The Wall Street Journal (WSJ) reported on the 21st (local time) that office vacancy rates jumped to 17% this month in Silicon Valley, where big tech companies such as Apple, Meta, and Google Alphabet are gathered. This is because these big tech companies are reducing the size of their offices to reduce costs.
WSJ reported this, citing the results of the U.S. real estate data company Costa Group’s tally of office vacancy rates in areas tied to Silicon Valley, such as San Jose, Palo Alto, and Anthony Vale, California. This is a sharp increase compared to 11% in 2019 before COVID-19. Some areas, such as Menlo Park, where Meta’s headquarters are located, and Mountain View, where Google’s Alphabet headquarters are located, have already exceeded 20% in the spring. WSJ said, “It is lower than northern San Francisco, which has a 25% vacancy rate, but I think the gap with Silicon Valley will narrow, especially among some investors and analysts.” This means that the vacancy phenomenon in San Francisco is also transmitted to the neighboring Silicon Valley.
The reason why Silicon Valley’s vacancy rate is expected to increase is the reduction of offices spaces due to the massive layoffs of big tech companies, which are major tenants. Meta has cut 21,000 employees over the past year and this year, while Google has laid off 12,000 employees. According to local real estate agents, Meta recently closed its Sunnyvale office, putting 65,000㎡ of office space up for sale on the market, and Google also took measures to re-lease 120,000㎡ of offices in Mountain View and Moffett Park. It’s not just big tech companies. According to CBRE statistics, the vacancy rate has continued to increase since 2019 on Sand Hill Road, where venture capital (VC) in Silicon Valley are gathered, and has risen to 14%. An official from Andreesson Horowitz, a large VC, said, “We maintain offices on Sandhill Road, but most of them are operating in the form of virtual offices.” In other words, the forecast that office demand will continue around companies is wrong as the pandemic subsides and people need space to accommodate it to resume work.
