Sweetgreen has landed a subtenant willing to take on the fast-casual chain's Los Angeles headquarters in a deal that bookends a yearslong effort to curb expenses and adapt to workplace shifts brought about by the COVID-19 pandemic.
The company finalized an agreement with FPM Development, a subsidiary of a hydrogen fuel cell company, for almost 100,000 square feet spread across two phases of Sweetgreen's recently constructed 3101 Exposition Place former headquarters in the West Adams neighborhood of L.A. The salad chain preleased the property in 2019 and listed both the 57,000-square-foot first phase and 36,000-square-foot second phase of construction in early 2022.
FPM took over most of the initial phase at the beginning of the month, according to information filed with the Securities and Exchange Commission, with the remaining space across it and the second phase expected to be ready later this summer. The sublease deal is set to run through the end of February 2032, and the fuel-cell company is estimated to pay a total of more than $42 million for the duration of the agreement, excluding the management fees or property expenses it is now responsible for paying.
The headquarters is in the gentrifying West Adams neighborhood southwest of downtown L.A. and near Culver City, an area that has attracted a bevy of entertainment and tech firms in recent years. It's also near the Expo/Crenshaw Metro station and Interstate 10, making it convenient for commuters.
Sweetgreen's headquarters, outfitted with a plethora of lounge areas, a staff kitchen, an outdoor patio, an herb garden and a mobile "work where you want" ethos, was designed by Abramson Architects to "encourage collaboration and a lively office energy."
The neighborhood "has completely outperformed the rest of the market," Asher Luzzatto, president of L.A. landlord Luzzatto Co., told CoStar News. "There are certain micromarkets that, for different reasons, will be part of the future for Los Angeles and other cities. This area in particular has had a ton of success because the location is so central and transit-oriented. It's a really critical node."
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Sweetgreen, like other companies across the country, decided to put its primary office hub up for sublease as part of a broader reevaluation of its real estate space needs in response to remote work. In the years since the pandemic's 2020 outbreak, increased flexibility and the widespread adoption of hybrid schedules has resulted in office tenants subleasing space they feel will no longer be necessary as they transition into stages beyond the pandemic.
For the salad chain, downsizing its real estate footprint has also anchored a series of restructuring moves it has rolled out over the past two years as it narrows in on its goal of profitability.
The company reported first quarter revenue of roughly $158 million, a 26% increase compared to the same period last year. It posted a loss of about $26 million, down significantly from the nearly $34 million loss it reported at the start of 2023.
"We have a strong foundation to build on and multiple levers to deliver long-term growth," Sweetgreen CEO Jonathan Neman told analysts on the company's earnings call Wednesday. "We've been focused on strategic priorities to improve our financial model with the goal of driving revenue growth and profitability. We're building a durable business positioned for a sustainable future."
The company plans to open as many as 27 restaurants through the rest of the year, but with lots of "white space" across the country, Neman said it will ramp up its brick-and-mortar expansion plans in 2025 by up to 20% to build on its more than 180-location footprint.