Trouble in paradise: why a tech slump is bad for US real estate
When the technology sector cuts back on staff, it isn’t just bad for tech workers. Commercial landlords are in the firing line too. Where does that leave the future of the corporate HQ?
As 2022 draws to a close, any hopes of a respite for the office real estate industry after a difficult year have been dashed by a slowdown in the US technology sector, which is causing significant cause for concern.
According to a report in The Economist, the major US tech companies are freezing plans to buy up more office space and instead considering downsizing once again. Those Silicon Valley giants, whose extravagant campuses were once considered to be at the cutting edge of employee experience, are changing their tune when it comes to their real estate purchasing. Commercial landlords could be left counting the cost.
Meta, Amazon, Snap and Twitter have all ended their plans to expand their current office spaces across the US and more are following their lead. With many people in the tech industry able to work from home, and tech companies able to provide the equipment for them to do so, it seems like the future of the big, bold, out-there tech company office hangs in the balance.
End to expansion
Accounting for 17.5 per cent of all leasing in America, the tech industry’s turnaround has put end to ten years of office expansion and could add to the already significant problem of empty office space in major North American cities.
Forbes reports that tech companies are already subletting out their office spaces or trying to escape the traditionally long leases they have agreed to in the past, in order to have a more fluid and adaptable real estate portfolio.
It’s not all doom and gloom, however. For remote-first companies who find hybrid working too complicated, and remote workers who enjoy working from home and thrive in an environment where long commutes and purposeless meetings don’t dominate their day, there is encouragement in the latest trends.
‘The message from this downturn is that office real estate will have to work harder…’
Remote-first organisations might also enjoy a tech recruitment dividend given that mandating employees back to the office is not popular with workers, even if it is what many CEOs want.
Overall, the message from this end-of-year downturn is that the office real estate industry will have to work harder to offer experiences that are truly attractive to employees and corporate decision-makers. If restaurants, theatres and concerts are rammed but offices are still under-utilised as we head into 2023, the drive to innovate in the sector will need to intensify – or the slump might get even worse.
