Jamie Dimon has never been shy about his envy for Silicon Valley.
The CEO of J.P. Morgan Chase frequently travels west to meet with venture capitalists and entrepreneurs, touts his bank's hefty investments in technology and famously warned in 2015 that "Silicon Valley is coming," thanks to "hundreds of startups with a lot of brains and money working on various alternatives to traditional banking."
Dimon is now opening his wallet in the region like never before. Early next year, J.P. Morgan will start development of a "new fintech campus" for over 1,000 employees in Palo Alto, one of the most expensive commercial real estate markets in the country. Sandwiched between Facebook to the north and Google to the south, the building will be located at Stanford Research Park, a historic part of the tech industry that's home to Hewlett-Packard and Tesla, and on a plot of land formerly occupied by Lockheed Martin.
For Dimon, who oversees the largest U.S. bank by assets, technology upgrades are critical to fending off competition from agile consumer-friendly upstarts who are winning with millennials and to addressing the constant and evolving risks associated with fraud and cybersecurity. Dimon said in his latest shareholder letter that the bank has almost 50,000 employees in technology and is pouring money into artificial intelligence and machine learning to reduce risk and improve underwriting, while also building up its cloud infrastructure. In August, J.P. Morgan jumped into the crowded market of online investing when it introduced a mobile and web service that includes free or discounted trades.
J.P. Morgan's fintech office, scheduled to open in 2020, follows its acquisition last year of payments start-up WePay, a competitor to PayPal and Stripe in serving small businesses. WePay and its more than 275 employees will be moving to Palo Alto from the company's office in nearby Redwood City.
'Don't let the big bank bog you down'
Tina Hsiao, WePay's operating chief, said the plan for a new space has been on the books since the deal closed, along with Dimon's commitment to double the size of WePay's engineering team.
"This is him planting that flag," Hsiao said in an interview. "The leaders have said: We're not tourists, we're here to stay."
Dimon visited the current WePay headquarters in April and sat down for a fireside chat with co-founder and CEO Bill Clerico. After that session in front of the entire company, he met with the eight-person executive team. Hsiao said one of Dimon's key messages to the group of start-up techies was that, while the company takes regulations, security and oversight very seriously, those things don't have to be burdensome.
"He said don't let the big bank bog you down, because that's not the point," said Hsiao. "He encouraged us to continue to push through and influence them."
Prior to settling on the old Lockheed Martin campus, J.P. Morgan had pursued a number of other locations, including the former Theranos headquarters, according to two people familiar with the matter who asked not to be named because the negotiations were confidential. Theranos, which shut down in September shortly after CEO Elizabeth Holmes was indicted on fraud charges, put its Stanford Research Park office up for rent last year.
J.P. Morgan said its plans for the new campus include an "innovation hub" and a "modern workplace design with amenities that matter most to employees and state-of-the-art technology to increase collaboration."
It will be one of two Bay Area locations for J.P. Morgan, along with the company's office in downtown San Francisco, which is primarily for traditional services like investment banking and wealth management. According to Truebeck Construction, the site developer, the first phase of the project will be a 115,000-square-foot two-story building, followed by a second phase that includes an 80,000-square-foot edifice.
J.P. Morgan declined to comment on whether there will be a second building.
The long-term lease won't come cheap. According to Jones Lang LaSalle, the average asking rent in Palo Alto is $107.64 per square foot per year, which is more than three times the national average. It's by far the most expensive city in Silicon Valley, with rents running more than double the regional average, JLL said in its third-quarter office insight report.
Financial companies, car manufacturers and industrial giants are all swallowing the costs required to attract the country's engineering talent. Visa announced a 62,000-square-foot research center in Palo Alto in 2016, a year after Ford opened an innovation center more than twice that size.
"Nontech industries are opening, whether it's thought centers or innovation centers, to tap into the intellectual capacity that's here in the valley," said Jon Cannon, executive managing director at commercial real estate advisory firm Newmark Knight Frank in Silicon Valley. "It's a continuing trend."
Not that J.P. Morgan has bought into every hot theme in technology. Last year, Dimon called bitcoin a fraud that will eventually blow up and said it's reminiscent of the tulip craze of the 17th century. But relative to other mega-banks J.P. Morgan has more openly embraced the idea that software is transforming all traditional businesses.
Hsiao said the bank's acquisition of WePay bucks the narrative of big companies ruining start-up culture. She said that WePay has benefited from the J.P. Morgan deal because it's brought in a whole new set of partners, such as BigCommerce, which powers e-commerce sites, and has helped the company start moving into physical point of sale systems.
"They're able to distribute us," Hsiao said, of her parent company. "We've got a huge pipeline."
WATCH: Jamie Dimon on bitcoin