Palo Alto Weekly

- February 27, 2008

Downtown gets boost from Facebook influx

Rents rise and so does fun factor, some say

by Arden Pennell

Those kids strolling the streets of downtown Palo Alto in matching track jackets aren't on the same sports team. They're the young army of Web firm Facebook, hundreds of employees that local workers and business owners say have become a dominant presence, boosting sales and rental prices.

Facebook's purchase of several offices in a small patch of downtown has caused commercial rents to increase 20 to 25 percent in the last year, according to realtor Sam Arsan, whose Menlo Park-based Arsan Realty rents downtown properties.

Located in Palo Alto since 2004, the technology firm now has four offices within a stone's throw of each other, at 156 and 151 University Ave. and 164 and 285 Hamilton Ave.

The company's growth is fueled by massive numbers of users who sign up for its free, Web-based social network, despite ongoing privacy concerns.

The company now employs 450 workers — up from 250 last May — and founder Mark Zuckerberg hopes for 1,000 before the end of 2008, according to Wall Street Journal columnist Kara Swisher's account of a January all-staff meeting.

Zuckerberg rented out the Aquarius movie theater for the meeting.

The company offers a monthly $600 subsidy to employees who live within a mile of the office, sparking rumors that the company's rapid growth has caused a corresponding rise in local rents.

It's true that few employees turn down the rent subsidy, which allows them to walk to work and shop on foot, Facebook employee Charlotte Carnevale said.

It hasn't gone unnoticed on Silicon Valley gossip Web sites. According to a Valleywag article, Facebook has "unleashed a flood of demand on a fairly tight supply."

The August article, "Facebook takes over Palo Alto," features an illustration of Godzilla destroying buildings. It got people gossiping but doesn't ring true, Carnevale said, noting it wasn't tough to find the downtown apartment she's moving to in April. But she did have to sit by her computer, vigilantly scanning Craigslist real-estate postings, she said.

"Every hour you refresh the page," she said.

Realtor Marseille Jaco of Palo Alto's Investment Capital Partners said rents remain high because many technology companies subsidize employee rents, not just Facebook.

The worst demand may be yet to come, according to John Carman, broker manager at Coldwell Banker's downtown office. He predicted Facebook's future initial public offering — whose date has not been announced — will spur suddenly wealthy employees to seek nicer downtown digs.

The Facebook "invasion" also provides plenty of patronage to local businesses, Carnevale said.

The company's catered cafeteria isn't open on weekends, leading employees to seek out waffles at Peninsula Creamery or lunch from Whole Foods, she said.

And because Facebook often hires using referrals — recently hired graduates encourage friends to apply for jobs — they often grab dinner or drinks nearby after hours, she said.

Fraiche yogurt shop co-owner and co-founder Jessica Gilmartin said Facebook workers have been a boon to her business, particularly a loyal set of regulars who come daily.

The surge of young Facebook employees brings vitality to downtown, she said.

"I live downtown and a couple of Facebook people live right down the block from me. They generate so much income for downtown businesses," she said.

And it's not just money they bring, she said.

"The Facebook people are all so young and energetic and fun, and they just have such an energy about them," she said.

The corporate culture is informal, with graffiti-style art on office walls and Razor scooters available for general use, Carnevale said.

There is even a beer-pong league based on the popular college drinking game of throwing ping-pong balls into plastic cups filled with beer, according to an employee who declined to be named.

It helps the youngest new hires transition to the workplace, the employee said.

Local workers said the surge of Facebook-ers is an obvious street presence.

"My gym is right by their office and [the area] is overrun by Facebook people," according to Palo Alto resident Priscilla Tan, who lives in midtown and works out at Vivre on Emerson street.

"Everywhere I go everyone has their little MacBook in hand and their Facebook sweater," she said.

The Facebook clothing is reassuring for Carnevale, who said the company is growing so fast she doesn't recognize everybody anymore — but can spot the Facebook logo on their clothes.

Eleanor Morgan works for international design firm Ideo. With about 250 employees, the firm is most likely the second-largest employer in downtown, behind Facebook. Like many of her coworkers, she commutes to Palo Alto from San Francisco on the Caltrain.

"It's so funny on the train. There are two main crowds that come off. We all have to funnel through the same underpass and walk down University, then we split off at High street and one goes to Facebook," while the other crowd continues to Ideo's offices around Forest Avenue, she said.

But she doesn't feel that Facebook has conquered downtown, because the young employees wearing logo-printed clothing still stand out, she said.

When the employees are simply ubiquitous, it'll be a different story, she said.

Facebook Chief Operating Officer Owen Van Natta explained why the firm chose Palo Alto in a meeting with City Council members in May.

"We think of Palo Alto as a real asset for us," he said, in reference to the practice of poaching workers from nearby tech giants such as Google.

And workers enjoy the downtown ambience, he said.

"You're working late hours, and it doesn't feel like you're in the middle of nowhere," he said.

Facebook declined to comment for this article.

Staff Writer Arden Pennell can be e-mailed at apennell@paweekly.com.

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