ULI Case Study: Market Square in San Francisco

What makes for a great office building in San Francisco? That depends on the kind of tenant being targeted. But if the tenant profile involves tech or media firms, then an office with unusual, even edgy qualities is often the preferred environment, and it may well be located in a transitional neighborhood. Such was the case with the development of Market Square in the Mid-Market area of San Francisco, now the headquarters for one of the world’s most dynamic and well-known tech firms, Twitter.

Market Square features a historic building, spacious interior public spaces, an innovative food market with a bar in the middle, an outdoor plaza and social gathering area, and the creative repurposing of existing wood and other materials to reshape an old trade mart into a special place that Twitter and several other tenants now call home. In addition to the food market, the property includes three restaurants and a fitness center—elements that serve a larger neighborhood of residents and workers in nearby buildings, making Market Square a hub of social activity.

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The project consists of two buildings joined by a landscaped plaza and features just over 1 million square feet (93,000 sq m) of rentable Class A office space and 85,435 square feet (7,937 sq m) of retail space. The complex is a major anchor and destination for this part of the city and has served as a catalyst in the revitalization of this important neighborhood, which for years had suffered from blight and decay.

Located on Market Street in a downtown area known as Mid-Market, the 3.1-acre (1.2 ha) Market Square site is within several blocks of the Civic Center, United Nations Plaza, City Hall, the Davies Symphony Hall, the War Memorial Opera House, the Asian Art Museum of San Francisco, the San Francisco Public Library, and Hayes Valley’s restaurants and shops.

However, for years, the immediate neighborhood was considered unsavory and unsafe, with little new development activity and considerable disinvestment. More recently, with its edgy reputation—but also convenient location—the area has emerged as a desirable spot for tech tenants seeking to move their operations into the city. The site offers easy access to transit, including a short walk to the Civic Center BART (Bay Area Rapid Transit) station on Market Street, as well as streetcars that run regularly along that street.

The two buildings on the site were originally built to house the Western Furniture Exchange and Merchandise Mart. Constructed in 1937, the building at 1355 Market Street is a San Francisco art deco icon and had been designated a historic landmark by the city. The second building, 1 TENth, was added in 1974 and included an unattractive facade with small windows, suitable for a furniture mart but not for modern office space.

The site had been owned and operated since 1968 as a mart by ADCO, a New York real estate firm, but increasingly, the mart concept became obsolete. Shorenstein acquired the property in March 2011 and signed a lease with Twitter shortly thereafter.

The first phase of the redevelopment involved readying the initial Twitter space—essentially three floors, including new restrooms and other building systems to serve these floors, restoration of the historic lobby area, and the parking garage.

After these initial efforts, the developers moved to create a new lobby near the Ninth Street side of the building and a great hall in the interior to connect the two lobbies. Subsequent phases prepared additional floors for occupancy as needed for Twitter expansions and for other tenants, followed by phases focused on the retail areas. Construction on the 1 TENth office building located behind the main building was the final phase and began in April 2013.

The site was acquired in spring 2011. The equity came from one of Shorenstein’s investment funds, Shorenstein Realty Investors Nine L.P. That same spring, a construction loan was arranged with Wells Fargo to fund the renovation and redevelopment costs.

The goal of the overall plan was to knit the two buildings together to create a multibuilding office complex with compelling ground-level public and retail spaces. Fundamental to the overall repositioning plan was the reconfiguration of the ground level of the historic 1355 Market building.

The original configuration included a main lobby area near Tenth Street that led to a small, two-level circular atrium at the center of the building, which in turn connected to a rear entrance that provided access to the alley and the second building. This entire public area was reconfigured and opened up, creating a compelling interior space that offers better views to the rear building and the new plaza.

The original lobby was restored, and the circular atrium was transformed into a more open square atrium. Most important, by opening this space, the designers were able to create a visual connection from the front lobby through the 1355 Market building to the plaza and the 1 TENth building.

A second entrance, lobby, and core were added to the building near the Ninth Street side, including six new passenger elevators; this lobby is connected to a new interior concourse that connects to the historic lobby. On the right side of the atrium, as one enters from the historic lobby, is the new Market on Market, an unusual food market that occupies 22,000 square feet (2,000 sq m) of space facing onto both Market and Tenth streets. This market includes large, open entrances off the atrium, enhancing the open feeling of the public area.

To the left side of the atrium is a long, wide, two-story concourse that connects to the second lobby and core of the building. Space on either side of the concourse has been leased to two restaurants—Bon Marché and Dirty Water—which will have either glass frontage along the concourse or will open onto it.

The 1355 Market building was seismically retrofitted, as well, to include new shear walls around the elevators and stairwells (including new footings) and a second concrete core that runs from the basement to the 11th floor, which added mass to stabilize the building.

A key feature of the final design is that the large floor plates offer tenants a variety of configurations while affording easy collaboration across one large floor for many workers, a feature sought by tech tenants.

To better integrate the two buildings and elevate the status of the 1 TENth building, the alley between the buildings was made into a pedestrian plaza to help make the entire project a kind of urban campus where the two buildings would function as one. The buildings are visually and functionally connected across the plaza space by their lobby entrances, which face each other. The 1 TENth building has entrances only from the plaza. The plaza forms a natural gathering place with outdoor seating, a fire pit, special lighting, and alfresco dining.

Twitter now leases the top seven floors of 1355 Market Street and all the nonretail space in 1 TENth. Several other tech and media tenants also occupy space in the building, including Yammer Microsoft, Runway, Viz Media, and Sosh Offline Labs. The office space is 100 percent leased to six tenants.

Market on Market—the first major retail tenant to be added—opened in February 2015. This grocery and prepared-food business offers local and made-on-the-premises food and several specialty subtenants—food retailers and other retailers to which Market on Market subleases space. In addition to Bon Marché and Dirty Water, a third restaurant, the Cadillac, has leased space in the buildings. Fitness SF occupies 22,000 square feet (2,000 sq m) at the base of the 1 TENth building.

Historic buildings offer unique qualities and challenges for developers. For Market Square, the historic facade and character of 1355 Market, the large floor plates, and the found wood on the property were important elements that would be difficult or impossible to offer in a new building. These features are especially appealing to tech tenants, whose employees are looking for a less formal, more edgy design for their workspace.

Shorenstein ended up spending more on the redevelopment than it anticipated, in part because of decisions it made over time to reach for a higher building standard than originally envisioned.

“We started out imagining a rougher project than we ended up delivering,” says Todd Sklar, senior vice president and head of the development group at Shorenstein. “During the course of development, we recognized specific opportunities to go further in our vision of what this place could and should be.”

One of the most important of these opportunities was to go with a much more developed retail treatment for the ground floor than initially had been conceived. But Sklar says the additional investment was worth it. “We ended up with destination-quality food service, and it has really made a difference.”

A symbiotic relationship has emerged in the neighborhood among the various uses. “What was most exciting about this was the renovation of the neighborhood,” says Tom McDonnell, Shorenstein senior vice president, leasing. The renovation of the building and the attraction of prominent new tech tenants drew attention to the area, which stimulated development of new residential units in the neighborhood. This, in turn, greatly improved the market for additional retailers, which further strengthened the location for office tenants and residents.

All these uses together are helping diversify the use patterns and safety of the neighborhood, resulting in the emergence of a cool new district in the heart of San Francisco.

Dean Schwanke is ULI senior vice president, case studies and publications.

For more information on Market Square, including videos, photographs, site plans, and financial information, visit ULI Case Studies at www.uli.org/casestudies.