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Citing a shift in its business strategy, SAP announced on Sept. 9 that it will close down HanaHaus, a co-working space with a Blue Bottle Coffee that has occupied the iconic Varsity Theater building in downtown Palo Alto since 2015.
Both the co-working space and the coffee shop will officially close on Oct. 1, according to an announcement that the Germany software company issued today. It cited as the reason for closure its “evolving ecosystem strategy” and “commitment to prioritizing key growth areas in our core business.”
SAP, which specializes in enterprise software and which has a campus at Stanford Research Park, opened HanaHaus in 2015 to help forge connections between local entrepreneurs and create spaces for meetings, conferences and working areas. The building at 456 University Ave. is among the city’s most iconic and recognizable downtown landmarks. Constructed in 1927, the Mission Revival-style building features a spacious courtyard with a fountain and seating areas. The former theater building had housed a Border’s Bookstore between 1994 and 2014.
HanaHaus Palo Alto is one of two coworking spaces and cafes that SAP has been operating. The other one, in Newport Beach, will remain open, according to the company.
“SAP is proud to be a part of the vibrant Bay Area community,” the company’s Sept. 9 announcement states. “We remain committed to investing in our three local SAP offices, our dedicated employees, and the flourishing ecosystem of startups, universities, and venture capital firms.
“Our commitment extends through numerous partnerships and initiatives across the region. HanaHaus Palo Alto has established a solid foundation for the local community to grow, and as we enter a new chapter, the spirit of HanaHaus will live on at our Newport Beach location, carrying forward the connections and memories we’ve built.”
The pending closure of HanaHaus comes at a time when the city is struggling to contain the growing vacancy rate in downtown Palo Alto. According to the city’s consultant, Michael Baker International, retail vacancy rate in the downtown area hovered at about 15.1% in the first quarter of this year, up by 6.9 percentage points from a year ago. City officials are preparing to discuss later this month a series of proposals to support retail and reduce vacancies in downtown and other retail areas. Current proposals include loosening restrictions on chain stores in the California Avenue area and allowing a greater variety of retail and retail-like businesses in commercial areas.
Another idea that some council members have proposed is imposing a vacancy tax on buildings that have not been occupied for over a year.
SAP’s decision to close HanaHaus means that the city will soon have a gaping vacancy in one of its most iconic downtown buildings. The company stated that the original purpose of establishing HanaHaus was “to create a space where people can connect, explore new ideas, and bring them to life.”
“As we bid farewell to HanaHaus Palo Alto, we celebrate the success stories that have emerged from this space. From startups that grew from a single desk to established companies, to innovative ideas conceived on HanaHaus whiteboards, the impact of HanaHaus will continue to resonate throughout the tech industry for years to come,” the company announced.
Maybe now the location can be returned to its original purpose, as an entertainment venue (and an exemplary one at that!)? I still regret the transformation to Borders Books years ago, and I, and many others, enjoyed the Varsity in all of its versions over the years, includings as a classic movies and concerts venue / restaurant / cafe. As I understand it, the building still contains much of what would be needed for such a reversion. Our region is starving for such locations. If we want vibrancy in our cities, we need the destinations that draw people out of their homes and onto the streets!
Bruce is right. We do need more arts. Too bad people are working too much to enjoy the arts.