The Patagonia vest recession, a current economic condition that New York University Stern School of Business Professor Scott Galloway aptly named because he’s predicting it will mostly affect employees of big technology companies, seems to be in full swing. Coupled with what may seem like a lasting transformation of how these companies work, the office space in cities where these companies have made big moves in the past will likely become abundant. In the latest iteration of this phenomenon, Menlo Park-based Meta, is ditching all the space it leased in Jay Paul’s 181 Fremont in San Francisco. The Gensler-designed offices were home to Instagram, and the San Francisco office of JLL is starting to market this space immediately.
The announcement is not a big surprise for those following the company’s announcements over the last few months. At the end of October 2022, the company announced in its third-quarter earnings that on top of a considerable slowdown in hiring, the firm is also expected to spend around $2 billion, or roughly 2 percent of its entire expenses in 2023, in order to consolidate its office facilities across the globe. At that time, the specifics of this plan were not yet evident, but the company made an announcement shortly thereafter, in November, that it will be firing 11,000 employees past of this plan.
“The future of work is here, and we’re embracing it at Meta. The past few years have brought new possibilities around the role of the office, and we are prioritizing making focused, balanced investments to support our most strategic long-term priorities and lead the way in creating the workplace of the future. Our aim is to build a best-in-class remote work experience to help everyone do the best work of their careers no matter where they are,” said a Meta spokesperson in an email to The Registry.
The charges related to its reduction in office footprint were an estimated $900 million just in the fourth quarter of last year. In the third quarter, the company had already spent $413 million on the same effort, signaling that this will remain a major focus of cost-cutting initiatives for the enterprise in the foreseeable future.
“We have increased scrutiny on all areas of operating expenses. However, these moves follow a substantial investment cycle so they will take time to play out in terms of our overall expense trajectory,” said Dave Wehner, Meta’s chief financial officer during the earnings call last year. “Some steps, like the ongoing rationalization of our office footprint, will lead to incremental costs in the near term. This should set us up well for future years, when we expect to return to higher rates of revenue growth.”
The building at 181 Fremont Street was completed in 2017, and it is a 70-story tower with 432,000 square feet of commercial office space and 67 condominium residences on the top 17 floors of the building.
The structure is a landmark building in San Francisco, featuring a state-of-the-art exoskeleton designed in a saw tooth pattern. The condominium portion of the building has individually designed floor plans and interiors by internationally renowned designer Orlando Diaz Azcuy. In addition to the residential and office space, the building also has 2,480 square feet of retail space that leads directly to the Transbay Transit Center elevated 5.4-acre City Park. The tower is San Francisco’s first pre-certified LEED Platinum mixed-use building, and it features a state-of-the-art water recycling system that captures, treats and reuses greywater and rainwater, as well as a unique glass curtain wall system, which maximizes natural light, according to a statement from Jay Paul.
The commercial offices feature column-free open floor plates offering optimal flexibility, 12.5-foot open ceiling heights, floor-to-ceiling glass curtain walls, unprecedented views, and advanced technological features, according to Jay Paul. It also includes a pedestrian-friendly lobby, bike shed with private stalls and an underground valet parking garage.
The JLL team marketing the property includes Chris Roeder, Ann Montilla and Clarissa Richardson. The property can be available as early as June 1st. Meta’s lease with Jay Paul runs through March 2031.
The move follows months of announcements from firms across the technology industry looking for ways to reduce their office footprint. Companies like Okta, Airbnb, Lyft, Slack, Zynga, Netflix and others have been slowly placing office space on the sublease market. Meta’s approach to paying penalties to get out of their commitments is aimed at reducing any future liabilities at a time when the firm can probably afford this type of expense.
The pronouncements about where the industry sees corporate office space in the future have been squarely focused on reduction.
“When I see headlines about CEOs trying to lure employees back to the office, I feel like it’s probably a doomed approach,” explained Slack CEO and Co-Founder Stewart Butterfield to The Washington Post in December of 2021. “Work is no longer a place you go. It’s something you do.”