Big Tech Layoffs Could Worsen Boston's Struggling Office Market

From the world’s largest companies to small startups, the technology industry has been laying off employees by the thousands in recent weeks, part of cost-cutting measures that are creating uncertainty about their commercial real estate footprints.  

In the Boston area, where local tech companies have been laying off employees for several months, the new wave of big tech layoffs headlined by Amazon, Meta and Twitter — three companies with large office footprints in the city — could serve as another blow to an already weakening office market.

While the office impact of the latest layoffs has yet to be fully revealed, tech companies in Boston have been looking to give back large chunks of office space for months. At least seven tech companies currently have spaces of more than 50K SF listed for sublease, with three of those exceeding 100K SF, according to Colliers data shared with Bisnow.

The largest of these is e-commerce company Wayfair,  which laid off more than 800 workers in August and has listed 321K SF available for sublease at 10 Saint James Ave. in the Back Bay, according to Colliers. Electronics company Bose, which has laid off more than 200 people this year, has listed 128K SF available for sublease at 80 Guest St. in Allston-Brighton.

“A lot of these companies were too optimistic about how the path of things that was started by Covid was going to continue and now you’re seeing the recalibration,” said Max Saia, senior director for investor research for VTS.

New demand for office space in Boston was down 6.1% in September compared to the prior month, according to VTS’ Office Demand Index.

“Tech is a big player,” Saia said. “Tech demand is down. Everything is down but tech is down more than any other major industry.”

In the third quarter, Boston’s office market recorded a negative net absorption of 316K SF and office vacancy rose to 16%, the highest level since the start of the pandemic, according to Colliers Q3 Office Report.

The quarterly data doesn’t yet show the office market impact of the big string of layoffs in the tech industry since the start of October. 

Last week, Amazon announced it would lay off roughly 10,000 workers. It didn’t say in which offices the layoffs would occur, but The Washington Post reported that several of the workers affected were part of the Alexa voice assistance team including some in Boston. The Alexa team occupies part of its 430K SF office in WS Development’s 111 Harbor Way building in the Seaport.  

“We’re facing an unusual macro-economic environment, and want to balance our hiring and investments with being thoughtful about this economy,” said Beth Galetti, senior vice president of people experience and technology at Amazon, in a statement. 

Amazon is slated to occupy another building next door at 1 Boston Wharf Road, where it signed a lease in 2021 for 630K SF in the building that is now under construction. While it is laying people off, the company still intends to occupy that new space, with an Amazon spokesperson telling Bisnow in an email Monday that there have been “no changes to those plans at this time.” 

Also this month, Facebook parent company Meta announced it would lay off 11,000 employees, citing rapid hiring and revenue loss as the main factors in the decision. In a letter detailing the layoffs, Meta CEO Mark Zuckerberg said the company will also shrink its real estate footprint but didn’t go into specifics on how and when that would happen.

The layoffs came four months after Meta hit pause on the expansion of its Boston-area presence. The company had signed a 250K SF deal at 50 Binney St. that would have tripled its office footprint in Cambridge, but the Boston Globe reported in July that Meta was delaying the build-out of the new space in order to redesign it for a hybrid work environment.

In the one month since Elon Musk finalized his acquisition of Twitter, thousands of employees have left the company, a combination of layoffs and the widespread resignations that followed his ultimatum to either follow his rules or leave. 

Twitter occupies 44K SF at the Center Plaza Complex in Boston, a lease it signed in 2019, and it occupies about 30K SF at 141 Portland St. in Cambridge. The first round of layoffs at the company included 55 people in the Boston office, and following the mass resignation, the number of Boston employees in its Slack channel fell from about 300 to just over 100, the Boston Globe reported.

Other tech companies located in and around Boston have been laying off employees and shrinking office footprints for months. Earlier this month, iRobot, the creator of the Roomba, laid off 100 employees and announced it would be “resizing” its global headquarters in Bedford. In October, Internet company Starry Inc. laid off 170 workers across three of its Massachusetts offices.

WHOOP, a fitness tech company, laid off 15% of its workforce in July. Fitness tech company Hydro, which laid off more than 70 people in July, has put 33K SF of office at 10 Summer St. on the market for sublease, according to Colliers. DataRobot, which cut at least 7% of its 1,400-person workforce this summer, put 76K SF on the sublease market at 225 Franklin St., according to Colliers. 

“Folks in different parts of the tech industry have had to make some adjustments and corrections, but I think it’s a strong sector in the longer term,” Kendall Square Association Executive Director Beth O’Neill Maloney said. 

Not all companies are experiencing the same level of pain, Maloney said. She said Google is still going ahead with its $75M expansion plans in Kendall Square. The company is a rare tech firm that hasn't announced layoffs this year, though it did freeze hiring, and one large shareholder has called for cuts to its workforce

“Things are going well over there and I think they’re fundamentally different from Meta and Twitter,” Maloney said. “Everything I am seeing is that [Google is] going full steam ahead.”

For owners of offices in areas like Kendall Square that have a big tech presence, there are already concerns popping up about what to do with their spaces. Boston Realty Advisors partner Bonny Doorakrian said landlords have begun to invest a lot of money in dividing suites and renovating existing offices to attract smaller tech companies.

“[Landlords] are so concerned that they’re proactively spending tons of money to build and furnish a spec suite that’s 4K SF to 7K SF,” Doorakrian said.

She said layoffs may not be the only reason these companies have begun to shrink their real estate footprints. She said that Kendall Square has been very quiet due to some of the area's tech players continuing to work remotely. 

“I don’t see much of a difference between layoffs versus companies completely changing and shrinking by 30 and 40%. It’s the same kind of thing and it’s got the same effect,” she said. “You’re either doing it because people are working remotely now or because you laid off your workers.”