Source: CoStar —
Silicon Valley tech giants in the years leading up to the pandemic collected gleaming office campuses around the world as trophies for what appeared to be boundless growth. Those days of blockbuster real estate expansions appear to be over for now, however, as job cuts and profitability concerns have companies pulling back on investments.
International tech hubs in London, Dublin, Berlin and Paris are reeling as some of the biggest companies shed office space after the pandemic forced many to reconsider their real estate needs and an economic downturn pummeled tech stocks and sparked widespread layoffs. After roughly a decade of rapid expansion, large technology firms including Google, Facebook parent company Meta, Twitter and Salesforce are offloading expensive real estate in the United States and overseas.
Within years of blockbuster leases such as LinkedIn’s regional headquarters expansion at Dublin’s Wilton Park development, companies are walking back their commitments to expanding their European footprints, leaving behind empty shells in high-profile cities.
Meta in late 2022 is backing off plans to fill roughly 700,000 square feet of office space across London and Dublin as it scales back on its international real estate portfolio, while Google leaves at least one London office as its lease for the space nears expiration. Salesforce confirmed it was trying to sublet some of its London office tower as Amazon and Microsoft have tabled pandemic-related plans to expand in the United Kingdom.
Andy Poppink, the markets CEO for JLL’s business in Europe, the Middle East and Africa, has lived through several Silicon Valley boom-and-bust periods, “a bit of a cyclical retrenching” is playing out internationally for real estate.
“Tech companies have fallen out of favor among stock investors for the time being, and higher interest rates provide a higher hurdle from a growth and revenue standpoint,” Poppink told CoStar News of cutbacks that echo the late 1990s’ dot-com bust. “Tech companies will then look at the bottom line and the biggest costs are labor and property. So, they pull back on hiring plans and real estate footprints.”
Many big tech firms benefited from a financial boost during the pandemic lockdowns when people stayed home and spent more time in front of a phone or computer screen. Companies hired aggressively to keep up with the sudden growth spurt, signing massive office deals and acquiring billions of dollars of real estate around the world that was expected to house their expanding workforces.
However, macroeconomic challenges and declining advertising revenue over the past year have meant companies are prioritizing profits over growth. Many Silicon Valley tech giants are now making deep cuts to their real estate portfolios by shutting down office locations, subleasing unwanted space, terminating prelease agreements and walking away from future investments.