
San Francisco Office Rents Seen Topping Manhattan in 2015 - prostoalex
http://www.bloomberg.com/news/2014-08-14/san-francisco-office-rents-seen-topping-manhattan-in-2015.html
======
driverdan
Serious question for other startup founders: why would you put your company in
the bay area or even the state of CA?

It has never been easier to build a tech company, especially a SaaS-type
business with no physical inventory. You could home your company in a cheaper,
more business friendly city like Austin (disclaimer: I live in Austin). The
tax savings alone would cover the costs of going to SF once a week. Quality of
life is just as high (or higher, depending on your interests) in many other
cities.

Edit: Seems people are missing the fact that you could literally fly to SF
once a week for networking / meetings / events and it would still be cheaper
to live somewhere else. You don't have to miss out on being a part of the
network.

~~~
hugs
Disclaimer: I live in Chicago, but started my company in San Francisco. I've
been in gravitational orbit around the SF Bay Area my entire working life.
(For a majority of the past 6 years, I've spent 1 to 2 weeks a month in SF.)

The standard arguments for starting a company in California is: 1) You'll be
closer to venture capital. 2) You'll be closer to talent. 3) You'll be closer
to customers.

1) If you want or need venture capital, then it helps to play by their rules.
One rule is: "Locate your company's headquarters within an hour's drive of my
office." In my opinion, this is stupid and short-sighted, but from their
perspective, it kinda makes sense. Giving you capital means (most likely) also
sitting on your board of directors. And if those board meetings only require a
short drive (instead of flying), then their life is easier. Also, if they're
giving you a ton of money (many millions, perhaps), they'll sleep better at
night knowing you're close by and can meet in person at any time.

2) Access to talent is closely related to access to capital. VCs will want to
give you money only if you want to get big and make billions of dollars. (AKA:
Are you the next Google, Facebook, or Apple?) The implication is that if
you're going to scale big, you're going to need a ton of employees. If you're
based in the middle of nowhere, your growth potential is limited to the size
of your local talent pool. Again, I think this argument is silly and short-
sited. But I've heard VCs make this argument directly to me in the past.

3) It generally makes sense to be close to your customers, especially early on
when you don't have any. If you're a software company selling to other
software companies, it might make sense to be based in San Francisco,
regardless of how expensive it is to operate there. (You're going to make
billions, anyway, right?) If your early customer is the U.S. Government, it
might make sense to be primarily based near D.C. If your customer is the
media, it might make sense to be based in New York or Los Angeles. If you can
argue that there isn't a central cluster city of potential customers for your
business (or you can argue that it doesn't matter), then it's less likely
you'll need to move to be closer to them.

This is how I plan to do my next startup given the above three arguments: 1)
Don't plan on needing VC. Bootstrap and get to profitability as quickly as
possible. Then I won't have to play by VC rules and move closer to them. 2)
Don't plan on needing to grow big. Plan on hiring people wherever they are,
and create a remote-friendly working environment. 3) Live near an airport. As
long as I'm close to an airport with lots of direct flights, I can visit
potential customers whenever/wherever I want. (This is why I'd rather be in
Chicago near O'Hare Airport, than live in the middle of Kansas, for example.)

However, I still might move back to the Bay Area someday. But I'd only do so
for personal reasons - e.g. being closer to family and access to awesome
hiking trails.

[edit: spelling and grammar]

~~~
forca
Sounds great, and I hope you succeed with your new venture. I'm with you on
not wanting VC money. Nothing says "I don't have control" like a company in
debt or beholden to those who control the purse strings.

~~~
hugs
Until you never have to work again in your life, you'll always be beholden to
someone. But I'd rather be beholden to my family, my employees, and my
customers.

------
tokenadult
Last week patio11 had an interesting comment on residential rents in San
Francisco compared to rents in Tokyo.[1]

"Can I throw one into the list? The median cost of a one-bedroom apartment in
San Francisco gets you approximately two bedrooms in Tokyo... in a semi-luxury
apartment, in the most desirable neighborhoods. . . .

"Still though, given that I have had lifelong impressions of Tokyo as being
the most expensive place to live anywhere, I was pretty gobsmacked when I
started doing the math."

[1]
[https://news.ycombinator.com/item?id=8142684#up_8142803](https://news.ycombinator.com/item?id=8142684#up_8142803)

------
debt
Many people here in SF have been saying this is the direction we've been
heading for quite a bit(if it hasn't happened already): SF becomes Manhattan,
the surround Bay Area become the boroughs.

~~~
michaelochurch
San Francisco has no right to compare itself to New York. None at all.

New York has a legitimate demand problem, seeing as it's the capital of the
world.

California has an _artificial_ demand problem due to NIMBYs who corrupt zoning
boards, oppose reasonable development at every turn, and live in the past
while paying lip service to "building the future".

(It also has a problem with corrupt/dirty foreign money swelling into the
housing market, but that's an issue in New York as well.)

New York has solid public transportation. You don't need a car if you live
there. People bitch about the MTA, but it's remarkably cheap compared to
having a car anywhere in the US, and remarkably convenient considering how
much access it provides.

San Francisco is a city where you need a car, but can't afford it. Parking
costs are so bad that many garages post their _15 minute_ rates (often around
$3.00).

New York is hard-core urban and owns the positives and negatives that comes
from it, and New York runs itself. San Francisco companies are run from the
suburbs-- specifically, from an office park called "Sand Hill Road" in a
stretch of land that really ought to be reclaimed by the cows and orange
trees, because the people living there are contributing nothing but additional
work for the sewer system.

Manhattan is what it is, take it or leave it. (And there's nothing wrong with
leaving it.) California is fundamentally dishonest and hypocritical, because
it's full of people who pretend to be liberal but are, in many ways, worse
than the Manhattan old board when it comes to elitism.

New York isn't perfect. There's a lot that's badly designed or unpleasant
about it, but if you compare it to the cataclysmic mismanagement of California
at all levels, it's a breath of fresh air.

~~~
forca
Well said. I couldn't agree more.

I have always loathed California. It all seems so fake and far reaching, while
NYC, as you say, is brutally honest in what it presents: lead, follow, or get
out of the way.

~~~
michaelochurch
New York is a place that forces you to accept that human life is mindlessly,
ludicrously, and inexcusably unfair. It's not there in the abstract
("lifestyle" shows about rich losers, poverty on other continents) but quite
visible, every day. It's in front of you, and it's not easy to accept, but
after a while you learn from it and tune out the idiocy, while keeping the
insights that make you a better person.

In the suburbs (and the mentality that is now dominant in San Francisco _is_
suburban, because the locals have been priced out by fratty douchebags and
basic bitches) people have enough distance from what's going on that they
don't have to acknowledge the facts of social injustice. They can persist in
the delusional belief that "the rich" are more successful versions of
themselves, and _not_ preselected winners who've had social connections and
resources delivered to them since before birth.

I don't loathe "California", insofar as many people I like live there and it's
a big state with some beautiful national parks. I'm just disgusted by what it
has become, and especially by the utter defeat of the technology/engineer
culture in Silicon Valley at the hands of MBA C-students and people flushed
out of McKinsey.

~~~
forca
Again, well said. I agree with you. I, too, have some good friends who live
out there (cannot fathom why).

I like the raw energy of NYC, something no place in CA has, not even LA, and I
lived out there for almost 4 years. NYC trumps any large US city for pure
energy and things to do. I can be in Europe in a few hours, Canada in no time,
the food is second to none, the weather is decent, as you tend to get four
seasons instead of warm and cooler.

I've lived in Europe, Asia, and 7 US states. NYC is by far my favourite place
in the US to visit, and perhaps one day, live. NYC is walkable, something few
US cities can boast. Not even Chicago comes close to NYC in amenities -- and
Chicago cannot seem to get a grip on their gun violence problem, something NYC
has all but stamped out.

Let's not even mention the plethora of museums, restaurants, theatre choices,
educational institutions, and more that NYC has going for it. No other US city
can compare.

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7Figures2Commas
> "At the heart of high-tech’s growth is strong demand for products and
> services from consumers," Los Angeles-based CBRE said in its report. "As
> long as high-tech companies align themselves with this demand, the
> unrealistic growth and valuation expectations that defined the dot-com
> bubble should be avoided."

"Demand" must be the new "eyeballs."

There's no question that there is strong demand from consumers for high-tech
products and services. The question is how many startups are capable of
offering those products and services _profitably_.

Right now, much of the rent money in the Bay Area is coming from investors,
not cash flow.

~~~
mlinksva
> Right now, much of the rent money in the Bay Area is coming from investors,
> not cash flow.

Do you know what the ratio is? Was in 2000? Is in NYC or elsewhere?

How to calculate? Investment divided by revenue of startups, or divided by
city or metro gross product? Investment in current period, or cumulative with
some decay factor?

Is there an index that gets at this that I don't know about?

------
capkutay
It's hard not to be excited for the development going on in the Transbay area
of San Francisco[0]. Including the tower built by Norman Foster[1].

0:
[http://sf.curbed.com/archives/2014/04/04/mapping_big_changes...](http://sf.curbed.com/archives/2014/04/04/mapping_big_changes_for_rincon_hill_and_the_transbay_area.php#reader_comments)

1:
[http://sf.curbed.com/archives/2014/07/23/norman_foster_vies_...](http://sf.curbed.com/archives/2014/07/23/norman_foster_vies_for_second_tallest_with_sparkly_soma_tower.php)

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itg
It would be nice if the city allowed more skyscrapers to be built.

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ktothemc
I think I've written about this a lot. Prop M from 1986 capped the amount of
office space that could be added per year. The city has only run into the hard
cap a couple of times in its history.

[http://techcrunch.com/2014/07/22/the-pressures-driving-
adapt...](http://techcrunch.com/2014/07/22/the-pressures-driving-adaptive-re-
use-and-silicon-valleys-strange-reverse-commute/)

------
JohnTHaller
It's not really surprising given the growth of tech and the lack of growth in
finance. That plus the sheer volume of office space available in NYC compared
to SF (NYC has about 4x the total office space of SF).

Of course, NYC's overall infrastructure for tech companies is horrible
compared to SF.

~~~
comrh
> Of course, NYC's overall infrastructure for tech companies is horrible
> compared to SF.

What makes it horrible out of curiosity?

~~~
bigdubs
Well, as an NYC based startup I can speak to a at least one thing; TWC
Business/Commercial internet is garbage. Plain and simple. We're lucky enough
to have FIOS in our building and that has been pretty decent, it still goes
out quite a bit.

~~~
Retric
As soon as you move past the low end of cable / FIOS Internet speeds NY has
awesome commercial network bandwidth. Think OC 192 and beyond. You can often
make a deal with another company in your building to add bandwidth or
redundancy.

Also,
[http://en.m.wikipedia.org/wiki/Multihoming](http://en.m.wikipedia.org/wiki/Multihoming)
FIOS and cable Internet or even just DSL is a good option if you need a little
more stability or bandwidth.

~~~
JohnTHaller
FiOS isn't available in many areas of the city (I can't get it at home where I
do most of my work). TWC is incredibly unreliable (daily outtages of a few
minutes, monthly/bimonthly outtages of a full day or so). I have no other
alternative other than slow/unreliable DSL or exceedingly overpriced (per GB)
mobile hotspots.

~~~
potatolicious
FiOS is actually "available" in _most_ parts of the city - i.e., there's a
Verizon FiOS line running right in the street in front of your apartment.

The main problem are buildings and landlords. Many landlords and supers
receive kickbacks from TWC to prevent Verizon from accessing the building and
delivering the last-100-feet service.

The best way to improve the state of internet in NYC is for the city to start
busting landlord heads.

~~~
JohnTHaller
It's not available where I am. Not on my block. Or the next one. Or the next
one. Verizon has no ETA on when it will be and hasn't been installing any new
fiber in my neighborhood in a long time. It has nothing to do with my building
owner. The owner-occupied single and two family properties on my block (or the
next one, or the next one, etc) can't get it either.

~~~
Retric
Absolutely no offence indented, but this is the type of thing you work out
before signing a long term lease. Not that that in any way helps you, but FIOS
is available in much of NYC so if your looking to move to that area it's an
option.

In your case, bonding with wireless or DSL in case of outages is probably
worth it. The difference between slow internet and no internet is huge. Other
options include wireless internet cards for PC's / laptops, it can get vary
expensive but for a small staff that occasionally does off site demo's it's
also vary useful for that.

~~~
JohnTHaller
Unfortunately, wireless is hugely expensive... as in $10 per GB expensive. As
posted in another comment, I have a Verizon hotspot that I use as a backup for
the unreliable Time Warner Cable connection.

DSL isn't an option as, like most (possibly all) of NYC, I only have a Verizon
or someone that resells it. I tried it once years ago and was out of service
for 7 days of my 1 month trial because a Verizon tech randomly unplugged
something at the local box.

My only real choice is to move to another neighborhood. But I've begun looking
into moving to San Francisco anyway, since it's a much better environment for
tech companies (unless you're in finance technology, which I used to do).

------
jpkeisala
Slightly off topic, it would be interesting to see how the rents compare to
Hong Kong, Tokyo, London etc...

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fred_durst
I think it's funny how the same NIMBY policies that all the techno-
libertarians hate so much, are the same policies that made San Francisco a
more desirable place to live for said techno-libertarians than San Jose and
the East Bay.

Personally, I hate NIMBYs but I also hate SF.

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lsc
>This time is probably different, the company said.

Chuckle.

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kirinan
This only makes sense. The amount of multi-million dollar seed rounds has
increased and people want the best office space to attract employees. The more
competition in the market for the best office space, the more people can
charge and then boom you get what you have now : hyper inflation in costs. I
actually wonder how long until people start looking at the north bay like San
Rafael for office space just to save on cash. I know people are already
targeting Oakland.

~~~
seanmccann
North Bay is one of the least assessable places in the Bay Area (to SF, PA,
SJ). Oakland has a lot of "room" to grow.

