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SAN FRANCISCO (Reuters) - From Apple’s(AAPL.O) earliest days, executives insisted that employees work from its headquarters in sleepy suburban Cupertino.
The thinking, championed by Steve Jobs, was that a centralized campus would put the CEO “within walking distance of everyone,” said Steve Wozniak, who founded the company with Jobs.
That stance may finally be softening as Apple prepares to open chic new offices in San Francisco’s high-rent South of Market neighborhood, which has spawned scores of promising startups.
Apple's decision to plant a flag in San Francisco, 46 traffic-choked miles north of its headquarters, comes years after similar moves from rival tech firms such as Google (GOOGL.O) and LinkedIn LNKD.N and marks a turning point in Apple's willingness to accommodate workers, according to recruiters and former employees.
The move is one sign of the intensifying war for tech talent – and of the overwhelming preference of younger tech workers to live and work in the city, with its vibrant nightlife and public transportation. The two floors Apple has leased in a building mostly occupied by CBS Interactive offer abundant open space and exposed ceilings, the preferred tech aesthetic.
As Apple's Silicon Valley rivals dangled perks to woo workers in the latest tech boom, the iPhone maker mostly held firm – the company still does not offer free lunch, and it was among the last companies to operate shuttles to and from the city.
Those company-paid charter buses to the valley appeased workers for a time, but the novelty has faded, said recruiter Andy Price of executive search firm SPMB.
With rising competition for talent from a new wave of private companies with sky-high valuations – such as Uber and Airbnb – Apple must do more, recruiters and former employees say.
“Apple’s attitude has always been that you have the privilege of working for Apple, and if you don’t want to do it, there’s someone around the corner who does,” said Matt MacInnis, a former Apple employee who worked on the company’s education business and is now CEO of Inkling, an enterprise technology company.
Now, MacInnis said, “they have to compete.”
Apple spokesman Colin Johnson declined to comment.
Apple's footprint in San Francisco until now has come largely through acquisitions of companies already based there, including Beats Music and Topsy Labs, a social media analytics firm.
After Apple acquired Topsy in 2013, workers were surprised that the company did not move those employees to the valley, a former Apple employee said. Topsy’s space was large enough for about 75 workers, but other Apple employees soon began dropping in to work from the city, crowding the office.
The iPhone maker's new office will be in about 76,000 square feet of rented space at 235 Second St.
Apple's presence in San Francisco will remain modest, especially compared to rival Silicon Valley firms such as Google and LinkedIn. The new office is big enough for about 500 workers.
Apple has said that it had more than 25,000 employees in the Santa Clara Valley, where it is headquartered.
Apple could opt to move some employees already in San Francisco into the new space, such as those from Topsy or Beats. The company has advertised for a variety of jobs in the city for workers in machine learning and big data – two of Topsy's specialties – and digital music, Beats' domain.
The space is currently under construction, suggesting Apple might be ready to move in late summer, real estate experts say.
Demand for desks there could be intense. After established tech firms open up shop in San Francisco, they often have more workers wanting space there than they can accommodate, said broker John Lewerenz of real estate firm Cushman & Wakefield.
Google has struggled to keep workers from swarming its San Francisco office, particularly on Fridays. The company quickly leases additional floors in its main San Francisco building when they are vacated by other tenants, Lewerenz said.
Apple's new San Francisco office appears to be “just a small adaptation” to some tech workers' disdain for the commute of at least 90 minutes to the South Bay, said former company executive Jean-Louis Gassee.
But some former employees say an official Apple office of any size in San Francisco was once unthinkable – even though the city is home to 14 percent of its workforce, second only to San Jose, according to a 2013 company report.
For a graphic showing where Apple employees live in the Bay Area, see tmsnrt.rs/1QwR4ZY
Apple's stance on centralization turns off some job seekers, said recruiter Amish Shah, founder of Millennium Search, who has run across some candidates who rule out the company because of the commute. Younger tech workers, he said, put a high premium on quality of life.
San Francisco residents now have more options to dodge the commute with a growing number of tech companies in the city, recruiters say.
"If companies want to stay competitive and have a shot at hiring the best available talent, they're going to have to be flexible," said Jose Benitez Cong, a former Apple recruiter who is now launching a startup.
Before leaving Apple in 2009, MacInnis spent three hours a day commuting from San Francisco to Apple headquarters. Now he uses Inkling’s location in the city to his advantage, systematically recruiting San Francisco residents tired of long commutes to the valley.
Russ Heddleston, co-founder and CEO of document sharing company DocSend, says he has also found an edge by planting his startup in San Francisco. He previously commuted to the valley to work for Facebook(FB.O), a notable exception to the trend toward satellite offices in San Francisco.
“They have the social clout to get people to commute,” he said. “But if they weren’t as cool, could they afford to have their office in San Jose and get talent to come in? It’s a real problem."
Another factor may be that the company has little room left to grow in Cupertino: It occupies about 70 percent of the office space in the city of about 60,000, said Angela Tsui, the city's economic development manager.
The sheer size of Apple’s work force has prompted the company to grab space in neighboring towns such as Sunnyvale and North San Jose.
The diffuse office structure has dimmed the allure of commuting to the South Bay, said one former employee, who requested anonymity to protect professional relationships.
"The old appeal was if you were an engineer at the mother ship, you could go to the cafeteria, and there's Steve Jobs ordering sushi," he said. "Those days are gone now."
In Wozniak’s view, spreading out the teams could infuse new creativity into the company. In a recent interview, he recalled being a lonely voice of dissent on the company’s philosophy of centralization.
"I was the executive who always opposed that," he said. "I felt that you should distribute your divisions… and let the teams think more independently."
Editing by Stephen R. Trousdale and Brian Thevenot