Politics, prices, real es­tate could drive job boom away

San Francisco Chronicle (Sunday) - - FRONT PAGE - By Owen Thomas

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.” Chron­i­cle staff writer Roland Li

contributed to this re­port.

Photos by Gabrielle Lurie / The Chron­i­cle

Tay­lor Skillin (cen­ter) chats with Miki Yoshida (left) dur­ing happy hour at Zen­desk’s head­quar­ters in S.F.

Anna Kowal­czyk (left) and Benny Ebert-Zavos work for soft­ware gi­ant Sales­force, San Fran­cisco’s largest pri­vate em­ployer.

Photos by Gabrielle Lurie / The Chron­i­cle

Shantel Vil­lar­roel (right) and Pooja Deopura work in Sales­force Tower in S.F. Other cities also have Sales­force Tow­ers.

Mon­ish Venu takes a selfie with friends Prag­nesh De­sai (left), Pa­vani Mangipudi and Neeraj Vish­nu­vard­han in the lobby of Sales­force Tower in San Fran­cisco. As Sales­force grows, its chief won­ders whether San Fran­cisco has enough space for its em­ploy­ees.

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