Sephora headquarters moving to 350 Mission — top S.F. office deal during pandemic.
Beauty company Sephora is moving its U.S. headquarters to 350 Mission St., a glassy tower in the Transbay area, after signing San Francisco’s biggest new office lease during the pandemic.
The LVMH-owned company subleased 286,000 square feet across 16 floors from Salesforce. The tech company previously occupied all 30 floors in the tower until it scaled back its offices due to remote work and listed around half of 350 Mission St. for sublease in 2021. Sephora will move into the space in 2023, consolidating two existing offices at 425 Market St. and 525 Market St.
The deal is the city’s biggest since Visa’s headquarters lease at Mission Rock in November 2019, which was slightly larger at 300,000 square feet. The largest lease during the pandemic, excluding renewals, was previously financial tech startup Chime’s 191,833-square-foot lease at 101 California St. last year.
Sephora’s deal is evidence of demand for high-end downtown buildings and follows Yelp’s headquarters lease in the same building. The deal builds upon modest growth in the city’s office market at the end of 2021, when the vacancy rate fell slightly to 19.9% from 20.5% in the prior quarter.
New leasing activity in 2021 totaled 4.8 million square feet,
more than double the 2.2 million square feet in 2020 but less than 2019’s 7.7 million square feet, according to real estate brokerage Cushman & Wakefield.
“350 Mission is thoughtfully designed to support and enhance the future of work at Sephora, which puts a strong focus on our employee culture, collaboration and flexibility,” Jeff Gaul, Sephora senior vice president of store development, said in a statement. “Most importantly, this move consolidates the number of buildings our corporate employees work in and supports our hybrid in-person and remote work practices while providing ample room for growth as Sephora continues to be a leading employer in the Bay Area.”
He cited the tower’s views of the Bay Bridge, collaboration space, and easy access to restaurants and gyms as draws to the building.
Salesforce didn’t immediately have comment.
Although leasing activity has picked up, the omicron variant has pushed coronavirus cases to record highs in California and the Bay Area, throwing office return plans into disarray. City officials estimate 15% of San Francisco office workers will stay remote permanently when the economy stabilizes in 2023, one of the reasons business tax revenue is expected to grow by only 1% in the next fiscal year.
Sephora parent LVMH, headquartered in Paris, had record revenue of 44.2 billion euros ($50.6 billion) in the first nine months of 2021, up 46% from the prior year. Luxury goods have seen a boom in sales during the pandemic, thanks in part to the wealthy benefiting from a soaring stock market and other investments. The company’s other brands include Louis Vuitton, Christian Dior and Fendi.
LVMH’s Selective Retailing division, which includes Sephora, had organic revenue growth of 13% in that period compared to 2020, but was still down 23% compared to 2019.
Sephora’s activity returned to 2019 levels despite store closures, and it opened spaces for the first time in Kohl’s stores, the company said.