. The state of Colorado is offering it $10.6 million in tax credits for a development that could generate 550 jobs.
Square, the payments processor, is adding 300 employees in St. Louis, the hometown of CEO Jack Dorsey, doubling its workforce; it might soon grow to 800. It has had a small Atlanta office since 2012, but in April, Square signed a lease for a 13,000square-foot office there with room for 100 employees.
Twitter, which Dorsey also runs, expanded its Boulder, Colo., office in 2016, with room for 200 employees; they include data engineers who help speed feeds of tweets around the world.
Yelp has had lobbyists in Washington for years, but the business reviews site is adding salespeople to the mix. It opened a 52,000-square-foot office near the city’s Verizon Center in March and plans to have 500 employees. The company is more distributed than most San Francisco firms: It has about 2,000 people in San Francisco, communications chief Vince Sollitto said, with 1,000person offices in Chicago, New York and Phoenix — mostly salespeople who pitch local businesses.
It’s long been an irony of the tech industry that despite making tools for global communication, its leaders prefer to house workers in physical proximity. That insistence on keeping everyone under one roof is weakening under various pressures.
Dorsey faces more than just economic concerns in planning his recruiting. Twitter is under fire from members of Congress and conservative critics accusing it of liberal bias. In testimony before a House committee in September, Dorsey made a surprising statement about his commitment to the city Twitter has called home since it was founded in 2006.
“We recognize that we need to decentralize our workforce out of San Francisco,” Dorsey told Rep. Larry Bucshon, RInd., in response to a question about whether Twitter’s workforce had diverse life experiences. “Not everyone wants to be in San Francisco. Not everyone wants to work in San Francisco. Not everyone can afford to even come close to living in San Francisco, and it’s not fair.”
Dorsey said Twitter was “considering ways of how we hire more broadly across every geography across this country” and that he was “personally excited to not consider San Francisco to be a headquarters.”
Salesforce is less equivocal about its devotion to San Francisco. Benioff likes to point out that he’s a fourth-generation San Franciscan.
“San Francisco has always been and will always be our world headquarters,” said Elizabeth Pinkham, who joined the company in 2000 and is now executive vice president of global real estate. “We’re San Francisco born and bred.” But she praises Indianapolis as “a fantastic hub for talent.” It is hiring designers and engineers there, not just support functions.
Pinkham notes that Salesforce is still moving into Salesforce Tower in San Francisco and taking more space in Salesforce West, its building across the street. Could Salesforce go past 10,000 employees, a figure Benioff has previously stated was its local maximum? “We’ve definitely got a plan, but we’re always trying to be flexible,” she said. Besides its hiring, the recent acquisition of Mulesoft, a San Francisco software company with more than 1,000 employees worldwide, helped bump up Salesforce’s numbers. Mulesoft’s employees moved into Salesforce Tower in August.
Pinkham would not comment on The Chronicle’s report that Salesforce is eyeing 45 Fremont, a 34-story tower adjacent to its Salesforce East building that would fit right into the urban campus it’s assembling.
Salesforce’s revenue crossed $10 billion last year, and it expects that to rise about 25 percent this year, a breakneck pace of growth that means more hiring. Those workers have to go somewhere, either into San Francisco’s changing skyline or into new Salesforce Towers sprinkled across the country and around the world.
With all this competition for space in San Francisco — only two office towers under construction are not yet leased, and local rules limit new office space — some companies are tapping out, as are prospective hires.
“Expansion in San Francisco is not a priority,” Yelp’s Sollitto said. “When given the opportunity to go elsewhere, employees certainly consider it. It’s getting very tough to compete for talent in the San Francisco Bay Area.”
Poaching by other tech companies — a common practice in the Bay Area, thanks to California’s ban on noncompete clauses — is an expensive problem, he said. Facebook, Google, Cisco and other companies headquartered in Silicon Valley are expanding in San Francisco, adding to the demand for office space and workers.
Sollitto also notes that San Francisco is “not the easiest place to do business.” Proposition C on the November ballot, also known as the Our City Our Home initiative, would raise the gross receipts tax on corporate revenue above $50 million to fund homeless services. Sollitto calls the measure “ballot box budgeting.”
But the city retains a magnetism for entrepreneurs like Salesforce’s Benioff and Zendesk’s Svane, a ferment of ideas about the future in a beautiful setting. Benioff sees the past decades’ growth and change as San Francisco achieving its destiny as a “top five” world city.
John Del Santo, senior managing director for the consulting firm Accenture’s western region, has seen the city through boom and bust and boom.
“I definitely think there will be pressure on the economy, the streets, the civil services, because there doesn’t seem to be a slowdown of talent wanting to be here,” he said. “Frankly, it’s the interesting work to be done.”
There’s San Francisco’s conundrum: So many ideas for changing the world in just 49 square miles; tech companies making billions while homelessness, addiction and poverty fester on its streets; a persistent resistance to the kind of growth new arrivals seem to demand.
With not enough space, with pressure from City Hall and the Capitol in Washington to share the wealth, the leaders of the city’s tech sector may have no choice but to broaden their sights.
“We have what we have,” Benioff said. “That’s the thing about San Francisco.”