Facebook hotel could be part of new campus expansion

Menlo Park, Calif., a city 40 minutes south of San Francisco and part of vaunted Silicon Valley, is famous for two reasons. In 1965, The Grateful Dead (née The Warlocks) played its first-ever gig at the town's local pizzeria. Second, the city is headquarters to Facebook and its some 7,000 employees, including one Mark Zuckerberg.

That's a lot of personnel to accommodate and, as a result, Facebook is looking to upsize its campus—and add corporate housing, among other amenities. This expansion is even more necessary after Facebook offered employees $10,000 to move closer to the Silicon Valley headquarters at 1 Hacker Way.

Facebook is also angling to develop a hotel project—something that has been kicked around since 2015.

On March 31, 2015, Hibiscus Properties, which is the real estate arm of Facebook, submitted an application to the city of Menlo Park toward  a proposed redevelopment of the former TE Connectivity Campus (about 1.7 miles west of Facebook’s main headquarters). The project would include office space and also "potential [for a] 200-room limited service hotel of approximately 174,800 square feet," according to the application.

Further, "if the hotel is built, transient occupancy tax generated from the hotel would be credited toward the $1.25 million TOT guarantee. In addition, Facebook has agreed to set the TOT rate for the hotel one basis point higher than the rate that would be otherwise applicable."

In the Revenues section of the term sheet, the hotel is described as limited service,  a limited service hotel, however, "Facebook has agreed that it will include a restaurant and hotel bar, which would generate additional sales tax revenue for the City and achieve higher room rates."

While Facebook is referring to it as a limited-service hotel, its added components make it more select-service or full-service, though meeting or banquet space is not noted.

According to the San Francisco Business Times, Gehry Partners has been engaged as the architect of the development.

Demand Generation

Whether or not the hotel will be branded or independent is also not mentioned. There is a concentration of full-service and select-service hotels in the Menlo Park vicinity, including the Hotel Lucent, Rosewood Sand Hill, Stanford Park Hotel, the Best Western Plus Rivera and Hotel Epiphany, a Joie de Vivre hotel.

Virgin Hotels, in September, announced a hotel project in Milpitas.

Silicon Valley has been one of the better-performing hotel markets in the country. Besides Facebook, other demand generators include Stanford University, Lockheed Martin, Cisco and Apple.

Strong performance has also led to a flurry of property listings due to strong investor demand. As real estate firm Atlas Hospitality points out: "Buyers are seeking out properties in close proximity to cor­porate campuses of the largest tech companies, and for good reason. According to JLL, a set of select-service hotels near Apple’s campus in Cupertino saw revenue-per-room growth of 14 percent annually from 2009 through 2014. The same thing is expected to happen as companies such as Google and Facebook complete planned expansions."