Tech Layoffs Propelling Office Sublease Market To Record Highs
The amount of office space available for sublease is reaching record highs as tech companies, facing a cold winter, mount aggressive layoff campaigns.
A record 212M SF of office space is available on the sublease market, according to CoStar data reported by the Wall Street Journal. Tech companies have placed more than 30M SF of offices on the sublease market, according to CBRE, triple the amount they listed in 2019.
“Downsizing is much more of a threat than work-from-home,” Nicholas Bloom, an economics professor at Stanford University, told the WSJ.
Salesforce is looking to sublease a third of its San Francisco office tower, and Meta is looking for someone to replace its lease in an Austin, Texas, skyscraper and backed out of a 200K SF Manhattan lease in October. Lyft said in August it plans to sublease nearly half of its office space nationally.
The tech industry has been courted by leaders and property owners in cities like New York, Austin and Washington, D.C., for years as they looked to diversify their job bases and office markets. But the layoffs announced this year throw cold water on the industry's reputation as a growth leader.
Some of the country's largest tech firms, including Meta, Twitter and Amazon, have embarked on aggressive cost-cutting campaigns that include hiring freezes and layoffs. Facebook's parent alone announced 11,000 layoffs last week, and Chief Financial Officer Dave Wehner said on Meta's October earnings call the company was prepared to lose $2B on office lease cutbacks this year.
Amazon is also planning to lay off approximately 10,000 corporate and technology employees, the New York Times reported Monday. The report follows earlier news that the e-commerce behemoth was giving back millions of square feet of industrial space amid warehouse cutbacks.
Tech industry tracker Layoffs.fyi has tallied more than 75,000 layoffs in the U.S. tech industry since the start of the year. Besides the Meta and Twitter layoffs in November — the largest mass layoffs for the industry — other firms cutting their headcounts include Peloton, Carvana and Gopuff, all of which have laid off more than 1,000 people this year.
Some firms are still holding out hope they can weather a difficult season for the industry. Proptech leaders told Commercial Observer on Tuesday that tech giants grew too fast during the pandemic years, taking advantage of free-flowing venture capital, and the much slower economic environment today has forced them to contract just as quickly.
Executives said the proptech industry is more conservative and thus better equipped to handle a difficult market. None of the executives CO interviewed was willing to say they would make layoffs of their own.
