The bright spot in San Francisco’s contracting real estate market has been the race for space by AI tenants.
As OpenAI and Anthropic raised billions for growth, they weren’t dialing up any of the brand-name brokerages in town. Instead, the call was going out to an independent firm few had heard about before the pandemic: Raise Commercial Real Estate.
The startup facilitated San Francisco’s largest office leases of both 2023 and 2024 so far and has had a bevy of emerging AI clients waiting in the wings, ready to move into bigger offices.
But in a sudden twist, the plucky underdogs cashed out this week, announcing that they had reached an agreement to be acquired by global real estate giant Jones Lang LaSalle (JLL). Both firms declined to disclose the sale price but said the deal was expected to close in the coming weeks.
“It is sort of like David joining forces with Goliath,” Raise founder and CEO Justin Bedecarre told The Standard. Still giddy, he added that it was the “best week of my life.”
“I look at this as a means to an end,” Bedecarre said. “We built something no one has been able to build before, and there is no better way to scale it for our clients — some of whom are going global — than to join a Fortune 200 company that believes in us.”
Around 2011, while in his late 20s, Bedecarre left his post as a junior broker at Cushman & Wakefield to start developing technologies for the commercial real estate industry, co-founding two startups in the process. One, formerly known as HelloOffice, became Raise in 2020.
The firm’s proprietary technology is an Airbnb-like platform for companies to manage their real estate holdings in one place. Other features include the ability to measure in-person office usage. Bedecarre and his team then built a traditional brokerage service on top of those products and sold them to clients in a bundle.
“We just stood out from the crowd,” Bedecarre said of Raise’s ability to beat larger real estate firms to clients like OpenAI and Anthropic. “No one else was offering what we had.”
Personal relationships help too. Bedecarre’s initial startup went through Y Combinator when Sam Altman ran the accelerator, and the two continued working together on office transactions after Altman took over OpenAI.
Bedecarre said conversations around an acquisition started picking up at the start of the year, and several of JLL’s competitors had inquired about buying Raise. He denied that he was pushed by his venture-capital investors to sell.
Raise has raised around $26.5 million from investors including Initialized Capital, Founders Fund, and Point72 Ventures.
“There was no pressure to get an exit,” Bedecarre said. “Both sides were coming from positions of strength. JLL was starting to put a lot of new pieces in place about how they were going to approach leasing in this next cycle that really impressed us.”
As part of the deal, JLL will gain access to Raise’s clients and integrate its tools across the 110,000-person company. Bedecarre will report to Andy Poppink, a former professional basketball player who now leads JLL’s Markets Advisory team.
A senior JLL executive overseeing the transition, who asked for anonymity to discuss sensitive matters, told The Standard the acquisition will not trigger layoffs, despite generating some redundancies.
The purchase continues a decades-long trend of consolidation within San Francisco’s commercial real estate industry, which had historically been a fragmented landscape of local and regional players.
Several industry experts surveyed by The Standard said publicly traded firms like JLL use acquisitions to grow their balance sheets and acquire talent in areas where they’re falling behind.
For example, real estate giant CBRE spent seven figures in 2017 to acquire an independent firm called Custom Spaces, started by a young San Francisco broker named Jenny Haeg who had accumulated an impressive roster of clients that included Uber, Spotify, Dropbox, and Airbnb.
Recently, Haeg helped CBRE facilitate Scale.AI’s sublease of the Airbnb headquarters on Townsend Street.
Before she struck out on her own, Haeg was trained at a local firm called CAC Group, which dominated the city’s office leasing market during the 1990s and 2000s before it, too, was swallowed up by CBRE in 2013.
In each of those deals, both buyers and sellers repeated themes of “shared values” and combining forces to reach more clients in more markets.
For JLL, the transaction will give them a leg-up on the next wave of tech growth. Shortly after the Raise deal was announced, OpenAI said it had raised $6.6 billion in what ranks as the biggest funding round of all time. The new cash ballooned its valuation to $157 billion, making it far and away the fastest-growing technology company in the Bay Area.
This week, the maker of ChatGPT also reportedly reached an agreement to lease its first office in New York.
“The data [JLL] has is only going to make our tools that much more powerful,” Bedecarre said.
How will the founder handle having a boss for the first time in more than a decade? After all, he left a large legacy firm because it wasn’t adapting to the changing times as fast as he would’ve liked.
“I’m genuinely excited,” he said. “Our vision was proven right, and now they know it.”