Technology companies aren't going to take up space just to have space when they don't need it.
Many office owners have relied on technology companies of all sizes to secure their space. It was a solid bet, but that seems to be changing, according to a new report from Savills Research and Data Services, The Tech Tenant.
The report notes that large tech companies have “strategic vacancy” space to enable growth. In most industries, this is only a fraction of the available space. However, the technology industry, at least the largest companies, has strategically kept 30% to 40% vacant positions through 2022 in anticipation of significant headcount expansion in 2023.
Inflation remains high, venture capital firms and others withdraw funding, many startups are unable to obtain funding to establish themselves, and advances in generative artificial intelligence make it important for all businesses. It became clear that the market was large, but no expansion took place. happen. Instead, there were layoffs, with 1,064 companies laying off 165,269 people in 2022. In 2023, 1,191 companies will lay off 263,180 employees. And so far in 2024, 219 companies have said goodbye to 50,841 workers, the report said. Layoffs.fyi, a site that tracks technical layoffs.
As a result, technology companies are rethinking the space they need for personnel, as well as nap pods, coffee bars, massage rooms, and game rooms.
“Emerging technology companies see opportunity in this landscape for 2024,” Savills wrote. “Those who believe in the power of in-person working will benefit from the current tenant-friendly market conditions, including the possibility of avoiding significant capital costs by leveraging infrastructure and equipment left behind by previous tenants. You can take it.”
The company wrote that in 2023, 21.9% of total leasing activity came from leases from the top five companies. IBM has a sale-leaseback of 774,000 square feet in Raleigh, North Carolina. OpenAI subleases 486,600 square feet in San Francisco. AMD updates 444,000 square feet in Austin. Amazon renews 260,000 square feet in North Virginia. His 234,537 square foot update in San Francisco by Cisco Meraki. Also, his 42.6% of leases completed nationwide last year were signed in the last quarter. The 9 million square feet contracted for 2023 was down from 16.6 million square feet in 2022 and 22.6 million square feet in 2021.
One factor that may help is the anticipated resurgence of venture capital. “Funding in 2023 increased with large rounds in the artificial intelligence (AI) space and new activity from other innovative technologies,” Savills wrote. “Increased VC funding can drive innovation and expansion, and working in-person rather than remotely can help develop breakthrough technologies, raise capital, and reach go-to-market milestones.” Start-ups that believe they can efficiently reach their goals need office space.
