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Months in the making, pact could signal end of industrial’s run

Some still cannot imagine life without office space. They insist workers will be back, that the past two years of remote work is a blip that will be forgotten once this is all over. They predict that working from home is passing fad, that no serious business will give up office space because of it. They explain that bosses won’t allow it. 

But there are already signs that working from home is leaving a lasting impact on the way that the world completes office work. Some of the fastest-growing businesses are shedding office space as they evolve their new workplace policies to the developing consensus around mandatory office attendance. Understanding why and where lease terminations are happening is key to the future of the office. Here are some companies that have already adapted to the remote aspect of the workplace.

The tech company that’s come to define sales in practically every industry made its ‘work from anywhere’ policy permanent last year. The majority of the company’s 50,000 employees can choose to either work flex or fully remotely. De-emphasizing the office is a course reversal for a company whose name is on a 1.6 million square foot office and a building has come to definite the San Francisco skyline, the tallest building west of the Mississippi. In San Francisco, where Salesforce is the city’s largest private employer, the company canceled its 325,000 square foot lease at a yet-to-be-built tower in the Transbay neighborhood.

Salesforce isn’t abandoning the office, the company just needs less space with more employees working remotely. The company has continued to utilize the gravitas that comes from its newly built Salesforce Tower, if Bay Area employees who want to connect in person will continue doing so there, where the company leases more than two-thirds of the 61-story skyscraper.

Canceling future plans to lease more space is one thing, paying to terminate an existing lease is another. Dropbox put its money where its mouth is, shelling out $32 million to forgo a part of its lease 750,000 square foot lease at its San Francisco headquarters. How much space Dropbox shed wasn’t disclosed, but did say the space was already being subleased. The subtenants deal was also terminated. Dropbox had nearly 400,000 square feet on the sublease market for months before terminating the space. On why pay the penalty to get out of the lease obligation, the company said cutting its real estate costs would generate “long-term financial gain and is an overall efficient use of our capital.”

Employees at the social-sharing website have stopped pinning office designs after the company announced it was terminating its 490,000 square foot lease at a yet-to-be-constructed high-rise near its existing HQ in San Francisco. Pinterest paid nearly $90 million for the privilege. Rather than a cost reduction strategy, Pinterest execs cited the advantages of a more distributed workforce and the ability to hire more people with a wider range of backgrounds and experiences as key drivers in the decision. Like most other deals in the list, Pinterest is still keeping its existing offices but scrapping plans to expand through termination. Having an office presence is still important but many companies are taking a wait-and-see approach to how much office they need exactly. 

Dallas thought it won big when it landed the promise of 3,000 jobs created by Uber new office location. The city even shelled out $36 million in public incentives for a major office hub…until Uber backed out. The company told the City of Dallas it will fall well short of that jobs estimate and will likely only employ between 400 and 500 in the region. In response, Dallas ended ongoing tax incentive deals. 

Uber has since put 116,000 square feet of its Dallas office space up for sublease. The pandemic has not been kind to Uber, the company is also trying to shed space in Chicago and San Francisco. Other companies ending office leases are doing so out of change in workplace strategy. Uber’s office reversals have an element of distress as the struggling ride-share company tries to lower its real estate costs. 

Outdoor retailer REI built a gorgeous eight-acre corporate headquarters outside Seattle—only to promptly sell it. The company put a lot of work into the project, collaborating with well-known designers and architects to craft what it hoped would be the office of the future. When the pandemic hit, REI reconsidered everything. The never-used 400,000 square-foot campus was eventually sold to Facebook for $390 million, a positive return on investment, according to REI. 

In lieu of a fancy HQ, REI will rely on satellite locations across the region, leaning into remote working trends. Execs at REI talked about discovering that collaboration isn’t tied to a location during the pandemic and mobile working tools can be effective. After a couple of rough years, there may be a more simple explanation: REI needed the cash.   

Eight months after triumphantly reopening and doubling the size of its office during the pandemic, Autodesk is closing it down altogether. The software company is ending its 117,000 square foot lease in San Francisco and will close part of another office in San Rafael. The company says reducing and consolidating its office footprint will allow it to invest in other areas to grow its business. Internal company surveys also revealed more than half the firm’s employees prefer remote work. Even with the downsizing, the company still occupies nearly 600,000 square feet of real estate around the Bay Area. 

It’s clear that remote work trends have taken hold in the tech sector specifically. Nearly every lease termination or downsizing announcement has come from a tech company, most based out of San Francisco. Long the crown jewel of office leasing, seemingly unable to keep up with exponential demand, the Bay Area office market has hit a wall. Vacancy rates are at all-time highs and negative office absorption hit nearly 5 million square feet. 

Still, there’s reason to believe markets will recover, though. For every lease termination in the tech sector, there’s another company doubling down on its office footprint. The office has an important role to play, few companies are abandoning offices entirely, but downsizing is a real threat. Tech companies that have expanded real state footprints at a rapid clip are now making careful considerations. For the past two decades, tech has defined the office, turning it into a place of accommodation and collaboration. Indications the vaunted place of the office may be changing should be taken as a worrying sign but no reason for doom and gloom. Companies still need an office. They just might need less of it.