SAN FRANCISCO-Sephora USA this fall will expand into 50,186 sf at 425 Market St., a 905,000-sf, 38-story office building in the Financial District that sits adjacent to the beauty supply retailer’s 108,000-sf headquarters at 525 Market St. The expansion, which soaks up the entire second and third floors at 425 Market, will be used for Sephora University, the company’s employee training program, and for additional administrative offices.

“By expanding to 425 Market, we were able to take advantage of the building’s large floor plate, [which is] perfect for accommodating [our] training facilities,” says Patrick Murray, CFO of Sephora. “And, clearly, the property’s proximity to our corporate headquarters is a huge plus.”

The lease, which commences this fall, backfills space vacated earlier this year by San Francisco State University, which now operates out of Westfield Centre. Next year, several more floors at 425 Market St. will come available. Leases with Charles Schwab and United Healthcare totaling approximately 204,000 sf are set to roll in March 2008. The floors they occupy are 11-16, 18 and 27.

The length of Sephora’s lease commitment and the negotiated lease rate were not released by the parties involved and not otherwise immediately available. The average direct lease rate in the Downtown core is approximately $35 per sf per year, according to Starboard/TCN Worldwide.

Kevin Brennan and Aaron Wright of Studley represented Sephora, as they did for the company’s two-year-old headquarters lease at 525 Market and subsequent expansions within that building. Chris Roeder, formerly with Cushman & Wakefield and now with Jones Lang LaSalle, represented the owner of 425 Market, Metropolitan Tower Life Insurance Co. C&W maintains the leasing assignment going forward.

Sephora was founded in France in 1969 and acquired by Paris-based LVMH Moët Hennessy Louis Vuitton in 1997. Sephora America operates approximately 143 stores in the United States and Canada. Sephora Europe has more than 480 stores within 11 countries and has established 10 locations in China.

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