The most recent monthly national office report released by CommercialEdge looked at several notable factors influencing trends across the U.S. office sector. Among them was how the recent wave of tech companies restructuring their workforces had affected their use of office space.
Read the full December national office rents report for extensive insight on office sector trends and fundamentals at the close of 2022 across all top U.S. markets.
Like Amazon’s recent scaling back of its overestimated 2021 plans for expansion of its industrial real estate footprint, some large tech companies have similarly been pulling back from the whirlwind office space growth phase of the last couple of years. At the same time, as fierce competition for talent led to hiring thousands of workers, the tech industry became a major driver of leasing across the U.S. office sector, supported by an abundance of capital and investor enthusiasm.
Now, CommercialEdge analysts note that, along with downsizing payrolls, some tech companies are also downsizing office footprints — especially in top gateway markets. For instance, Facebook parent-company, Meta, had already backed out of several lease commitments by its third-quarter earnings call last year and announced plans to retreat from even more.
Specifically, Meta withdrew from four Manhattan office space leases: The company pulled back from its 300,000-square-foot commitment at 770 Broadway and vacated the space it was occupying at 225 Park Ave. Meta also opted to let two of its three office leases at Hudson Yards expire: The company declined renewals for the space it holds at 30 and 55 Hudson Yards, although no such announcement has been made for its office lease at 50 Hudson Yards.
What’s more, the company also shed office space in Austin, Texas, where it’s reportedly looking to sublease nearly 590,000 square feet of office space at 400 W. Sixth St. The 66-story high-rise at Sixth and Guadalupe is Austin’s tallest building under construction. At the close of 2021, Meta signed a lease for the entire 589,000 square feet of office space in the mixed-use property, which was reportedly the second-largest office lease in the Austin office market. Then, by Q3 2022, the company announced that its plans for the space had changed as it reevaluated and refocused its global real estate portfolio.
Nevertheless, Meta maintains a notable presence in the market. Existing local offices include the Third + Shoal tower and an office high-rise at 300 W. Sixth St. in downtown Austin, along with office space in North Austin at the 17-story Domain 12 tower.
Likewise, Meta opted out of its Mountain View office space at The Village at San Antonio Center. The company had signed a lease here in early 2021 that was supposed to run through July 2034. According to reporting by The Real Deal, it was one of the largest vacancies to hit the Silicon Valley office market in 2022.
“The future of work is here and we’re embracing it at Meta,” Meta Communications Representative Tessa Giammona explained to The Mountain View Voice. “The past few years have brought new possibilities around the role of the office, and we are prioritizing making focused, balanced investments to support our most strategic, long-term priorities and lead the way in creating the workplace of the future.”
However, CommercialEdge analysts noted that Meta was not the only big brand name making waves in the U.S. office sector: During the summer of 2022, Amazon announced that it was halting the construction of six new office buildings — Tower 1 at Bellevue 600; The Artise; 555Tower; and Towers 2 and 3 at West Main in Bellevue, Wash.; as well as its second office tower, named Juno, in Nashville, Tenn. According to statements made by the company, pausing construction would not affect hiring plans in either location. Rather, Amazon said it was merely taking a step back to reevaluate the original designs in order to better suit changing workforce strategies.
Additionally, in San Francisco, Salesforce announced that it was looking to sublease a significant portion of the 43 floors it occupies at the Salesforce Tower. The company leases 875,000 square feet of premium San Francisco office space at its headquarters in the Yerba Buena submarket.
Finally, Lyft also put some of its office footprint on the sublease market. The ride-hailing company stated last August that it was going to rent out roughly 45% of the combined 615,000 square feet of office space it had across San Francisco, New York City, Nashville and Seattle. Lyft plans to maintain its presence at existing locations in all of these markets, but will rent entire floors to other businesses with separate entries for its own staff.
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