The Palo Alto residential market is equally tight, with the average four-bedroom, two-bath house listing for $2.1 million, making it the second most expensive city in the U.S., according to Coldwell Banker. Palantir CEO Alex Karp lives in the neighborhood.
Meanwhile, fast-growing start-ups are leaving town and younger companies are choosing to set up shop elsewhere. Online financial services provider Wealthfront, unable to find suitable space to grow in Palo Alto, moved five miles north to Redwood City, as did smartwatch maker Pebble.
"Spaces becoming available were requiring 10- to 15-year leases, which for a start-up is a tough nut to swallow," said Ashley Fieglein Johnson, Wealthfront's finance chief. In moving to Redwood City, Wealthfront upgraded from a 9,500 square foot office to one more than twice that size.
While emerging companies bid adieu, Amazon.com, through its A9 search division, has become Palantir's principal competitor for space. The company recently won the bid for SurveyMonkey's 50,000-square-foot office, about the same size as A9's headquarters across the street. SurveyMonkey is relocating to a bigger facility in San Mateo.
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Jeff Clavier, a prominent venture investor in early-stage start-ups, moved his main office from Palo Alto to San Francisco because of a lack of investment opportunities. His last Palo Alto-based start-up, marketing software developer Kahuna, left Palo Alto in late 2015 for a 42,000-square-foot space in Redwood City.
"Start-ups cannot compete against Palantir and sign super long leases at top dollar," said Clavier, founder of SoftTech VC. "Now, you just have a bunch of Palantirians hanging out in P.A. There's nothing wrong with that except it once had a vibrant start-up community and that's gone."
A Palantir spokesperson declined to comment for this story.
Everything about Palantir is unique. Founded in 2004 by a group of ex-Stanford students including Karp, Joe Lonsdale and PayPal co-founder Peter Thiel, it's the most valuable venture-backed start-up focused on selling to enterprises.