San Francisco and Austin: A Changing Office Space Landscape
Meta’s Downsizing Efforts
In San Francisco and Austin, the tech giant Meta Platforms Inc. is continuing to downsize its office space. This trend is part of a larger initiative that the company predicts will cost billions of dollars. As they decrease their physical footprint, both cities are witnessing significant changes in their office space markets.
Developments in Austin
Recently, in Austin, Meta has vacated a considerable amount of office space, specifically a notable tower in The Domain area. Fortunately for this location, IBM has stepped in, taking over the lease for the entire tower that Meta is leaving behind.
This transition has had a mixed impact on local real estate dynamics. For instance, construction plans for new office towers at The Domain by real estate developer Hines have been paused due to a slowdown in leasing. They also had to cancel a lease with IBM for an important 320,000 square foot space. Just as that news unfolded, Cousins Properties, the owner of the Domain 12 office building that Meta was leasing, found some good fortune with IBM’s move. That same building happens to be 320,000 square feet as well.
Challenges in Downtown Austin
In stark contrast, the situation in downtown Austin remains troubling. The tallest tower in the area stands empty, still searching for a corporate tenant. Meta has opted to sublease all the office space in this building before even moving in, which leaves it without any takers so far. Meta has been on a mission for the past two years to offload much of its downtown space.
Last November, the company confirmed they would not proceed with plans to occupy the 586,000 square foot office space in the under-construction Sixth and Guadalupe building, which has apartments taking up the top half. In June 2023, they also announced a plan to find a subtenant for 120,000 square feet they had leased in the 300 West Sixth office tower. As it stands, Meta is still leasing 320,000 square feet in the Third + Shoal office tower.
Pursuit of New Tenants
Meanwhile, a recent highlight in the office space market has emerged with Strava, a fitness-tracking app company, securing a sublease at 181 Fremont Street. Strava’s new headquarters spans approximately 41,000 square feet and is part of a larger effort to find new tenants for Meta’s former office spaces in the downtown building. They signed the deal in mid-September, as confirmed by a source who requested anonymity.
Strava’s current lease, which encompasses 34,000 square feet at their existing headquarters at 208 Utah Street, is set to expire in the summer of next year. In addition to Strava, other businesses have also taken portions of Meta’s office space. For example, software company Zendesk acquired 41,000 square feet earlier this year, while travel management tech firm Navan took 36,000 square feet in the fall.
Meta’s Subleasing Strategy
In total, these three deals account for roughly 120,000 square feet of space, but still, more than two-thirds of Meta’s office space at 181 Fremont remains available. Meta’s lease at this location doesn’t end until March 2031. Initially, the company signed a deal in 2017 to lease the entire 435,000 square foot office space from developer Jay Paul Co., and then made headlines the following year by leasing the entirety of the Park Tower at 250 Howard Street, which spans a staggering 755,900 square feet.
As Meta continues to sublease their properties in both San Francisco and Austin, the landscape of office space in these cities is evolving rapidly. Companies, real estate developers, and communities are all watching closely to see how these changes will affect the local economy and office market dynamics.
