Always aiming to save money, Meta, Lyft, Salesforce and many other big tech companies decide to get rid of their offices due to downsizing.

A blow to the office real estate market

According to the Wall Street Journal , this abrupt withdrawal is a severe blow to the real estate market in many cities, which has been counting on the real estate appetite of technology giants for several years to fuel its growth. Over the past few weeks, a general economic slowdown has prompted major technology companies to reduce their workforce. This is the case of Twitter (with the arrival of Elon Musk and the loss of 50% of the team), Meta (with the 11,000 dismissals announced) and even Amazon (10,000 layoffs to come).

Following this wave of layoffs, several tech giants are dumping millions of square feet of office space in San Francisco, Silicon Valley, New York, Austin, Texas, and elsewhere. Amazon, for example, has halted construction on its new offices. With the prospect of a recession, tech companies feel like they have too many offices. For Nicholas Bloom, a professor of economics at Stanford University, downsizing is a much bigger threat to the housing market than working from home.

This setback by large technology companies is a severe blow to the office market and the economy of many cities. The office vacancy rate in the United States is 12.5%, up from 9.6% in 2019. It’s the highest since 2011. If owners start defaulting on banks, their angst could spread through the entire financial system. Tech giants had become the main drivers of office demand in dozens of cities, including Pittsburgh, Baltimore, Nashville, San Diego and Detroit.

The situation is particularly tense in San Francisco. Salesforce, one of the city’s biggest employers, said this year plans to cut about a third of its office space. This investment could mark the end of a long cycle where tech companies often had the strongest presence in new office towers. Even during the pandemic, as companies embraced hybrid work strategies, many tech companies continued to rent space because they were in the midst of hiring.

Tech giants have also shown a preference for co-working spaces. They say it has allowed them to attract top talent. Contact us to build your team!