Facebook to Move in Biggest Leasing Deal Since 1991

Facebook Inc., the world’s most-used social networking service, is moving its headquarters to Sun Microsystems Inc.’s former campus in Menlo Park, California, in the area’s biggest office leasing deal in two decades.

The company plans to relocate from nearby Palo Alto starting in mid-June, Chief Financial Officer David Ebersman said at an event today. Facebook will rent the space from Deutsche Bank AG’s RREEF, which said it purchased the 57-acre property from Sun Microsystems owner Oracle Corp. Financial terms of the deals weren’t disclosed.

The agreement for about 1 million square feet (92,900 square meters) is the largest lease for Silicon Valley since Apple Inc. signed an 865,000-square-foot deal in 1991, according to the Cassidy Turley CPS commercial brokerage. The office market is “transitioning to recovery mode” as vacancies remain above 20 percent, the firm’s fourth-quarter report said.

“This is a localized phenomenon,” Gregory Davies, vice president in the broker’s Santa Clara office, said of Facebook’s agreement. “The market is not back.”

Silicon Valley’s vacancy rate may end the year at 21 percent after reaching 24 percent at the end of 2010, according to Cassidy Turley CPS. The only office submarkets with vacancy below 10 percent are Palo Alto, Cupertino and Mountain View, where Facebook, Apple and Google Inc., respectively, are based.

The new home of Facebook has nine buildings and was constructed from 1993 to 1995 for Sun Microsystems, RREEF, which bought the property on behalf of an institutional client, said in a statement today. Oracle acquired Sun last year.

Menlo Park Amenities

“We were attracted to the campus that Sun had built, to the location in Menlo Park that had central accessibility from around the Bay Area, to the local amenities, and extremely attracted to all the support that we got from local officials,” Facebook’s Ebersman said.

The company, which has more than 500 million users, will likely increase its workforce by 50 percent a year, Ebersman said. Facebook has more than 2,000 employees -- including 1,400 in Palo Alto -- up from a total of about 1,000 in August 2009, according to its website.

The campus can accommodate about 3,600 employees, said Steve Berkman, real estate partner with law firm Paul, Hastings, Janofsky & Walker LLP, which advised Facebook on the deal.

Facebook has the option to buy the property in five years, Ebersman said. The company also bought an adjacent 22-acre property, connected to the new site by a tunnel, for future development.

Menlo Park City Manager Glen Rojas said last week that city officials have been talking with Facebook on zoning rules and development of the area.

The company said it will continue to occupy its offices in Palo Alto through this year and possibly into 2012. They include 265,000 square feet on Page Mill Road and 137,000 square feet on South California Avenue, according to Cassidy Turley CPS. Facebook moved there in May 2009.

To contact the reporters on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net; Douglas Macmillan in San Francisco at dmacmillan3@bloomberg.net

To contact the editors responsible for this story: Kara Wetzel at kwetzel@bloomberg.net; Thomas Giles at tgiles5@bloomberg.net

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