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Salesforce as top tenant makes tower more marketable, expert says

May 6, 2016

Friday morning’s announcement that tech giant Salesforce.com would add 800 jobs in Indianapolis and establish a regional headquarters in downtown’s Chase Tower undoubtedly boosts the building’s chances of changing hands, a commercial real estate expert says.

The 48-story tower is owned by Chicago-based Equity Commonwealth, which is expected to shop the building as part of a larger plan to exit secondary markets across the country.

Chase Tower will become Salesforce Tower Indianapolis as part of the San Francisco-based company’s deal to occupy the building. Employees will begin moving in early next year.

“It will come on the market very soon now that the Salesforce transaction is completed,” said Jon Owens, an office broker at Cushman & Wakefield who has no involvement in the building.

Commonwealth REIT in 2012 paid $201 million for both the 905,000-square-foot tower and the connected 153,000-square-foot Circle office building, which gives the complex its 111 Monument Circle address.

IBJ first reported in October that Salesforce was scouting Chase Tower and was eyeing up to 200,000 square feet. A source familiar with the deal told IBJ the amount Salesforce now intends to occupy is closer to 250,000 square feet.

The arrival of Salesforce should take the building to roughly 92 percent occupancy, the source said. Plans for the headquarters include collaboration spaces, mindfulness areas and social zones. The company also plans to renovate the lobby and create a dedicated space where guests can experience interactive, hands-on demonstrations.

Indianapolis is Salesforce’s second-largest location, with about 1,400 employees. The company currently splits its local workforce among three downtown buildings. It occupies all eight floors in the Century Building, eight of 10 in the Guaranty Building, and four of five in the Gibson building, for a total of 215,000 square feet.

The three leases have expiration dates ranging from 2016 to 2021, according to a filing that Salesforce predecessor ExactTarget Inc. made with the Securities and Exchange Commission in early 2013. Salesforce bought the locally based software firm in 2013 for $2.5 billion.

It was unclear Friday morning whether Salesforce would keep a presence in the three buildings while establishing its home base in the tower, or for how long. It recently created a 15,000-square-foot employee cafe and networking center in the Gibson building at 433 N. Capitol Ave., including a 200-person conference room and game corner.

Salesforce’s expansion will benefit the downtown office market, which for years has struggled with maintaining levels of occupancy but is beginning to show signs of recovering. Downtown vacancy in the first quarter stood at 18.5 percent after peaking above 21 percent during the recession, according to Cushman & Wakefield’s latest office report.

Salesforce’s move to Chase Tower also should send a message to other tech firms that downtown’s towers aren’t taboo, Owens said. Those firms typically have preferred older, historic buildings with more character.

“Salesforce’s commitment to consolidate or expand sends a big message to the rest of the tech community that, ‘Hey, it’s OK to be in a tower,’” Owens said. “That’s one of the biggest positives to come out of this.”

The 905,000-square-foot Chase Tower features 20,000-square-foot floorplates. It had four contiguous floors available for sublease that the bank already had vacated. Overall, 14 floors were available.

The skyscraper, developed by Columbus, Ohio-based Galbreath Co., was built in 1989. It originally was known as the Bank One Tower, but took the Chase moniker after the New York-based financial giant acquired Chicago-based Bank One Corp. in 2004.

Occupancy took a hit during the recession when several firms either downsized their space or left the building entirely. Merrill Lynch and Proliance Energy were among the departures, and Woodard Emhardt Moriarity McNett & Henry LLP and Ernst & Young reduced their footprints.

“Most of that happened during the downturn,” Owens said. “I wouldn’t point to anything related to the property itself.”

Chase signed a lease extension that included the vacated four floors, to ensure its name remained on the building.

John Robinson and Adam Broderick at JLL represented landlord Equity Commonwealth in the Salesforce deal. Jenna Barnett at Newmark Knight Frank Halakar represented Salesforce.
 

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