MENLO PARK, Calif. — Aydin Senkut started his venture capital firm Felicis Ventures in San Francisco a decade ago. Five funds and more than $430 million later, Senkut is ready to open an office on Sand Hill Road, alongside such Silicon Valley institutions as Kleiner Perkins Caufield & Byers and Sequoia Capital.
He’s going to have to pay up.
Located in Menlo Park, Calif., Sand Hill Road has the most expensive office space in the United States, according to commercial real estate firm Cushman & Wakefield. At an average of nearly $130 per square foot, office space exceeds the cost of renting in other high-end markets such as Greenwich, Conn., and Park Avenue in Manhattan. It is also far more than comparable space in San Francisco’s south Financial District, where rents average $75.39 a square foot, said Robert Sammons, a regional director at Cushman & Wakefield.
While many VC firms are opening offices in San Francisco, Senkut’s move underscores that tech investors are willing to pay a premium for close proximity to other big firms, the companies that might buy or do business with their startups, and the suburban homes of investing partners.
What Sand Hill Road lacks is vibrant street life and access to major public transportation routes. On either side of the roughly 2-mile strip between Interstate 280 and Junipero Serra Boulevard, where many of the world’s top VCs hang their shingles, sit low-slung “woody walk-ups,” nestled among trees, rosemary plants, and parking lots.
Felicis Ventures, a backer of clothing startup Bonobos Inc. and satellite maker Planet Labs Inc., is in the process of relocating from downtown Palo Alto, Calif., the second-most-expensive market in the United States, according to Cushman & Wakefield.
Rent on Sand Hill Road is generally costlier, but it can be easier to find larger spaces. Felicis Ventures recently signed the lease on a 10,000-square-foot office at 2460 Sand Hill Road, where Senkut plans to host big events for his startups and investment prospects. He declined to discuss how much he’s paying for the space.
“Let’s be honest: It’s still a high rent,” he said.
While the startup world has sobered up a bit this year, with wavering valuations afflicting some unicorns and fewer investments to go around, it hasn’t much affected the economics of venture firms. VCs raised $22.9 billion in the first half of the year, according to the National Venture Capital Association, a trade group. That puts the industry on track for the best fund-raising year since 2000. In April, Felicis Ventures said it raised a $200 million fund, almost double the size of its last one.
Today’s rents are still nowhere near what landlords demanded in early 2008 before the financial crisis. Back then, asking prices topped an average of $170 a square foot on Sand Hill Road, said Cushman & Wakefield.
For architecture lovers, Sand Hill Road doesn’t offer much to look at. But the area’s blandness is precisely its appeal, providing a brick-and-mortar equivalent to the understated dress code of a blazer and jeans favored by many VCs.
Crucially, an address on Sand Hill Road establishes cachet, said Brad Van Linge, senior managing director at real estate firm Newmark Cornish & Carey.
“The entire world looks at that and says, ‘OK, we know you’re somebody,’ ” he said.