Big Tech’s Impact on the Commercial Real Estate Space
The Work From Home Boom Causes Changes in the Real Estate Market
When the COVID-19 pandemic first hit the US in March, millions of tech workers grabbed their laptops and went home for what they thought would be a few weeks of working remotely. Now, about six months later, many big tech companies are still out of the office indefinitely. Facebook (FB) and Google (GOOGL) said they will give employees the option to be remote well into 2021. Twitter (TWTR) and Square (SQ) said employees will be able to work from home “forever.”
The work from home boom is not just a temporary anomaly. Big tech companies changing their business models is impacting the real estate landscape—both in urban areas where offices are closed, and in more rural areas.
Subleases Surge in San Francisco
In San Francisco, a hub for big tech offices, demand for office space has plummeted. Last week, Twitter listed 104,850 square feet of space in its San Francisco headquarters for sublease. In August, Pinterest (PINS) broke its 490,000 square-foot lease in SoMa.
The amount of office space available for sublease in San Francisco has gone up by 65% as a result of the pandemic. There is about 6.7 million square feet of office space for sublease in San Francisco currently, compared to normal levels of about 1 million square feet. Some analysts expect that even more companies will abandon their office space in the coming months, and the market will not bottom out for another year.
Tech Companies Snap Up Real Estate Elsewhere
While big tech companies are vacating office space in some urban centers, they are buying real estate in other places. For example, Amazon (AMZN) is making plans to put 1,000 new warehouses in suburban neighborhoods, which will impact the real estate landscape across the country. The company is also adding warehouse space near big cities to help with last mile delivery.
Additionally, Facebook just paid $367.6 million for a custom-built office complex that was supposed to be the headquarters for REI, the outdoor clothing and gear retailer. REI decided not to move into the campus, located outside of Seattle, because of the pandemic. The move shows that Facebook plans to have at least some employees return to working from physical offices eventually.
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