Snapchat's stealthy real estate moves are worrying small business owners in Venice

Snapchat veniceMadeline Stone / Business InsiderA view of Market Street in Venice, where Snapchat leases several buildings.

Two years after turning down a $US3 billion offer from Facebook, Snapchat continues to grow at breakneck speed. Its business has been valued at as much as $US19 billion, and it’s raised a total of $US848 million in seven funding rounds. Its 24-year-old cofounder and CEO, Evan Spiegel, is reportedly worth $US1.5 billion.

But in an interesting contrast to the majority of today’s billion-dollar tech companies, Snapchat makes its home not in the office parks of Silicon Valley, but in the Southern California beach town of Venice.

Snapchat has some 200 employees at its Venice headquarters. As of this writing, there are more than 40 job openings in the company’s Venice office in addition to several in New York.

A company expanding that rapidly needs lots of office space, in addition to infrastructure like parking and housing for employees.

But Venice, a beachfront community of Los Angeles that’s long been a haven for artistic types, is known for its pricey bungalows, dearth of parking, and often crippling traffic.

“The market is escalating. There’s not a lot of inventory,” Tami Pardee, owner and principal broker at Venice-based Pardee Properties, said to Business Insider. “In terms of office space, there’s not room for everyone.”

Snapchat’s first official office was a bright blue beach house on the Venice boardwalk. A yellow sign with a depiction of Ghostface Chillah, Snapchat’s ghost logo, marked the spot.

But by the end of 2013, they had outgrown the beach house and moved to new offices on nearby Market Street. They leased 6,000 square feet of space at 63 Market Street.

The company quickly outgrew that space, however, and a few months later they signed for an additional 3,940 square feet in the building next door.

They also leased space at 64 Market Street across the street.

In January, according to the Los Angeles Times, the company also leased 25,000 square feet of space at Thornton Lofts, about a half-mile away from Market Street on Ocean Front Walk.

Snapchat veniceGoogle MapsThornton Lofts, located along Ocean Front Walk in Venice.

It’s Snapchat’s latest real estate deal, however, that has some local business owners questioning the company’s decisions.

Snapchat is rumoured to be in talks to take over more than 40,000 square feet in a 55-unit office complex at the corner of Abbot Kinney and Venice Boulevards, one of the busiest intersections in the neighbourhood.

More than 30 smaller businesses already make their home there — including mobile advertising startup Briabe Mobile, drone and robotics company Ctrl.Me, design agency Clever Creative, and several law and insurance offices.

Most tenants at the complex are on a month-to-month lease.

According to several business owners in that complex, tenants received a note from their landlord that a deal was going to come down soon, and that it would be in their best interest to look for new space. They would know for sure by June 1 and have until the end of the month to move out.

Tenants haven’t gotten any updates since receiving the note several months ago, though the Los Angeles Times recently reported that the deal is as good as done.

“None of us has been given a lot of information,” Briabe Mobile CEO James Briggs, whose company leases about 2,600 square feet in the complex, told Business Insider. “Everyone is under the assumption that Snapchat is going to take the whole thing.”

Snapchat veniceGoogle MapsThe 55-unit office complex that Snapchat is reportedly in talks to take over.

Several of the business owners we spoke to said they will have to leave Venice if the deal goes through. According to data from real estate firm CBRE published by the Los Angeles Times, office lease prices in Venice have doubled since 2011, reaching an average of $US5.82 per square feet a month. According to the same data, the vacancy rate has halved to 10%.

“We’re looking on the west side of L.A., maybe Marina del Rey. It’s going to be a struggle,” Briggs said. “There are not a lot of business complexes like this in Venice, and we’re completely priced out of what’s left. Venice is out of the question now.”

In an effort to avoid the uncertainty completely, Helena Ruffin moved her health insurance company out of the Venice complex in February.

“I really loved the community, but I couldn’t risk it,” she told Business Insider. “We were in the process of enrolling a hundred new clients, and I couldn’t risk having to move offices and move my staff and interrupting my business seriously.”

Ruffin purchased a two-story townhouse in Playa Vista, just a few miles east of Venice. She lives on the second floor and runs her business on the first, paying roughly the same amount she paid at the Venice office complex.

“I wanted a little more control over my destiny,” she told Business Insider. “I didn’t want to be subject to the whims of a landlord.”

Playa Vista has been a place of interest for many larger tech companies looking to increase their footprint in Los Angeles. In December, Google paid $US120 million for 12 acres in the city, in addition to its Venice presence. Yahoo plans to move its Los Angeles operation there. Facebook, Microsoft, YouTube, Konami, and Belkin also have large offices there, and there’s plenty of room for construction.

Youtube spaces laMadeline Stone / Business InsiderYouTube Spaces in Playa Vista.

Snapchat, however, has opted to stay in Venice.

“The expectation was that they would build their own campus in Culver City or Playa Vista, but they consider Venice part of their culture,” Levi Brooks, cofounder and CEO of digital creative consultant firm Use All Five, said to Business Insider. Use All Five’s office is located in the complex at Venice and Abbot Kinney.

“I understand capitalism and how it works. I’m not mad at Snapchat,” Brooks said. “It would have been nice if they had helped us find a new space. Some kind of communication would have gone a long way.”

According to Curbed LA, an art studio, youth shelter, and gallery are among the Market Street businesses that have already been pushed out by Snapchat in the past two years.

Some local business owners are concerned that Snapchat’s rapid expansion could contribute to a deterioration of Venice’s quirky culture. Established in the early 20th century as a planned community, Venice has at different points in its history served as an amusement park, hippie haven, and the birthplace of modern skating culture.

With lots of hip restaurants and boutiques, it still maintains an edge today; in 2012, GQ named Abbot Kinney “the coolest block in America.”

But Snapchat isn’t the only company to push small Venice businesses out of their office space. Locals protested GQ’s designation, pointing to rising rents and gentrification as big national brands like Lucky Brand, LF, and Gant moved onto Abbot Kinney.

Silicon beachMadeline Stone / Business InsiderRestaurants and shops along Abbot Kinney.

“Venice has always been a place that prides itself on diversity,” Brooks said. “When you’re buying up all of this space, you lose the diversity of small business.”

Of course, not everyone sees Snapchat as having a negative influence on the community. Pardee, who sold a $US2.1 million home to Snapchat cofounder Bobby Murphy in 2013, has helped several other employees find homes in the area.

“They have been respectful and very educated about the market as they research so much online,” she told Business Insider. “They are excited to be a part of our community.”

Plus, she says, having more employees in the area means more people frequenting local boutiques, restaurants, and coffee shops.

“Small businesses and big businesses tend to feed off each other, especially in terms of creativity,” Pardee said. “It’s a delicate mix, but I don’t think Snapchat has been a vulture in Venice. They have been really good tenants.”

Jim Murez, manager of the Venice Farmers Market, told the Los Angeles Times that growing tech companies are just a sign of a changing economy.

“Is having a Snapchat better or worse than a mum-and-pop production company?” Murez said to the LA Times. “It’s neither. It’s just different.”

Snapchat declined to comment on its real estate negotiations. A spokesperson told Business Insider, “We love being in Venice and we strive to be great neighbours within the community where we live and work.”

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