Salesforce to shrink office footprint

Software giant could afford $28B for Slack but will cut back on rent

Salesforce CEO Marc Benioff (Getty)
Salesforce CEO Marc Benioff (Getty)

Software giant Salesforce recently made headlines with a $27.7 billion deal to buy workplace messaging app Slack. But the company won’t be expanding its commercial real estate footprint — quite the opposite.

Chief financial officer Mark Hawkins said on a call with analysts last week that Salesforce planned to consolidate and sublease certain sites as more people worked from home.

“The pandemic has also empowered us to reimagine how we operate in this work-from-anywhere, digital world,” Hawkins said on the call, which was reported by Business Insider. “In Q3, we continue to reimagine our operations after analyzing our global lease commitments.”

The move will result in a writedown of between $80 million and $100 million, the publication reported.

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Manhattan has seen a spike in subleasing in the past six months, with sublease space reaching 25 percent of total office availability in September. The push started with companies that were under pressure before the pandemic, including media and retail, but extended to others in technology and other relatively stable sectors.

A recent change to accounting rules means the subleasing trend could cost businesses dearly.

“Under prior accounting rules you were able to amortize the loss from a sublease annually over the life of the lease,” R. Byron Carlock of PwC told BI. “Now tenants have to take the full writedown of the loss they expect to incur from the subleased space up front.”

It’s unclear which Salesforce office locations will be consolidated. Hawkins said the company’s headquarters in San Francisco will not be affected.

[Business Insider] — Sylvia Varnham O’Regan