Downtown gets boost from Facebook influx

Rents rise and so does fun factor, some say

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.


Like this comment
Posted by Resident
a resident of Another Palo Alto neighborhood
on Feb 27, 2008 at 12:25 pm

I am pleased to have Facebook and their staff in downtown. It is good to see such a positive influence on our own young people. Welcome and hope you are here to stay.

Like this comment
Posted by Paly grad
a resident of Palo Alto High School
on Feb 27, 2008 at 3:37 pm

Thanks for making it unaffordable to live in my own hometown guys.

Like this comment
Posted by What Goes Up Must Come Down
a resident of Another Palo Alto neighborhood
on Feb 28, 2008 at 4:50 am

And what happens when Facebook decides to move somewhere else?

Like this comment
Posted by Eric
a resident of Another Palo Alto neighborhood
on Feb 28, 2008 at 6:12 am

At some point Facebook like GOOGLE will want to consolidate all their employees in one central location. When that day comes they will move out of PA to another City that has the office space to accommodate them. Then see a glut of empty office spaces Downtown, lower rents and more housing stock for rent. This will not last forever!!

Like this comment
Posted by Resident
a resident of Another Palo Alto neighborhood
on Feb 28, 2008 at 8:47 am


Your comment would make sense, except that Facebook has given incentives to employees who live within walking distance of their office. For this reason, it would be extremely hard for them to decide to move out of PA as then they would expect all their employees to move house? No, I expect at somestate they will want to consolidate but I expect they will want to remain in PA. Keep an eye on any large empty buildings near the downtown area. They will probably try to demolish and rebuild.

Like this comment
Posted by Palo Alto way
a resident of Another Palo Alto neighborhood
on Feb 28, 2008 at 8:56 am

Well it won;t be that easy to "demolish and rebuild". First of all we have to make sure that the buildings are not historic. Then the Planning and Transportation Committee will have to nitpick the plans for a few years. Then the Architectural Review Board will nix the plans, since they never like anything that is proposed. So if facebook wants to build anything in Palo Alto and have it ready by 2020, they need to start now.

Like this comment
Posted by Joanna
a resident of Adobe-Meadow
on Feb 28, 2008 at 8:57 am

Those "kids" will move out when people realize that facebook is just the next myspace.

Like this comment
Posted by Smart
a resident of Leland Manor/Garland Drive
on Feb 28, 2008 at 9:01 am

Joanna, thanks for your trenchant insight - what are those VCs thinking?

Like this comment
Posted by Joanna
a resident of Adobe-Meadow
on Feb 28, 2008 at 12:13 pm

Hi Smartypants!

Your phrase implies that you have complete faith in VCs and that they have good judgement more often than not. This leads me to believe that you don't know the ratio of winning investments to losing investments of the VC world (worse than 1 to 10). I will further assume that you blindly believe that facebook is worth the $15b that zuckerman says it is worth. VCs aren't gods, buddy.

Like this comment
Posted by Smart
a resident of Leland Manor/Garland Drive
on Feb 28, 2008 at 3:41 pm

They might be wrong - but I think more likely you are ;-) FB has a bunch of technology underpinning that is stronger and more enabling than MS. It may be that it just comes and goes, but I doubt it at this point.

Like this comment
Posted by No-Such-Thing-As-A-Free-Lunch
a resident of Another Palo Alto neighborhood
on Feb 28, 2008 at 4:32 pm

If any of these offices are on the ground floor, this will not allow for Retail stores to occupy this space--which means that the City will be denied much needed sales tax revenue.

Like this comment
Posted by Joanna
a resident of Adobe-Meadow
on Feb 28, 2008 at 5:02 pm

I have no doubt you believe that. Good luck with that.

Free Lunch,
I agree that we need more retail spaces in downtown. Any non-retail businesses, hyped baloney or not, should limit themselves to second floors or the like. As it is, we have to travel outside of PA to do most of our shopping.

Like this comment
Posted by Fbomb
a resident of Adobe-Meadow
on Feb 28, 2008 at 7:56 pm

How are they going to commodify their product? And don't tell me adverts bc they're not nearly on the level of $15 billion EV...seems like a load of #### to me...

it's a great distraction though.

Like this comment
Posted by Alex Christenson
a resident of Hoover School
on Feb 28, 2008 at 9:07 pm

What's facebook?

Shit what neighborhood do I live in?

Like this comment
Posted by Resident
a resident of Another Palo Alto neighborhood
on Feb 29, 2008 at 9:06 am


I am not sure what sort of retail you think may use downtown Palo Alto ground floor space, but I can't imagine what would appear there that may make me shop in Palo Alto rather than the stores I use all the time, Costo, Target, Mervyns, etc. Palo Alto shopping is a joke.

Like this comment
Posted by Eric
a resident of Another Palo Alto neighborhood
on Feb 29, 2008 at 11:52 am

Resident: Reminder, Palo Alto was GOOGLE's first choice for office space. Mountain View was the nearest location they could find with sufficient space available, and more importantly give them room to grow.

If Facebook continues to grow, they will grow out of all their rented offices in Downtown PA, and move further south. Since most of their employees are young and probably rent it will be easy for them to move also.

Like this comment
Posted by w
a resident of Meadow Park
on Feb 29, 2008 at 12:41 pm

with the ''jail lockdown'' of downtown at night,with police cruising looking for errant skateboarders, its quite an ''ambience''.

Like this comment
Posted by Eric
a resident of Palo Alto High School
on Feb 29, 2008 at 12:54 pm

My schools Web journalism program did a story about cyberbullying on facebook. Its really interesting to hear the what students have to say.

Web Link

Like this comment
Posted by Clarification
a resident of Palo Alto High School
on Mar 1, 2008 at 7:05 pm

Eric, that was actually written by your school's newspaper (The Campanile), not the Web journalism program (Voice).

Just giving credit where it's due.

FB may have some neat technology, but at the end of the day it's simply a social networking site that's largely used by teenagers. Teens NEVER stick to one thing for long. They're always looking for something else. The minute FB has a legitimate competitor, it will begin losing traffic - fast.

Like this comment
Posted by Resident
a resident of Another Palo Alto neighborhood
on Mar 1, 2008 at 7:19 pm

Facebook is changing. It is beginning to get used by parents who want to check up into what their kids are doing and then they start finding out about their old college and high school friends. When the teens start leaving it will be the parents who keep it going, using it as a find old friends service.

Hope this is not going to be the death of its use by teens.

Like this comment
Posted by Joanna
a resident of Adobe-Meadow
on Mar 2, 2008 at 12:41 am

Dear Clarification,

Well put.

The house of cards is going to fall soon.

I'm just glad that facebook isn't carving their logo into any stone. That will look as silly as a logo or a logo in stone.

Like this comment
Posted by k
a resident of Duveneck/St. Francis
on Mar 2, 2008 at 1:23 pm

Yes, it will be interesting to see if FB is another! Do they have luxury offices too?

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