It may have headlined one of the largest bank failures in U.S. history, but Silicon Valley Bank is back on the scene with plans to take over a piece of high-profile San Francisco office space.
The regional financial institution, long favored by global tech companies, confirmed it is nearing a deal to sublease roughly 60,000 square feet of office space leased by LinkedIn at 222 Second St. The agreement has not been finalized, an SVB spokesperson said, but if and when it is completed would be a "relocation" that underscores the bank's commitment to maintaining a physical presence in the city.
“The new SVB office space will continue to enable us to provide a high-quality work environment for our employees as well as collaboration and event space to host and interact with our clients,” the spokesperson said in an emailed statement. The pending sublease arrangement is planned to replace the bank's existing office space at the nearby tower at 505 Howard St., where it has been leasing more than 80,000 square feet.
The new space is seen as a component of SVB's future as an affiliate of First Citizens Bank, which acquired the Silicon Valley institution after it was taken over by federal regulators earlier this year.
While it would represent a downsizing for the bank — the failure for which became the nation's second-largest among financial institutions in U.S. history — it is a welcome sign for San Francisco's office market, which has struggled to regain its pre-pandemic momentum.
The significant concentration of tech companies in the city, which before the pandemic had been the nation's priciest office market, has made it especially vulnerable to the fallout from remote work, layoffs and other corporate cost cuts implemented as tech giants such as Google, Salesforce and Meta have shifted their focus from growth to profitability. That shift has resulted in an unprecedented amount of sublease availability for the greater San Francisco area and an office vacancy rate that has soared since pre-2020 levels.
In downtown San Francisco, the average vacancy rate among leased office buildings has jumped past 25% from less than 7% reported in 2019, according to CoStar data. Large tech companies such as LinkedIn have contributed hefty chunks to the nearly 13 million square feet of available sublease space across the market, adding even more pressure to declining rents and landlords competing with empty listings.
Once it closes, the deal with SVB, reported earlier by The San Francisco Chronicle, would land shortly after Sunnyvale, California-based LinkedIn officially listed for sublease some of its San Francisco hub space. The professional social network, which is owned by Microsoft but operates independently, last month put up the space SVB is expected to take over as part of a plan to lay off another nearly 700 employees, its second round of job cuts after letting go of about 715 workers earlier this year.
LinkedIn preleased the entire 450,000-square-foot tower at 222 Second St. in 2014 from developer Tishman Speyer before the building’s completion the following year. The downtown space was intended to consolidate LinkedIn’s San Francisco workforce under one roof, and the deal was among the largest in the city’s history.
For SVB, the sublease space would fall in line with a strengthening trend across the country among companies shrinking their real estate footprints in response to a combination of lower office use, permanent flexible-work policies and an interest in cutting extraneous expenses. So far this year, leasing volume has dropped by 17% compared to its annual average in the late 2010s, according to CoStar analysis, a decline largely attributable to deal sizes that are about 20% smaller.