HanaHaus to close at the end of the month

Citing a shift in its business strategy, SAP announced on Sept. 9 that it would close HanaHaus, the coworking space connected to Blue Bottle Coffee that had been located in the iconic Varsity Theater in downtown Palo Alto since 2015.

Both the coworking space and the coffee shop will officially close on October 1, according to an announcement the German software company made today. It cited its “evolving ecosystem strategy” and “commitment to prioritizing key growth areas in our core business” as the reason for the closure.

SAP, which specializes in enterprise software and has a campus in Stanford Research Park, opened HanaHaus in 2015 to help connect local businesses and create spaces for meetings, conferences and workspaces. The building at 456 University Ave. is one of the most recognizable landmarks in the downtown area. Built in 1927, the Mission Revival-style building has a spacious courtyard with a fountain and seating. The former theater building housed Border’s Bookstore from 1994 to 2014.

HanaHaus Palo Alto is one of two coworking spaces and coffee shops that SAP operates. The other, in Newport Beach, will remain open, according to the company.

“SAP is proud to be part of the vibrant Bay Area community,” the company said in a Sept. 9 announcement. “We remain committed to investing in our three local SAP offices, our dedicated employees, and our thriving ecosystem of startups, universities, and venture capital firms.

“Our commitment spans numerous partnerships and initiatives across the region. HanaHaus Palo Alto has built a strong foundation for community growth, and as we embark on a new chapter, the HanaHaus spirit will live on at our Newport Beach location, continuing the bonds and memories we’ve built.”

The expected closure of HanaHaus comes as the city struggles to curb rising vacancy rates in downtown Palo Alto. The downtown retail vacancy rate hovered around 15.1% in the first quarter of this year, up 6.9 percentage points from a year ago, according to city consultant Michael Baker International. City officials are preparing to discuss a series of proposals later this month aimed at supporting retail and reducing vacancies in downtown and other commercial areas. Current proposals include easing restrictions on chain stores in the California Avenue area and allowing a greater variety of retail and retail-like stores in commercial areas.

Another idea proposed by some council members is to impose a vacancy tax on buildings that have been unoccupied for more than a year.

SAP’s decision to close HanaHaus means the city will soon have an empty space in one of its most iconic downtown buildings. The company said the original goal of establishing HanaHaus was to “create a space where people can connect, discover 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 the startups that grew from a single desk into established companies to the innovative ideas born on the boards of HanaHaus, the influence of HanaHaus will continue to resonate throughout the technology industry for years to come,” the company announced.