Zendesk Becomes Latest Tech Firm to Exit SF’s Mid-Market

The bosses at Zendesk have officially abandoned their headquarters in San Francisco’s Mid-Market, where exiting tech firms have left nearly half its offices available for rent.

The locally based customer service software firm subleased more than 40,000 square feet of office at the 55-story tower at 181 Fremont Street, in SoMa’s Transbay District, the San Francisco Business Times reported.

Terms of the lease from Menlo Park-based Meta Platforms, parent of Facebook, were not disclosed.

The deal, announced this spring, came after the firm led by Mark Zuckerberg put the vacant, 435,000-square-foot office building up for sublease. Meta leased the offices after the $500 million building was completed in 2018 for occupancy by its Instagram division.

Zendesk was slated last month to move out of its former hub at 989 Market Street, where it had leased up to 90,000 square feet since 2011 following a payroll tax break enacted by San Francisco, according to the Business Times.

It’s move is part of a greater tech exodus out of Mid-Market, which has left nearly half its offices available for rent. The overall vacancy rate in San Francisco is 37.3 percent, according to CBRE.

Elon Musk, who bought Twitter two years ago for $44 billion, renamed it X and announced he’d close its headquarters in Mid-Market this year to move the company to Austin, Texas.

The move came as a blow to Mid-Market, which has seen nearly all of the tech tenants that defined the last decade move elsewhere.

Spotify left in 2018. Uber left to open its Mission Bay headquarters in 2021. Then Block announced it would not renew its lease in the neighborhood, which expired late last year.

It’s not yet clear what tenants will fill the empty offices abandoned by tech in Mid-Market, which had a 48.6 percent total office availability in the third quarter, according to Kidder Mathews.

Fernando Pujals, deputy director of the Mid-Market Business Association, told the Business Times this summer the group is working to remake Mid-Market into an area known less for its offices than for the arts.

The Mid-Market office market has been reset by severely discounted deals.

In August, Los Angeles-based BH Properties bought the former home of Zendesk at 989 Market for $13.5 million, or $115 per square foot. The seller, Maryland-based ASB Real Estate Investments, had purchased the building a decade ago for $61.3 million, or $523 per square foot.

— Dana Bartholomew