Snowflake's new corporate hub may be based in Montana, but the tech company is creating waves around its former San Francisco Bay Area headquarters after signing one of the region's largest office deals in the wake of the pandemic.
The cloud-based data storage company has agreed to sublease from fellow tech giant Meta a three-building office campus in Menlo Park, California, a deal that totals roughly 773,000 square feet.
Meta confirmed the lease in a statement provided to CoStar News. The arrangement will run through 2033, according to JLL marketing materials, and not only takes down one of Silicon Valley's largest sublet availabilities but also marks the latest evidence of tech tenants' willingness to sign onto blockbuster deals after years of muted activity.
Warrick Taylor, Snowflake’s vice president of workplace and real estate, said the expansion was driven by the fact that the Bay Area has been “at the heart of technology and innovation for decades, [and] the most data-driven enterprises, leading startups and best talent in the world are based here, so it’s a natural fit.”
Snowflake, which in 2021 relocated its headquarters from the Bay Area to Bozeman, Montana, will take over all three buildings at 125 Constitution Drive, 135 Constitution Drive and 100 Independence Drive within the Menlo Gateway campus, a project developed in the early years of the pandemic that's owned by Bohannon Cos.
“Snowflake has been on an unprecedented growth trajectory, and our incredible new campus will accommodate our continued growth in the years to come,” Taylor said of the company's fast-growing workforce. Snowflake employs upward of 7,000 people, a sharp spike compared to the 4,000 employees it reported a couple of years ago.
Back to growth mode
The sublease deal is a significant boost to the growing sense of optimism that tech companies, after years of dormant leasing activity, are gradually returning to the national office landscape.
The tech industry so far this year has accounted for almost 20% of the total office leasing activity throughout the country, according to a recent CBRE report, a share that totaled just shy of 10 million square feet of deals for the quarter ended Sept. 30.
That renewed interest in physical office space among companies such as Snowflake marks a continuation of the slow but steadily rising demand throughout the tech industry, which up until recently was responsible for offloading record amounts of space and adjusting to pandemic-era shifts.
Meta, for example, listed the Menlo Park campus for sublease last year as part of its ongoing effort to optimize its global real estate footprint. A spokesperson for the tech giant declined to comment on the Menlo Park deal, earlier reported by the San Francisco Chronicle.
The space is in addition to the roughly 237,000 square feet Snowflake leases across the two buildings at 450 Concar Drive in the nearby Silicon Valley suburb of San Mateo, California, which used to house the company's corporate headquarters prior to the Montana move when it decided to become "headquarterless."
The company also recently tripled its presence across the bay in Dublin, California, as part of a lease that expanded its footprint from about 40,000 square feet to 153,000 square feet.
While the Menlo Park space will be its largest North American office, Snowflake's Taylor said the company would remain without a headquarters.
The expansion is a major win for the greater San Francisco Bay Area, which has faced steep occupancy losses in recent years as many tech companies aggressively shrunk their real estate footprints in an effort to curb expenses and redirect capital to higher-priority spending.
In Silicon Valley — where tech companies contribute nearly two-thirds of the region's leasing volume — the office vacancy rate has soared past 16%, the highest in 20 years.
While leasing has rebounded slightly after hitting a post-pandemic trough last year, the regional availability rate is stuck at about 25%, according to CoStar data, and rents have fallen from their pre-pandemic highs of more than $80 per square foot to the current average of roughly $68 per square foot.
For the record
A team of JLL brokers including Mark Bodie, Toss Vallentine and Clarissa Richardson represented Meta. Luke Ogelsby, Nick DeMartini and George Fox of CBRE represented Snowflake.