Life Science Company Takes Massive Bite of Macys.com’s San Francisco Sublease Space
July 6, 2021
Benchling Expands Office Footprint With Deal To Quadruple Headquarters Space
San Francisco-based life science company Benchling intends to expand its corporate headquarters by about four times after signing a deal to sublease space from Macys.com.
A life science tech company intends to relocate and expand its San Francisco headquarters, taking over a significant chunk of one stagnant sublease listing that has been gathering dust for the past year and a half in the city with the nation's highest office sublease availability.
Benchling, a cloud-based research and development platform for biotech companies, has signed a sublease agreement with Macys.com to take over 109,000 square feet of the e-commerce retailer's space at 680 Folsom St. in the city's SoMa neighborhood. The deal, which was confirmed by a Benchling spokesperson in a statement to CoStar News, means the company would almost quadruple its San Francisco office footprint.
The life science tech company leases 28,000 square feet of office space at 555 Montgomery St. in the city's United Commercial Bank Building a mile away from its future headquarters space on Folsom. The expanded space, which comes on the heels of a $200 million funding round this past April, is also expected to support Benchling's growing workforce, which has doubled throughout the course of the pandemic to more than 500 employees around the world.
Neither Macy's nor the 14-story office tower's landlord, Boston Properties, responded to CoStar News' requests for comment.
The sublease arrangement may be a welcome sign for San Francisco's battered office market, which has suffered the most severe decline in office occupancy amid the pandemic, according to CoStar data. Despite retaining its title as the most expensive office market in the United States, it is also the one with the highest amount of sublease availability, the data show.
Despite the influx of both direct and sublet listings, new leasing activity in the greater SoMa area is down by almost 85% compared to this time last year, with about 461,000 square feet of office leases signed over the past 12-month period, according to CoStar.
Macys.com's sublet availability hit the San Francisco market just weeks before the city's coronavirus lockdown early last year. The retailer listed all seven floors of its 247,000-square-foot space in February 2020 as part of a decision to relocate the company's technology operations across the country. Brokerage JLL was brought on to help market the space, which has sat vacant ever since.
After striking its arrangement with Benchling, about 138,000 square feet is still sitting on the sublease market as part of a deal that won't expire until the end of 2028, according to CoStar and JLL marketing materials.
More than 10.4 million square feet of sublease space is currently weighing down San Francisco's office market recovery, a record-breaking local figure that equates to roughly 5.5% of the market's total inventory and about one-third of its 35.6 million-square-foot space availability, according to CoStar.
However, as return-to-office plans steadily materialize and companies gradually figure out their office space requirements, the sublease outlook in San Francisco and other premier markets across the country has started to shift. Iconic denim retailer Levi Strauss & Company, for example, withdrew its initial plan to try to sublet about 100,000 square feet of its headquarters space at 1155 Battery St.
Instead, the retailer signed the largest lease for the priciest U.S. office market in more than three-and-a-half years as part of a decision to renew the lease for its entire 355,000-square-foot corporate office in the city's Levi's Plaza complex.
Boston Properties purchased the 524,793-square-foot building on Folsom Street as part of a three-property office and industrial portfolio deal for $171.62 million back in 2012, according to CoStar, six months after Macys.com signed its 15-year lease.