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Big tech companies are cutting back on their previously voracious appetite for office space, adding to the worries of commercial landlords.
According to a report in The Wall Street Journal, big tech firms such as Meta, Amazon, Salesforce and Google are offloading office space and letting leases expire as the popularity of remote work looks to be permanently entrenched in the tech industry.
Google has listed Silicon Valley office space for sublease, Meta is getting rid of office space and is leasing less than it did in the early pandemic era, Salesforce said in a recent filing that it leases or owns 900,000 square feet of office space in San Francisco — nearly half the 1.6 million square feet of office space it had in that city alone just a year earlier — while Amazon has opted not to review several office leases and has paused construction on its Virginia headquarters.
Tech firms moving away from office space marks a reversal of their attitude from earlier in the pandemic era. Amazon, Meta and Google had been in the process of bolstering their office space before the pandemic hit, and continued that process even when employees started working remotely, adding millions of square feet of space. Tech firms came to rival the finance industry in Manhattan for the amount of office space they consumed.
The pullback threatens the financial health of cities, many of which had greatly benefited from the office space appetite of tech companies and the influx of well-paid employees tech companies often brought with them. It also represents a major blow to office landlords, who are already dealing with the threat of high interest rates and a parallel decrease in demand for space from law firms, financial service companies and other corporate tenants.
The decrease in demand from tech has already hurt the valuation of some office buildings, such as 1800 Ninth Avenue in Seattle, which saw its valuation triple thanks to Amazon’s rental payments starting in 2013, when the e-commerce giant rented about two-thirds of the building.
At the end of Amazon’s first year in the building, it sold for $150 million — nearly double the $77 million it sold for two years earlier, according to the Journal. Its price kept climbing, with another sale in 2019 to J.P. Morgan Asset Management for $206 million.
This year, though, Amazon’s lease is lapsing, and it is expected to move out. The building is listed for sale again and is expected to sell for just a quarter of its 2019 price, according to the report.
