About five years ago, Fintech startup Brex gave up its headquarters during the pandemic to join others ditching office space to become a remote-first workplace. Five years later, the firm says it needs that office space to compete in the artificial intelligence era.
Brex, a provider of credit cards and AI-powered banking software for businesses, inked a decade-long lease at 270 Brannan St. in the city's SoMa District, taking the entire 200,000-square-foot building.
The company has been in the seven-story building since last summer — when the city was at a much earlier point in its office market recovery — when Brex leased about half the building in one of the year's largest office deals.
"San Francisco is Brex’s home, and we're excited to be here as we enter our next chapter," said the company's president, Ben Gammell, in an emailed statement to CoStar News. "We look at the momentum building around AI and see a city entering its best years yet, and we're planting ourselves right in the middle of that."
Brex, acquired by Capital One earlier this year, now has more than three times the space it occupied when it left San Francisco five years ago. Its expansion comes as the company morphs into a broader financial platform for managing expenses, payments and other business operations.
That represents a dramatic switch from the company's view back in 2021, when — a year into the COVID-19 pandemic — the startup announced the San Francisco-based company was going "remote first," allowing employees to work where they liked. Co-founders Pedro Franceschi and Henrique Dubugras even moved to Los Angeles.
“The truth is that talent is spread across the world,” they wrote in a note to employees in 2021, the year the company gave up its headquarters.
About face
It didn't return to the city and the neighborhood until last year, when it leased a significantly larger 100,000 square-foot space at 270 Brannan St.
A spokesperson said then that the move marked "an exciting new chapter in our growth and our commitment to the Bay Area."
The story of its new building at 270 Brannan St. mirrors the ups and downs of San Francisco’s downtown office market in the past decade.
The property, built in 2016 at the height of San Francisco’s last tech boom by Mitsui Fudosan America Inc. and San Francisco-based SKS Partners, featured “a flexible, open floor plan suited for tech companies,” according to CoStar's LoopNet.
It housed software giant Splunk until the firm followed in the footsteps of a stream of San Francisco tech companies and departed the building for a much smaller office space nearby, leaving the building vacant by 2022.
These days, however, SoMa is enjoying a resurgence thanks to the AI industry. Startups are drawn by the neighborhood’s proximity to freeways that provide convenient access to Silicon Valley and elsewhere in the Bay Area and its relatively cheap rents in comparison to the Class A office buildings of the Financial District, according to Chris Pham, a JLL senior analyst who tracks the artificial intelligence sector.
San Francisco's office vacancy rate is gradually dipping following the record highs of the post-pandemic period, largely thanks to the latest artificial intelligence-driven tech boom.
Demand for office space is rising, "allowing net absorption to turn decisively positive," according to a CoStar analysis. Artificial intelligence, biotechnology and professional services tenants are driving this improvement, with activity no longer confined solely to trophy properties.