The tech industry is downsizing its office footprint. It started with the post-pandemic ending of the tech boom and the swath of layoffs that came with it. In the face of economic uncertainty, these companies have been looking for ways to cut back on expenses, and giving up office space left vacant by job cuts and remote and hybrid work schedules has become a regular occurrence.
In the first quarter of 2023, Meta Platforms listed a total of 1.8 million square feet of office space as it continued to reduce its footprint. More recently, in May, news emerged that Google would reduce its office space in California’s Silicon Valley by giving up 1.4 million square feet at a handful of buildings. Alphabet Inc., Amazon, Microsoft, Salesforce—veritably all of the tech giants have been relinquishing office square footage in tech centers across the country.
Despite the seemingly endless announcements of office downsizings among tech giants, many of the United States’ top tech hubs are faring better than the overall metropolitan markets they occupy. To better understand the office markets in the nation’s tech hubs we looked at their office vacancy rates compared to their larger metropolitan areas.
|Tech Hubs||Vacancy Rate Q1 2023|
|Silicon Beach (Playa Vista)||22.50%|
|Metro Markets||Vacancy Rate Q1 2023|
|San Francisco Bay Area||21.80%|
|New York City||18.60%|
|Greater Los Angeles||26.20%|
Despite the rash of office retrenchments, Silicon Valley’s vacancy rate in the first quarter of 2023 was a relatively modest 13.5 percent compared to the San Francisco Bay Area’s vacancy rate of 21.8 percent. San Francisco played a major role in the Bay Area region’s high vacancy rate, with the city’s office sector showing the consequences of downsizing across industries, especially financial, due to reduced space requirements and right-sizing programs. For all the tech companies that gave up office space, Silicon Valley’s office market took less of a beating than the San Francisco Bay Area overall.
Silicon Alley, New York’s tech hub consisting of the Flatiron area, which is a combination of Gramercy Park and Chelsea, also saw tenants return space to the market, leaving a 14 percent vacancy rate in the first quarter. However, New York City, with Manhattan seeing major office space retrenchment, recorded a vacancy rate of 18.6 percent.
Back on the West Coast, Silicon Beach was the only one of the Silicon markets to see its vacancy rate pass the 20 percent mark in the first quarter. Like Los Angeles’ plethora of submarkets, the city’s Silicon Beach area consists of several cities. However, looking at Play Vista, Silicon Beach’s largest tech market, the vacancy rate reached 22.5 percent, compared to a 26.2 percent vacancy rate for Greater Los Angeles.
The tech industry’s surrender of office square footage continues, and the news usually makes headlines. Tech firms expanded their office footprint rapidly before the consequences of the pandemic turned the economy and the office sector upside down, so any word of one of these companies putting space up for sublease justifiably turns heads. Certainly, office vacancies in tech hubs are on the rise, but a closer look reveals that compared to their larger metropolitan areas, they are actually doing quite well given the ongoing downsizing in the tech industry. So, tech firms’ reduction of their office presence may simply be a consequence of the overall economy, as opposed to an occurrence that is unique to the tech industry. However, as some of these companies reverse course on their pandemic-era promises of permanent remote work and demand employees make a full return-to-office, the rise in office vacancy rates in the nation’s tech clusters may begin to slow in pace.