SJ Downtown: Where are the tech firms?

Downtown: Where are the tech firms?


By Jon Ann Steinmetz, Mercury News

From all appearances, Adobe Systems has built a happy home for 2,300 employees in its downtown San Jose headquarters — completing three office towers in the past 10 years and recently eyeing land nearby for more space.

So why haven’t other high-tech companies followed its lead? For the better part of two decades, city officials have tried to lure Silicon Valley companies downtown, to little avail.

The answer seems to lie in a combination of reality and perception. It really is more expensive to operate in tightly packed downtowns, and tech culture has long favored the free-flowing, casual atmosphere of a sprawling campus over the imposing formality of a high-rise.

But cost and culture aren’t the only considerations for tech companies, said Nate Goore, principal of San Francisco architecture firm MKThink. Flexibility matters, too, and the tilt-up buildings typical of Silicon Valley office parks are much faster, easier and cheaper to build than steel-framed towers on crowded city streets.

“Particularly with technology companies, the order of magnitude of staffing changes can be dramatic,” he said. “You can go from 10 people to 300 in a matter of months.”

Agile Software, which moved from downtown San Jose to the Edenvale area in 2004, couldn’t find a place to accommodate its space needs as it grew from the city’s Software Business Cluster to almost 200 employees locally.

`Walk to the Fairmont’

“We really liked the downtown experience. The De Anza Hotel was convenient for customers, we could walk to the Fairmont, we could walk to the Shark Tank,” said CEO Bryan Stolle. “Our problem was that it was hard to get a lot of space. We were in four or five buildings downtown — it was a challenge and a problem.”

Agile now occupies 80,000 square feet in two buildings, and has options on 80,000 more.

Stolle said the campus setting probably has made employees more collaborative; just the task of having to wait for elevators to talk to colleagues “was a real psychological barrier,” he said.

“I doubt it’s any more time to walk down the hallway and get on the elevator, but for some reason there’s this mental thing. People will pick up the phone, or they’ll e-mail,” rather than talk face to face.

More esoteric factors come into play as well, says Drew Arvay, managing partner of the San Jose office of NAI BT Commercial.

Downtowns tend to thrive “on a moving business format,” he said. “You move into a parking garage, do your business, then empty the parking space. Over the course of a day, a parking spot may have five or seven users.”

Contrast that with the typical tech company, in which workers park their cars for eight or more hours at a stretch. That means the companies have to have more spaces on site for employees, and in a central business district, that gets pricey fast.

In a downtown, Arvay said, “you either have to pay higher salaries, or you cover the cost of parking, and then you still have the issue of whether there’s enough capacity.”

Real estate brokers estimate that paying for employee parking downtown adds 33 to 40 cents per square foot each month to office rents.

“Most R&D rents are 75 cents to $1, so it’s not just a small margin more expensive to them,” Arvay said. “When you figure out what they’re used to paying, then adding 40 cents a foot — it’s not even close in most cases.”

Adobe is the first major tech company to come downtown since Apple Computer leased 126,000 square feet in River Park Tower in 1988. Adobe was lured by a $35 million subsidy by the San Jose Redevelopment Agency, which “essentially allowed them to have free parking,” Arvay said.

Adobe CEO Bruce Chizen recently said the company’s workers love being downtown and often use Caltrain to reach Adobe’s San Francisco offices.

Beyond cost, the sprawling, low-slung campus has offered some functional advantages.

When electronics manufacturing was done on site, and computers were the size of refrigerators, one- and two-story buildings made the most sense.

“Going up elevators with large equipment has never been an ideal combination,” said Arvay.

Ground floor

And even now that computers are shrinking to hand-held size, testing and lab equipment still needs to be on ground floors.

Campuses, with fewer, larger floors, also offer the space “to construct an interior environment that creates the type of interaction among employees that you’d like to have,” said architect Goore.

But Kevin Schaeffer, principal and managing director for design firm Gensler, said it’s time to take another look at the cultural preference for large spaces, especially now that so much manufacturing takes place overseas.

“What we’ve been left with is the shell of these one-story buildings that have sprawled endlessly on, but what do you do with them?” he said. “It’s not a good use of the land.”

He thinks building convenient mass transit near downtown offices is key to changing the mindset of sprawl. And Goore adds that as costs rise for companies to provide their own cafeterias, gyms and the like, “downtowns, where all those amenities are being offered by somebody else, are going to become more attractive.”

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