One of the best-known businesses on the Internet is moving into a signature tower in the Financial District in a potential breakthrough deal for a commercial area that has been stagnant, as Boston’s legal and investment firms shrink or relocate.
PayPal, the online payment division of Internet auction pioneer eBay Inc., has signed a seven-year lease to occupy 65,000 square feet on two floors in One International Place, one of the tallest buildings in the Boston skyline. The arrival of the Web economy giant could mark a transition for the district if its property owners look for new tenants from the growing technology sector.
“PayPal has broken the ice,” said David Martel, a commercial real estate agent with Cushman & Wakefield, which helped broker the deal. “They are making a huge commitment to International Place, which has always been seen as a law firm and a financial services building.”
PayPal plans to move its 150 local employees, who are currently working out of an office in the North End, to International Place by October.
PayPal, based in San Jose, Calif., established a local presence last year with its $135 million purchase of Where Inc., a Boston mobile technology firm that is now known as PayPal Boston.
PayPal considered about a dozen spaces in Boston before deciding on International Place, said David Chang, chief operating officer of PayPal Media Network, who added that the company chose the tower because it offered wide-open space and plenty of room to grow. The move also keeps the office in the city, which is important to its staff of young technology workers, he said.
Chang declined to disclose either the financial terms of the lease or the number of employees PayPal plans to hire for its new Boston office.
In its efforts to sign PayPal as a tenant, International Place owner The Chiofaro Co. commissioned renderings that cast the tower as an appropriate home for a technology company, with unbroken space from wall to wall, and without the cubicles that might be found in a traditional Financial District office.
“We wanted to rebrand this complex — and this part of the city — as a place that’s not just for the staid old financial firms and the law firms,” said Don Chiofaro Jr., project manager for International Place.
PayPal has elaborate plans for the space, and will perform its own renovations, he said.
For the past two years, Boston Mayor Thomas M. Menino has promoted another neighborhood as a home for the city’s cluster of tech companies: the Innovation District on the South Boston Waterfront, with its new construction and waterfront views.
Chiofaro said he has been courting the same types of firms that were moving to the Innovation District.
Menino welcomed the PayPal deal.
“It’s not about any district; it’s about the city,” he said. “I think it’s going to send a strong message that the Financial District is in a renaissance.”
PayPal could lead the way downtown for the local technology sector, which is growing more quickly than the state’s financial services industry. Massachusetts added more than 12,000 technology jobs over the past year; its finance and insurance sector created just 400 jobs in the same period, according to the governor’s Executive Office of Labor and Workforce Development.
The vacancy rate in the Financial District has reflected the industry’s fortunes, remaining stagnant at about 15 percent for the past few years, according to commercial real estate brokers.
International Place lost a big tenant in 2010, when the law firm Ropes and Gray left 350,000 square feet of space in the complex for offices in the Prudential Building.
At the same time, vacancies have decreased in other parts of the city, including the Innovation District. “There’s just not a lot of big blocks of space [in the Innovation District], so it’s going to force growing technology companies . . . to consider other parts of the city,” said Roy Hirshland, president of T3 Advisors, a real estate consulting firm in Waltham.
Another factor: Rents are lower in the Financial District, where the average class A office space costs around $47 per square foot per month, compared with $55 per square foot in the Innovation District, according to T3.
Commercial real estate brokers say this deal could cause rents to rise in the area. According to Hirshland, “The major Financial District landlords are thrilled at this news.”