Tech Firms Retreating From Office Market

Big tech firms have been solid business for office landlords across the country, but the end of a growth spurt in the sector means that’s no longer the case.

Many of the top technology companies are downsizing or reevaluating their office needs across the country, the Wall Street Journal reported. Those firms’ reluctance to keep vast amounts of space is another hit to commercial owners.

Amazon, one of the largest office tenants in the entire country, is looking to reduce its office vacancies by passing on lease renewals, terminating some deals early and dropping underutilized floors.

Alphabet’s Google and Meta are also reconsidering their office needs. The former has listed office space in tech mecca Silicon Valley for sublease, while Mark Zuckerberg’s company is leasing less space than it did at the onset of the pandemic, an acknowledgement that remote work is here to stay, as well as a cost-cutting measure being deployed by tech firms everywhere.

Meanwhile, in 30 cities with a high volume of technology tenants, office space up for sublease is at its highest levels in a decade, according to CBRE. The volume of new office space leased by tech companies in the fourth quarter was roughly half of the space leased in the same quarter in 2019.

The loss of tech tenants isn’t only damaging to office landlords. It can also spell a dip in business for retail landlords in central business districts who rely on steady foot traffic to draw in business.

The vacancy rate of offices across the country rose to 19.8 percent in the first quarter, according to preliminary data from Moody’s Analytics, representing a record for its tracker.

— Holden Walter-Warner