Pullback marks a sharp reversal after years when companies had been bolstering their office footprints
3 min
Big technology companies are cutting back on office space across major coastal cities, leaving some exposed landlords with empty buildings and steep losses.
The pullback marks a sharp reversal after years when companies such as Amazon.com , Meta Platforms ’ Facebook and Google parent Alphabet had been bolstering their office footprints by adding millions of square feet of space.
Their expansion continued even after the pandemic erupted and many employees started working remotely. Tech companies have been the dominant tenant in West Coast cities like Seattle and San Francisco, and by 2021 these companies came to rival those in the finance industry as Manhattan’s biggest user of office space .
Now, big tech companies are letting leases expire or looking to unload some offices. Amazon is ditching or not renewing some office leases and last year paused construction on its second headquarters in northern Virginia. Google has listed office space in Silicon Valley for sublease, according to data company CoStar . Meta has also dumped some office space and is leasing less than it did early on in the pandemic.
Salesforce , the cloud-based software company, said in a recent securities filing that it leased or owned about 900,000 square feet of San Francisco office space as of January. That is barely half the 1.6 million of office space it reported having in that city a year earlier.
Tech giants looking to unload part of their workplace face a lot of competition. Office space listed for sublease in 30 cities with a lot of technology tenants has risen to the highest levels in at least a decade, according to brokerage CBRE . The 168.4 million square feet of office space for sublease in the first quarter was down slightly from the fourth-quarter 2023 peak but up almost threefold from early 2019.
Even tech companies that are renewing or adding space want less than they did before. The amount of new office space tech companies leased fell by almost half in the fourth quarter of last year compared with 2019, CBRE said.
Tech’s voracious appetite for office and other commercial real estate had been an economic boon for cities. The new workspace usually brought an influx of well-paid employees, boosted cities’ property-tax revenue and translated into more business for local retailers and shop owners.
Now, the waning appetite is a blow to cities at a time when it is difficult to find other big tenants. For landlords already grappling with higher interest rates and a drop in demand from financial companies, law firms and other tenants, tech’s reversal is especially painful.
In some cases, tech’s softening demand can lead to plunging real-estate values. Take 1800 Ninth Avenue, a 15-story office building in Seattle. Amazon’s rent payments helped almost triple the building’s value in the decade after the 2008-09 financial crisis.
In 2013, Amazon moved into about two-thirds of the building. At the end of that year, the building sold for $150 million—almost double the $77 million it had sold for just two years earlier.
Its price kept climbing as strong demand from tech companies and low interest rates drew big investment firms into the Seattle commercial-real-estate market. In 2019, J.P. Morgan Asset Management bought the building for $206 million.
Amazon’s lease expires this year, and the company is moving out. The building is listed for sale. It is expected to sell for about a quarter of its 2019 price, according to estimates by real-estate people familiar with the property.
“We’re constantly evaluating our real-estate portfolio based on the dynamic and diverse needs of Amazon’s businesses by looking at trends in how employees are using our offices,” an Amazon spokeswoman said in a statement.
When the pandemic upended the U.S. office market, large tech companies were initially a bright spot. They continued adding space, betting they would eventually need it as they hired more people and as employees gradually returned to the office.
“Big tech was pretty resilient,” said Brooks Hauf , a senior director at brokerage Avison Young.
That changed in 2022. Remote work continued to be popular, and some big tech companies laid off workers , meaning they needed less space than they had thought, said Colin Yasukochi , an executive director at CBRE’s Tech Insights Center.
Leasing by tech companies fell by about half between the third quarter of 2021 and the third quarter of 2022, according to CBRE.
Since then, companies tied to the booming artificial-intelligence business have leased more space in San Francisco and other cities. But that hasn’t been enough to meaningfully boost the office market. San Francisco’s office-vacancy rate hit a record 36.7% in the first quarter, according to CBRE, up from just 3.6% in early 2019.
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What a quarter-million dollars gets you in the western capital.
Alexandre de Betak and his wife are focusing on their most personal project yet.
3 min
Many luxury hotels only build on their gilded reputations with each passing decade. But others are less fortunate. Here are five long-gone grandes dames that fell from grace—and one that persists, but in a significantly diminished form.
A magnet for celebrities, the Garden of Allah was once the scene-making equivalent of today’s Chateau Marmont. Frank Sinatra and Ava Gardner’s affair allegedly started there and Humphrey Bogart lived in one of its bungalows for a time.
Crimean expat Alla Nazimova leased a grand home in Hollywood after World War I, but soon turned it into a hotel, where she prioritised glamorous clientele. Others risked being ejected by guards and a fearsome dog dubbed the Hound of the Baskervilles. Demolished in the 1950s, the site’s now a parking lot.
The Astor family hoped to repeat their success when they opened this sequel to their megahit Waldorf Astoria hotel in 1904. It became an anchor of the nascent Theater District, buzzy (and naughty) enough to inspire Cole Porter to write in “High Society”: “Have you heard that Mimsie Starr…got pinched in the Astor Bar?”
That bar soon gained another reputation. “Gentlemen who preferred the company of other gentlemen would meet in a certain section of the bar,” said travel expert Henry Harteveldt of consulting firm Atmosphere Research. By the 1960s, the hotel had lost its lustre and was demolished; the 54-storey One Astor Plaza skyscraper was built in its place.
In the 1950s, colonial officers around Africa treated Mozambique as an off-duty playground. They flocked, in particular, to the Santa Carolina, a five-star hotel on a gorgeous archipelago off the country’s southern coast.
Run by a Portuguese businessman and his wife, the resort included an airstrip that ferried visitors in and out. Ask locals why the place was eventually reduced to rubble, and some whisper that the couple were cursed—and that’s why no one wanted to take over when the business collapsed in the ’70s. Today, seeing the abandoned, crumbled ruins and murals bleached by the sun, it’s hard to dismiss their superstitions entirely.
The overwater bungalow, a shorthand for barefoot luxury around the world, began in French Polynesia—but not with the locals. Instead, it was a marketing gimmick cooked up by a trio of rascally Americans. They moved to French Polynesia in the late 1950s, and soon tried to capitalise on the newly built international airport and a looming tourism boom.
That proved difficult because their five-room hotel on the island of Raiatea lacked a beach. They devised a fix: building rooms on pontoons above the water. They were an instant phenomenon, spreading around the islands and the world—per fan site OverwaterBungalows.net , there are now more than 9,000 worldwide, from the Maldives to Mexico. That first property, though, is no more.
The Ricker family started out as innkeepers, running a stagecoach stop in Maine in the 1790s. When Hiram Ricker took over the operation, the family expanded into the business by which it would make its fortune: water. Thanks to savvy marketing, by the 1870s, doctors were prescribing Poland Spring mineral water and die-hards were making pilgrimages to the source.
The Rickers opened the Poland Spring House in 1876, and eventually expanded it to include one of the earliest resort-based golf courses in the country, a barber shop, dance studio and music hall. By the turn of the century, it was among the most glamorous resort complexes in New England.
Mismanagement eventually forced its sale in 1962, and both the water operation and hospitality holdings went through several owners and operators. While the water venture retains its prominence, the hotel has weathered less well, becoming a pleasant—but far from luxurious—mid-market resort. Former NYU hospitality professor Bjorn Hanson says attempts at upgrading over the decades have been futile. “I was a consultant to a developer in the 1970s to return the resort to its ‘former glory,’ but it never happened.”
