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June 01, 2015

Palo Alto Networks agrees to lease space for up to 5,000 workers in Santa Clara

San Jose Mercury News

George Avalos

SANTA CLARA -- Palo Alto Networks has struck a deal to lease potentially more than 1 million square feet of office space in Santa Clara where the technology company could employ more than 5,000 workers, according to a regulatory filing Monday.

In a major Silicon Valley lease agreement, the tech firm has concluded a transaction to rent four buildings totaling 752,000 square feet, the filing with the Securities and Exchange Commission shows. The company also has an option to lease a fifth building totaling 300,000 square feet.

All told, the leases could add up to 1.05 million square feet, or enough space for about 5,100 workers.

"This deal shows that Silicon Valley is doing great," said Tom Sweeney, a senior managing director with Cornish & Carey.

The deals were arranged by Cornish & Carey brokers Tom Sweeney, Lori Sweeney and Andrew Hueser and Colliers International brokers Gregg von Thaden and Don Reimann.

Palo Alto Networks now occupies about 300,000 square feet for its corporate headquarters at 4401 Great America Parkway in Santa Clara, according to regulatory filings.

The current headquarters has enough space for 1,500 employees.

Palo Alto Networks at the end of 2014 had 1,722 workers worldwide, which was 50 percent higher than the 1,147 workers the company had at the end of 2013, public regulatory documents show.

The company's new offices are at a site bounded by Scott Boulevard, Garrett Drive, Tannery Way and Lakeside Drive, on the south side of Highway 101.

"It's almost a 20-acre site and Palo Alto Networks has plenty of room for outdoor amenities, including a nice auditorium," Tom Sweeney said. "It's within walking distance to a lot of amenities and it's close to the company's existing campus."

The agreement calls for construction of three buildings, totalling 310,000 square feet of offices, 290,000 square feet of offices and 30,000 square feet for an amenities center that will include a fitness center, conference center and large kitchen and dining area.

"Palo Alto Networks is really showing that it's going to be in Santa Clara for a long time," said Chad Leiker, a broker with Kidder Mathews, a commercial realty firm. "They are really going to be growing in this area."

In addition, Palo Alto Networks would occupy an existing 122,000-square-foot building.

If the tech company decides to lease an additional 300,000 square feet through the option, that would widen the company's new footprint even further.

Over the most recent 12-month period, Palo Alto Networks lost $151.1 million on revenue of $822.4 million. The company offers enterprise-wide security systems for networks at a time when data breaches are becoming a greater concern.

"Demand is really strong for office space in Silicon Valley right now by tech companies," Leiker said. "Tech companies really want to get control of as much large chunks of office space as possible."

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