WeWork, a shared-workspace renter, gobbled up even more space in San Francisco on Tuesday with the signing of its largest lease in the city — a nearly 250,000-square-foot deal that further solidified the company’s presence as one of the city’s biggest commercial tenants. The company will transform the Union Bank Building, a mid-’60s brutalist tower at 430 California St., into another of WeWork’s signature trendy and amenity-heavy co-working spaces, its 13th in the city. The bank, which sold the building in 2016, has been moving employees out over the past 18 months and will completely vacate the tower ahead of WeWork’s projected opening in February. WeWork has grown ferociously in San Francisco over the past year, and it is now the city’s fourth-largest tenant behind Wells Fargo, Salesforce and PG&E. This growth has accelerated over the past 12 months, as it roughly doubled its leased space in 2017, according to Robert Sammons, research director for Cushman & Wakefield. The California Street building will expand its footprint by another 33 percent. “Certainly in the last year they have become one of the fastest-growing tenants in San Francisco,” Sammons said. “If they can find space they will continue to grow, although it’s becoming harder and harder to find space in San Francisco.” The additional 247,000 square feet in the Financial District will give WeWork a total of 1.04 million square feet and 13 locations in the city. It is the largest lease signed in San Francisco in 2018 — and not the last one that WeWork plans to sign in the city this year. “We are seeing in San Francisco, and lots of other markets in the West and the U.S., that we have more demand than supply, which is a good problem to have,” said Jon Slavet, WeWork’s managing director for U.S. and Canada West. “We’re constantly digging and searching and negotiating for more place.” In the past eight years, the New York City company has propelled itself from a scrappy startup with a few locations to a corporation valued in the tens of billions of dollars, with more than 200 locations around the world. WeWork leases out shared work spaces in cities around the world to people who don’t have traditional offices, like freelancers or entrepreneurs, and draws them in with amenities like gym membership discounts, free snacks and beer. (Amid concerns over permits, it shut the free-flowing beer in California locations, replacing it with kombucha.) While startups remain its bread and butter, WeWork has also started doing deals with larger companies like Microsoft and Amazon, who house traveling employees or those working far from a traditional office. This current deal is notable because WeWork will take over the entire high-rise, instead of just leasing out a floor or two, as it usually does. When it opens, it will have familiar neighbors. There are already two other WeWork locations nearby, one at 600 California St. and another at 650 California St. Slavet said this additional space will help the company accommodate demand. Many locations in San Francisco — including three floors in Salesforce Tower, an unfinished space that is still concrete and boxes — have a waiting list. WeWork’s $20 billion valuation, far higher than comparable space-leasing companies, has raised eyebrows. Other companies that rent work spaces, like Regus, aren’t as richly valued when compared to their annual revenues. Alexander Paci, a tech industry analyst at CB Insights, says he considers WeWork to be a real estate company with “compelling technology aspects.” WeWork considers itself a tech company that acquires physical spaces to deliver its services. (“It’s like if you asked Time Warner Cable if they were in the business” of fiber-optic cables, Slavet said.) The debate over how to value WeWork hasn’t stopped it from snapping up office space. In New York City, where it leases 2.9 million square feet in 50 buildings, it is the second largest tenant, behind JPMorgan Chase. Last year it bought the iconic Lord & Taylor building on Fifth Avenue in Manhattan to serve as its new headquarters. In San Francisco, the transition of 430 California St. from financial services to tech-powered co-working space is the latest example of the city’s shifting economy. Over the past decade, professional services companies that have long dominated the Financial District have been shrinking, with law firms, insurance companies and banks consolidating into smaller offices and in some cases moving back-office functions to cheaper markets. And as WeWork continues to absorb more and more space in San Francisco’s tight real estate market, commercial brokers and building owners are watching the company carefully, said Daniel Cressman, executive managing director with Newmark Knight Frank. “It’s a new generation, a new era,” he said. “Clearly WeWork is delivering a product that has gotten tenants’ attention.” Trisha Thadani and J.K. Dineen are San Francisco Chronicle staff writers. Email: tthadani@sfchronicle.com, jkdineen@sfchronicle.com Twitter: @TrishaThadani, @sfjkdineen
The shared office provider WeWork has expanded its presence in San Francisco by a third with its lease of the 250,000sq ft Union Bank Building , the largest it 's signed this year . The expansion will see it lease the entire building and comes in response to growing demand , according to the company . The Union Bank Building is WeWork 's 13th location in the city , making the company San Francisco 's fourth - biggest employer .