Spo­tify departs Warfield build­ing

San Francisco Chronicle - - BUSINESS REPORT - By Roland Li

When mu­sic stream­ing com­pany Spo­tify moved to San Fran­cisco’s Mid-Mar­ket area in 2013, its ar­rival was hailed by city of­fi­cials as an­other re­vi­tal­iza­tion of the trou­bled neigh­bor­hood.

The Swedish tech com­pany leased three floors of of­fice space in a 1922 build­ing at 988 Mar­ket St. that in­cludes the Warfield the­ater concert venue. It was a “per­fect fit” for the mu­sic-fo­cused com­pany, Spo­tify said at the time.

But in the past month, the com­pany moved out be­fore its lease ended — and will no longer be el­i­gi­ble for the con­tro­ver­sial Mid-Mar­ket pay­roll tax break. The 2011 pro­gram gave nine com­pa­nies — in­clud­ing Spo­tify, Twit­ter and Zen­desk — a tax break in ex­change for open­ing of­fices in the neigh­bor­hood and pro­vid­ing com­mu­nity ben­e­fits like do­na­tions to non­prof­its.

Spo­tify’s de­par­ture un­der­scores con­tin­ued chal­lenges in the Mid-Mar­ket area, where tech in­vest­ment has brought thou­sands of high-pay­ing jobs but hasn’t changed a chal­leng­ing street mi­lieu of poverty, home­less­ness and drug deal­ing.

Spo­tify’s new of­fice is the Mer­chants Ex­change Build­ing in the north Fi­nan­cial Dis­trict, which in­cludes the swanky Ju­lia Mor­gan Ball­room. The com­pany moved in about a month ago, said a Spo­tify se­cu­rity guard who gave his first name as Charles.

The change was mo­ti­vated in part be­cause some Spo­tify work­ers felt un­safe, said two for­mer Spo­tify work­ers, who re­quested anonymity to avoid reper­cus­sions from for­mer or

cur­rent em­ploy­ers. The Mid-Mar­ket and Ten­der­loin neigh­bor­hoods have some of the high­est violent crime and poverty rates in the city, ac­cord­ing to gov­ern­ment data.

Last year, a fe­male Spo­tify em­ployee was slapped in the face by a home­less woman near the of­fice, the for­mer em­ploy­ees said. A per­son in the real es­tate in­dus­try fa­mil­iar with the build­ing who was not au­tho­rized to speak pub­licly about the episode also con­firmed that the in­ci­dent hap­pened.

“There were safety con­cerns,” one of the for­mer em­ploy­ees said, in­clud­ing drug deal­ing on the cor­ner. “I think it re­ally alarmed peo­ple.”

Em­ploy­ees who had moved from Swe­den were un­ac­cus­tomed to San Fran­cisco’s home­less­ness cri­sis, the per­son added.

Spo­tify’s new Fi­nan­cial Dis­trict of­fice is the cen­ter of old money, across from Wells Fargo head­quar­ters and a block from the one­time head­quar­ters of Bank of Amer­ica.

Spo­tify’s for­mer Mid-Mar­ket neigh­bor was the Crazy Horse, a strip club, and across the street is the empty 6x6 shop­ping mall, which has strug­gled to find re­tail ten­ants.

Spo­tify didn’t re­spond to re­quests for com­ment.

Its San Fran­cisco work­force has fluc­tu­ated since it went pub­lic in April. There were 30 to 50 em­ploy­ees in San Fran­cisco this year as the com­pany sought to cut costs, said one of the for­mer em­ploy­ees.

The com­pany is now hir­ing mostly in Stock­holm and New York. The web­site lists 72 job open­ings at its Stock­holm head­quar­ters, 109 in New York, 28 in Lon­don, four in Los An­ge­les and two in San Fran­cisco.

Spo­tify leased 13,500 square feet in 2013, enough space for about 80 em­ploy­ees. At its new Fi­nan­cial Dis­trict of­fice, it is sub­leas­ing 15,650 square feet from tech com­pany Dis­covia, with the deal ex­pir­ing next Oc­to­ber, ac­cord­ing to bro­ker­age data.

As part of its tax break, Spo­tify agreed to vol­un­teer and pro­vide meals at non­prof­its in­clud­ing the Cut­ting Ball The­ater, and to sub­si­dize art and mu­sic tick­ets in the Ten­der­loin, ac­cord­ing to a com­mu­nity ben­e­fit pact it signed this year.

Spo­tify has do­nated more than $3,000, pur­chased more than $182,282 in food ser­vices, held five events and com­pleted 12½ vol­un­teer hours from Jan­uary through Novem­ber, ac­cord­ing to city fil­ings.

“The com­mu­nity ben­e­fit agree­ments have re­sulted in mean­ing­ful en­gage­ment be­tween the com­pa­nies and the com­mu­nity. We’ve seen the com­pa­nies stay and grow,” said Bill Barnes, a spokesman for the city ad­min­is­tra­tor.

Del Sey­mour, founder of non­profit job train­ing pro­gram Code Ten­der­loin and a neigh­bor­hood tour guide, said Spo­tify has been a “steady partner.”

“Spo­tify has spon­sored events, at­tended grad­u­a­tions and do­nated equip­ment,” he said. “We have not done any re­cent com­pany tours, al­though we have Spo­tify in­di­vid­u­als from time to time.”

But Don Falk, ex­ec­u­tive di­rec­tor of the Ten­der­loin Neigh­bor­hood De­vel­op­ment Corp., a non­profit af­ford­able hous­ing oper­a­tor, said that Spo­tify’s com­mu­nity ben­e­fit agree­ment was “rel­a­tively weak,” in part be­cause of the soft econ­omy at the time it was signed.

Spo­tify hasn’t ap­plied for a tax ex­clu­sion for the cur­rent year. It would be in­el­i­gi­ble for the time pe­riod af­ter it moved since its of­fice is no longer in the area, ac­cord­ing to the city ad­min­is­tra­tor’s of­fice. The dead­line to ap­ply is the end of De­cem­ber.

Ten­der­loin ac­tivists ac­knowl­edged a safety prob­lem.

“Are things bet­ter than a month ago? Yes. But it’s not ac­cept­able,” said Randy Shaw, ex­ec­u­tive di­rec­tor of Ten­der­loin Hous­ing Clinic, which works with low-in­come ten­ants.

Shaw said the Warfield build­ing’s block is rel­a­tively safe, but the next block west has crime problems. “I don’t see any problems there. That block to me seems very good to me,” he said.

Other tech com­pa­nies in the build­ing in­clude Zen­desk, Match Group and Benchmark, a ven­ture cap­i­tal firm known for its in­vest­ment in Uber.

Zen­desk leased space in 988 Mar­ket as part of a re­cent ex­pan­sion of its Mid-Mar­ket head­quar­ters, which is spread across sev­eral build­ings.

“There is enor­mous need ev­ery day on the streets, but there’s also enor­mous po­ten­tial,” Tif­fany Apczyn­ski, Zen­desk vice pres­i­dent of pub­lic pol­icy and so­cial im­pact, said in a state­ment. “We are com­mit­ted to cul­ti­vat­ing what makes this neigh­bor­hood spe­cial, now and in the fu­ture.”

Spo­tify hasn’t en­tirely left the area. On Fri­day, the Pow­ell Street BART Sta­tion was filled with col­or­ful Spo­tify ads, high­light­ing the com­pany’s most pop­u­lar songs and playlists of 2018.

Roland Li / The Chron­i­cle

Spo­tify re­cently moved out of 988 Mar­ket St., which houses the Warfield the­ater, in San Fran­cisco’s Mid-Mar­ket neigh­bor­hood. For­mer em­ploy­ees said safety con­cerns led to the move.

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