Palo Alto Weekly

News - July 9, 2010

Research Park attracting younger, hipper firms

Skype is latest big-name tech tenant to lease space in city's district of innovation

by Gennady Sheyner

When Russell and Segurd Varian signed the first lease in what was then Stanford Industrial Park in 1951, they hedged their bets by making their new headquarters look like a schoolhouse.

According to the Park's official history, the brothers — developers of the world's first klysteron tube, which generates microwave radiation — wanted to make sure that if their business failed, the building could be used as a school.

Today, Varian Medical Systems is a leading manufacturer of radiation and radar equipment. It is also one of roughly 150 companies occupying the 700-acre sprawl of high-tech campuses stretching from El Camino Real to Deer Creek Road, mostly clustered along Page Mill Road and Foothill Expressway.

Unlike half a century ago, the Park is now nearly built out. The name has been altered — substituting "Research" for "Industrial." And just as the times have changed, so have the types of companies moving in.

Last week, Skype became the latest big-name firm to announce its intention to open an office in the Stanford Research Park. The Luxembourg-based company, which allows users to talk, share files and teleconference over the Internet, plans to move into a 90,000-square-foot building at 3210 Porter Drive, a short stroll from HP's headquarters.

In his blog entry, Skype CEO Josh Silverman called the company's move to Palo Alto "an exciting step for us." He said he expects to move about 80 employees from San Jose and Brisbane to the new Palo Alto office in October.

"And, we hope to attract some of the best and brightest talent in the Valley, especially engineers who are skilled at building ultra-scalable infrastructure," Silverman said.

Skype is, in many ways, emblematic of the Park's recent wave of young, hip and high-tech tenants. The social-media company Facebook and the electric-car manufacturer Tesla both moved their headquarters to the Research Park last year. Facebook left its downtown Palo Alto offices to come to the Research Park, while Tesla (like Varian) moved from San Carlos. Better Place, a company founded in 2007 to build networks of charging stations and battery-swapping stations for electric vehicles, is headquartered on Arastradero Road.

Park officials have been proactively luring companies that "reflect and represent the changing trends," said Jean Snider, managing director of Stanford Research Park.

It was the Research Park that reached out to Tesla, not the other way around, she said. Stanford University officials were looking for companies that would further boost the Research Park's reputation for green technology and felt the electric-car company perfectly fit that mold.

In announcing the company's move to Deer Creek Road in Palo Alto last year, Tesla CEO Elon Musk touted Stanford Research Park as "synonymous with innovation and entrepreneurship," a sentiment shared by many incoming tenants, Snider said. Companies leasing space in the Research Park are particularly attracted to the Park's proximity to Stanford and its location between San Francisco and San Jose — factors that help them attract top talent from the entire Bay Area.

In Skype's case, Snider said it was the company that first contacted Stanford. But because the Palo Alto location was one of several sites Skype was considering, Stanford officials still had some convincing to do.

"We competed directly and hard for them," Snider said. "Companies have options; they don't just come to you."

The Research Park lost one major tenant two years ago when the pharmaceutical giant Roche, which occupied about 10 percent of the Park, merged with Genentech and began its departure from Palo Alto. But the area has otherwise proven resilient during the ongoing economic downturn.

When Roche is taken out of the equation, the vacancy rate in the district is now at about 5 percent, Snider said. Some of the Research Park's best-known companies, including HP; spacecraft manufacturer Lockheed Martin Missiles and Space; and information-technology company VMware remain entrenched in the Park. VMware, in fact, recently built a new gymnasium and expanded its campus on Hillview Avenue by 460,000 square feet, a notable occurrence for an area that is already largely built out.

The area has rebounded from the dotcom bust of the early 2000s, when the vacancy rate hovered around the high teens, Snider said.

"We are very fortunate that we have a lot of very strong companies in the Research Park that aren't experiencing problems or difficulties to the point where they're putting space on the market," Snider said.

The success of the Research Park is also great news for Palo Alto, where city officials are coping with dropping revenues and struggling retailers. City officials were excited to welcome Tesla last year and were pleased to learn about Skype's move last month.

Deputy City Manager Steve Emslie, who heads the city's new Office of Economic Development, said the creation of the office is part of the city's effort to improve its coordination with Stanford and to welcome more companies to Palo Alto.

The Research Park may have evolved since its industrial roots, but it remains an attractive destination for some of the nation's top companies, he said.

"It's what's driven companies for ages — access to talent, a committed university, energy, innovation and the fact that they're around other high-tech companies," Emslie said.

Staff Writer Gennady Sheyner can be e-mailed at gsheyner@paweekly.com.

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