Why Snap's unusual headquarters could make the stock risky for investors

Patrick T. Fallon | Bloomberg | Getty Images

The Snapchat headquarters on the strand at Venice Beach in Los Angeles.

Snap's headquarters are unlike those of any other company. It's a handful of low-slung buildings scattered across the expensive real estate landscape of Venice, California. The main office is a stone's throw from Venice's famous boardwalk, teeming with tourists and joggers, and just a bit further from the surf.

The offices make up more than 300,000 square feet across buildings on at least six different streets in Venice. Snap employees pick up breakfast at the cafeteria in one building and then walk across the street to their desks. Many of the buildings are shaded between Venice's famous colonnades, and they're interspersed with some of the hippest coffee shops and restaurants in Los Angeles.

The lack of one main headquarters office is unusual enough that the company listed it as a risk in its S-1.

...This diffuse structure may prevent us from fostering positive employee morale and encouraging social interaction among our employees and different business units. Moreover, because our office buildings are dispersed throughout the area, we may be unable to adequately oversee employees and business functions...

This spread-out format could not be more different from the typical Silicon Valley office park or San Francisco high-rise. Headquarters like Facebook's Menlo Park campus or Google's in Mountain View are designed to give employees everything they need so they stay put. From gyms and sushi bars, to dry cleaning (even a dentist at Facebook) there's no reason to venture outside, which would mean not only stopping work, but giving up an opportunity to collaborate and brainstorm with colleagues.

We don't have any recent footage from inside Snap's offices because the company is notoriously secretive. It's pulled the logos off its doors and has a number of security guards outside its buildings, and no windows to peek in.

While being so close to the beach certainly has its appeal — and there's lower competition for talent — it also has its drawbacks. The company cites Venice as "an enticing location to live," but warns in its S-1 of "certain disadvantages such as the increased need to recruit remotely and requiring employees to relocate to Venice, California or the Los Angeles area."

While employees may want to live in Venice, housing is expensive. According to Trulia the median sales price in the area increased 14% in the past year. The price per square foot is just a hair less than Palo Alto and more than 25% higher than in San Francisco. And with real estate inventory tight, that may make it difficult for Snap to find other nearby real estate to expand.

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