Facebook considers major office expansion into San Francisco

Facebook Inc. is considering opening its first San Francisco office, potentially bringing the Silicon Valley social media behemoth northward in a major shift of its real estate growth strategy, according to three real estate sources.

Sources said no specific deals have moved forward, but that Facebook (NASDAQ: FB) has indicated that it is contemplating leasing hundreds of thousands of square feet in the city. One source said that the company was planning to wait to pursue a deal until after the city's Central SoMa Plan is approved, which is set to upzone the tech-filled neighborhood and could lead to the development of millions of square feet of new office space.

Facebook declined to comment. The company is already planning at least 962,000 square feet of office development in Menlo Park for an estimated 6,550 new employees. It also bought its main headquarters at Menlo Park's 1 Hacker Way for $202 million in January.

Sources stressed that the tech giant's real estate plans in San Francisco are very preliminary and could end up being discarded in favor of more growth in Menlo Park. Facebook is currently Menlo Park's largest employer with 6,068 employees, according to the city's 2016-2017 budget. According to Business Times research, Facebook is the 14th largest employer overall in the Bay Area (excluding Santa Clara County).

A potential expansion would affirm San Francisco's status as a global tech capital, not only for young startups, but also for one of the largest tech companies in the world. Facebook's potential expansion could also ignite more backlash from critics who blame tech's booming job growth for the Bay Area's escalating rents and crowded highways, bridges and school systems.

Facebook's Oculus Rift division already has a small office of 5,000 square feet at 524 2nd St. in San Francisco, but its parent company doesn't have an office in the city. Oculus Rift was seeking an office expansion earlier this year, a source confirmed, but it hasn't moved forward with a lease.

Facebook has long resisted a northward urban expansion, relying instead on a fleet of shuttle buses to whisk workers who live in Oakland and San Francisco to its suburban headquarters. (It has also offered employees $10,000 to live within 10 miles of its headquarters.) The "tech buses" themselves, which are also operated by Google Inc. (NASDAQ: GOOG), Apple Inc. (NASDAQ: AAPL) and other major South Bay employers, have become problematic symbols of Silicon Valley's increasing influence on housing demand and traffic in the city. The Board of Supervisors has been divided over the regulation of the buses. And in more evidence of the backlash against tech, Supervisor Eric Mar has also proposed a payroll tax of 1.5 percent on tech companies that the Board could vote to put on the November ballot.

In Menlo Park, Facebook is offering millions to the city in concessions to gain approvals for its new office development. But if the company leases from a developer of an existing or already approved San Francisco project, the city would have minimal leverage in seeking additional concessions from the company.

Although Facebook has reported strong earnings since going public, the company is facing more recruiting pressure from other San Francisco-based tech firms including Uber Technologies Inc., which has poached dozens of Facebook employees, including Joe Sullivan, Facebook's former chief security office. The daily commute from San Francisco to Menlo Park has been cited as a major complaint from some Facebook employees, who have called for a San Francisco office.