After a blow-out fourth-quarter earnings announcement, Salesforce is still looking at ways to optimize for efficiency and cost and has decided to sublease additional 125,000 square feet of office space it rents in its eponymous Salesforce Tower in San Francisco. This latest space reduction will bring the total tally of space the company is looking to reduce to over one million square feet.
“This is part of what we announced in January,” said a company spokesperson in an email to the San Francisco Business Times, which covered the announcement. The company leases around 875,000 square feet in the building that offers roughly 1.41 million rentable square feet. Boston Properties owns the building.
The technology giant has regularly shed office space over the last few years. Last year, the company placed 412,000 square feet on the sublease market at 50 Fremont, roughly half of the building which is across the street from the Salesforce Tower in the City’s downtown core. That was followed by another sublease that Salesforce offered at 350 Mission Street, also in the City’s downtown where it occupied 450,000 square feet and placed roughly 225,000 square feet on the market in early 2021.
In May of 2021, Salesforce also decided to pull out plans to occupy 325,000 square feet in a development property at Transbay Parcel F in San Francisco. This development was proposed by Hines, Goldman Sachs and Urban Pacific Development, according to industry reports.
The news comes on the heels of constant sublease announcements from companies across the region, spurred by the novel way working has evolved since the global COVID-19 pandemic began. “There’s a lot of things pre-pandemic that we had in our company that are expenses that we don’t need post-pandemic,” Benioff stated in the firm’s earnings call last December. “So before the pandemic, the percentage of remote workers for Salesforce was approximately 20 percent. For other companies now, we’re seeing that normalize at somewhere around 50 percent even with mandatory workdays.”
This new normal is not hurting businesses like Salesforce, which continue to look for ways to innovate the way their teams work. And the results speak for themselves; the top-line revenue for the company continued its growth trajectory. Fourth quarter revenue hit $8.38 billion, which is up 14 percent on a year-over-year basis. For the fiscal year 2023, total revenue reached $31.4 billion, up from $26.5 billion a year earlier. This helped boost the company’s gross profit to nearly $23 billion, up from a record $19.5 billion a year ago.
“We’re making Salesforce one of the most profitable software companies in the world with one of the highest cash flows and one of the very largest as well,” said Benioff during the March 1st, 2023 earnings call. “You can see it from our numbers by this quarter why I’m so motivated, so inspired and so confident that we can do even more faster than anyone realized.”
The remarkable thing about this is that the company is well aware of the challenges posed by the work-from-home environment, yet it looks at that as an opportunity. “And I will call out one more thing, which is probably one of the most successful things we’ve done is come up with new ways to work,” Benioff stated in December. “You have to have a beginner’s mind, and we’re finding our way through this.”
The company’s President and Chief Operating Officer, Brian Millham, saw the need for the presence in the office to be stronger, and he values the benefits of a collaborative environment that an office location fosters. “I really believe that being together drives more learning, better collaboration, better networking and better enablement,” he said during a call last December. “I like that connection that we have to one another, I think, it’s part of our culture and how we operate, I’ve asked my team recently to spend more time in the office.”
However, the company is looking very closely at rebalancing how things are done in the office, Benioff said. He acknowledged that there are people who need to be in the office, workers who perform core functions, or employees who are not indoctrinated into the organizational culture or need mentorship and can benefit from an office environment.
“But we’re never going back to how it was. We all know that,” Benioff concluded.