Silicon Valley Offices Are Stunningly Pricey | Hacker News Reader

Silicon Valley Offices Are Stunningly Pricey

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38 pointse15ctr0n36 comments

For pricey real estate and offices, I think it comes back to the restrictive zoning policies in SV and SF. Ideally, developers would build very dense buildings next to public transportation, but this is more a dream than the reality here.

Caltrain is already over capacity at peak times. I agree that there needs to be more accommodation near public transport, but I think they'd be better off building more public transport first!

The south bay (south of Diridon) is poorly-served by Caltrain - 3 trains each way per day, weekdays only, no bullets. I think it'd make a great SV extension with its cheap(er) real estate and easy access to SF. I know a lot of SV types with families who are in Morgan Hill/Gilroy because they can actually afford decent family housing without spending 50%+ of their income on it.

They might need better train scheduling software, but the existing tracks could handle significantly more trains.

I dono; everywhere I go in santa clara, I pass big construction projects.

I think a big part of it is also the cyclical nature of demand. You know that big apartment development in sunnyvale near murphy st? it started before the big real-estate crash... then sat there, skeleton-like, for several years. It's done now, of course, and more are on the way.

I mean, I'm sure zoning difficulties are part of it... but the dramatic increases and decreases in demand have also got to have something to do with it. The business cycle here is shorter than your typical amortization schedule for a building. And yes, that isn't going to stop anyone from building on the upswing (if you structure it right, bankruptcy laws being what they are, you have a limited downside, and not much limit on the upside) - but when the cycle isn't "up" - people just stop building.

I just spent a few days down in the area, where I grew up and used to live, and came back to my home. And I can tell you all with certainty- the only reason people are paying this is that they're all in a shared hallucination/brainwashing.

I'll keep my home city a secret for now- it's easy enough to find- but let's see- I make a Valley-sized salary, live in a house with a yard less than 5 miles from downtown that costs about 25% of the equivalent in the Bay Area, my office is about 10% of what Google pays, I never sit in traffic, I work on challenging problems, I can indeed barbecue 12 months out of the year (with the best beer, wine, and meat in the world) and I know a thousand other engineers all doing the same.

Any engineer or entrepreneur staying in the Valley or even SF right now should lose credibility immediately for poor business and lifestyle choice.

And what's happening to SF right now is interesting. It's becoming a suburb- but the poets are still there. Always.

I know you wrote your comment just to evoke emotions from people and be controversial but do you really feel like you're in the position to judge someone based on the lifestyle they chose?

Not everyone is after the money or the barbecue.

Given the ecosystem can give you a tremendous upside, it would take truly ridiculous prices to make people stop coming.

But I think it is obvious to everyone that the exploding prices for very, very basic things you need to run a business are unhealthy and slowly suffocating the ecosystem. It's a lot of money going to all the wrong people.

Those rents are insane. I run a HFT firm in the suburbs of Denver, and we have a beautiful office on a golf course for $20/square foot. For a 10 person firm using 4,000 square feet, that is an extra $20k per month, which could hire you 2 extra people. Wow!

Your cost per employee at an HFT firm is $10k per month? Sounds like not much of a salary & benefits for the employee, especially given the industry.

Depends on the trading strategy. There's a surprising number of trading shops that do niche strategies that don't make much money but have zero competition. The trading development cost is correspondingly low.

I think the math here is:

4000 square feet for 10 people -> 400 square feet per person. $20/sq ft. -> $8000 -> $20k hires 2.5 people worth of office space.

He describes it as a lavish expense, and obviously 400 square feet per person is more than I've ever seen at a normal tech company. All in all I'd wager this guy is paying above-market for engineering talent, as most in the finance space do.

You are correct on all counts. a) we have more than 10 people in our 4,000 square feet. b) we have lots of extra space. c) we pay well, most people make more than $10k/month.

In addition to some superb coders, mathematicians and traders, we have several fairly low skill positions.

High frequency trading in Denver? How do you execute in the required nano seconds with no dedicated cable?

Only the servers need to be co-located.

loumf is correct, even if our offices were in Chicago, we'd still be colocating the trading servers at the exchanges.

> In Mountain View, for example, the home of Google, the price of office space is more than two-and-a-half-times the national average: nearly $97 per square foot

Almost $100/square foot in Mountain View? I used to work in a high-rise in Midtown Manhattan (very desirable location: adjacent to Grand Central, and convenient to the 4/5/6, the 7, and Metro North). Rent was in the $70-80 neighborhood.

I'm reupping my lease in Oakland for around $2.30/sq ft. The 2.5x seems pretty far off.

EDIT: this is for class B+ space. I'm guessing the space being talked about is class A.

Last time I was looking, plenty of offices in Mountain View were on the order of $40 to $80. For the areas away from Caltrain, it got down to $30-40. This was 2012-2013, though, so it's entirely possible prices have gone up since then.

The real problem is everyone wants proximity to both 101 and Caltrain, which limits you to an exceptionally small area and small number of commercial buildings.

(I went in with some friends on warehouse space on Treasure Island last month, for about $12/ft with free 3ph power...finally going to have a decent hardware lab.)

This is interesting to me... how did you go about finding the space?

One of my friends asked me if I wanted in. I wasn't really involved in finding the space.

Well, during the bubble $120/sq ft for class B space was not uncommon in Mtn View/Palo Alto. So we're not back to that craziness yet.

I moved the office a couple of years ago and got more space for less money than our existing landlord wanted just to renew. I still see a lot of room for expansion up and down the peninsula so clearly there is some downward pressure there.

Caltrain access is a big win though. Folks don't want to drive the freeways during rush hours (understandable) or just don't want the hassle of owning a car.

This is when the really scrappy innovators, the lifeblood of the valley, head elsewhere.

Every time I see stories like this on HN I am very tempted to scream about how my burn rate is $700/mo living a very good life without too many distractions from my work. I cannot imagine why people would lace up with lead boots on their first venture by trying it in SF.

Networking. Isolation is fine in KTLO mode but if you're trying to innovate you (usually) need the right environment.

"We all like to believe great works are made like the book Ulysses. James Joyce locking himself literally in a hotel room for 2 years straight and doing nothing but working. But reality most great works take as much from what surrounds them as give back to it." -John Green (Slightly Paraphrased).

"all of us go a little mad: whether from great personal success, or just an all-night drive, we are the sole survivors of a world no one else has ever seen." - John le Carre

Because VCs won't fund you unless you're nearby: http://www.forbes.com/sites/maureenfarrell/2010/10/28/ventur...

Seems like maybe there's an opportunity for a VC firm that only invested in far-flung companies.

It does happen. However, as the article you linked notes, they hold the reins a lot tighter when it does. I speak from personal experience, since I ran a startup located in Florida which was funded by DFJ. I can say that it was a different experience than the typical Valley startup; we didn't benefit as much from networking as much as we possibly could have. After the first year, we would have a new funding round every few months, and we had to meet benchmarks to show progress. Even though Tim is a really nice guy and was great to work with, it was very stressful to operate with such a short but continually lengthened (until it wasn't) runway. I wouldn't recommend it to the weak of constitution. However, I can understand why they did it - without eyes on the scene on a frequent basis, they were putting much more trust in us than they were in other startups which they could more easily monitor and guide.

The OP is about office rents, but like all other property in California, Prop 13 distorts the market.

https://en.wikipedia.org/wiki/California_Proposition_13_%281...

"The proposition decreased property taxes by assessing property values at their 1975 value and restricted annual increases of assessed value of real property to an inflation factor, not to exceed 2% per year. It also prohibited reassessment of a new base year value except for in cases of (a) change in ownership, or (b) completion of new construction."

One contradiction:

"The tech talent is in Northern California, centered at Stanford University." ... "Despite Silicon Valley’s ongoing dominance, however, JLL uncovered a counter-trend. Tech is growing all over the place, the firm found, especially in cities that are able to find a particular niche within the industry. Atlanta and Charlotte are growing hubs for financial tech, for example. Detroit, not surprisingly, is attracting automotive innovation."

Having just got back from the bay, I recall walking around downtown San Jose wondering why nobody is making use of open spaces there.

The talent pool isn't much different, as Stanford is just a 20 min train ride, yet real estate is a good amount cheaper and would provide more reasonable commutes for areas with even cheaper real estate like Gilroy.

A good article on a related topic is The secretive billionaire who built Silicon Valley: http://fortune.com/2014/07/07/arrillaga-silicon-valley/

Why are people still surprised that the Bay Area is expensive? This is the standard now. It's only going to get worse.

What I can't figure out is why major companies, big enough to hire across the country and even the world, don't make more of a point of hiring staff virtually anywhere other than the Valley.

If you're in software, you need a presence in the Valley. The Valley attracts the exceptionally talented and ambitious, you want to hire some of them, and most of them won't leave. Even Microsoft eventually caved and opened an office there. OK, I get that.

But surely those who aren't wild talents -- and really, even at elite shops, most aren't -- are cheaper elsewhere?

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