Microsoft Shedding Offices to Save $1.5B a Year in Rents

Microsoft is getting rid of millions of square feet of offices, saving $1.5 billion in yearly rents.

In its quest to shed unneeded offices, the Redmond-based tech giant said its annual lease payments could drop by $1.5 billion by 2028, the Puget Sound Business Journal reported, citing the company’s latest quarterly report.

Microsoft’s total operating lease liability next year is $3.6 billion, according to the company, which forecasts the value of its future rent payments.

In 2028, when Microsoft will have vacated all of its Bellevue offices, the company said it expects to pay $2.1 billion. That’s a 41.7 percent drop from what it expects to pay next year.

The number of offices the firm expects to shed was not disclosed.

The company has already vacated its City Center Plaza office in Downtown Bellevue, plus several office campuses along the Interstate 90 corridor, according to the Business Journal. Its leases in the two Bravern office towers run through next year.

Microsoft has already paid $2.4 billion for leased offices over the past nine months, and must pay $956 million over the next two months, ending its July-to-June fiscal year, according to the firm.

While the maker of Windows operating systems expects to pay less on office lease costs, it expects to pay more in other real estate costs, including data centers and R&D centers.

Microsoft reported that leases tied to its data centers and research and development facilities will add expenses to its balance sheet. Data center leases worth a total of $8.4 billion will start this year through 2030, with terms ranging from one to 18 years.

“The investments we are making in cloud and AI infrastructure and devices will continue to increase our operating costs and may decrease our operating margins,” Microsoft said in its earnings report. “We continue to identify and evaluate opportunities to expand our data center locations and increase our server capacity to meet the evolving needs of our customers, particularly given the growing demand for AI services.”

The tech firm’s cloud and AI infrastructure contributed to a strong fiscal third quarter, which passed Wall Street estimates.

The company brought in $61.9 billion in revenue for the three months ending March 30, with almost $22 billion in profit.

— Dana Bartholomew