Ride-sharing giant Uber's initially quiet attempts to shed a large part of its San Francisco office space have grown louder as the company officially lists nearly a third of its new corporate hub in the city's Mission Bay neighborhood.
The move is one of the latest among U.S. firms looking to reduce their space as executives shift priorities in an uncertain economy and the rise of hybrid work patterns stemming from the pandemic.
Uber is marketing for sublease all 286,548 square feet in one of four buildings it uses for its global headquarters, according to marketing materials shared with CoStar News. The firm has enlisted JLL to help it land a subtenant willing to take on the hefty chunk of space, no small feat given the dwindling number of office tenants willing to invest in and expand in the city, which has one of the highest office vacancy rates in the country, CoStar data shows.
An Uber spokesperson confirmed the listing to CoStar News, adding that the company never occupied the property developed by Alexandria Real Estate Equities at 1725 Third St.
“We are in the early stages of seeking interest in subleasing one of our four buildings in Mission Bay," the spokesperson said. "As one of our buildings is currently unoccupied, this will not change our footprint in the city or impact space available for employees. We remain committed to our hybrid work approach, which emphasizes in-person collaboration, and continue to welcome employees to our Mission Bay campus.”
Uber implemented its flexible-work policy in late 2022, requiring nonremote employees to be in an office on Tuesdays and Thursdays each week as part of the company's efforts to "maximize the benefits of in-person collaboration," Uber's Chief People Officer Nikki Krishnamurthy wrote in a company blog post at the time. Employees are allowed to work from anywhere for up to four weeks per year, and the company is providing some flexibility for certain employees to continue operating fully remote.
Uber leases more than 1 million square feet for the four Mission Bay properties that serve as its global headquarters. The company, which started paying about $84 per square foot for the spaces in 2019, invested about $160 million in the campus build-out, according to previous DBRS Morningstar analysis and CoStar data.
San Francisco rents, which are still among the highest in the nation, now average about $62 per square foot, CoStar data shows.
Rumors of Uber's interest in offloading some of its new Mission Bay campus, which it moved into at the height of the pandemic, have been swirling for a couple of years. Uber had been privately marketing some of its Mission Bay space, but after touring it with several prospective takers, the company decided against officially listing the space.
The game has since changed, however, as Uber's renewed focus on profitability over expansion has echoed similar moves among other big tech firms looking to curb expenses.
New Office Reality
Alphabet, Meta, Salesforce and Amazon, to name a few, posted surging revenue, users and advertising early in the pandemic, but they are now contending with a slowing economy and fears of a recession.
Many Silicon Valley tech giants have been and continue to make deep cuts to their real estate portfolios by shutting office locations, subleasing unwanted space, terminating prelease agreements, and walking away from future investments. Those decisions have loaded up the Bay Area's real estate market with millions of square feet of sublease space or have downsized offices as leases come due.
The national impact includes Chicago, where Salesforce was expected to offload as much as 125,000 square feet of office space in its 60-story namesake skyscraper before moving in. And Facebook parent Meta has shed more than a million square feet of space in the Bay Area and elsewhere across the country, expanding its efforts to slash expensive real estate after announcing plans for 10,000 global layoffs.
For Uber, in particular, its food delivery business made it possible for the company to largely avoid the depressed ride-sharing business at the height of the pandemic. However, it hasn't been immune from factors such as the wobbly economy, impact of a hybrid and more flexible work schedule, as well as increased pressure to cut any unnecessary expenses.
In Chicago, Uber started marketing more than 50,000 square feet of office space, the latest such move the company has made in the city's Old Post Office building. The firm became the largest tenant in Loop business district building when it leased 463,000 square feet for the headquarters of its Uber Freight unit in 2019.
Uber has since shed about 100,000 square feet of that initial footprint, a figure expected to climb once the company lands a subtenant willing to take over the fresh batch of space.
In addition to several properties it leased across San Francisco, Uber put nearly 730,000 square feet of space up for sublease at its previous headquarters and supplementary offices in the months leading up to the pandemic's 2020 outbreak as part of its preparation for its move to the new Mission Bay headquarters.
Those listings were largely seen as setting the stage for the subleasing woes to come for the city, which now touts one of the highest sublease availability rates in the country.
Nearly 12 million square feet of sublease space is available in San Francisco alone — more than 6% of the city's entire inventory — still well below New York, which has about 31 million square feet sitting on its sublet market, or about 3% of its entire office stock, according to CoStar data. Worsening the issue is falling office demand for space in and around the city's downtown, where vacancy has shot up to surpass 20%, the data shows.