One of Silicon Valley's most powerful office tenants is looking to slash its significant footprint in the region by offloading nearly 1.5 million square feet of space it neither uses nor wants.
Alphabet Inc.'s Google has listed for sublease at least seven office buildings near its global headquarters in Mountain View, California, according to marketing materials circulated by brokerages including Colliers, Newmark and Cushman & Wakefield.
All told, the listings amount to about 1.4 million square feet and land at a point when Google and other Silicon Valley tech powerhouses are trying to rein in expenses by slashing their previously expansive real estate portfolios.
"As we work to ensure that our real estate investments match the needs of our hybrid workforce, we’re ending leases for a number of unoccupied spaces," a Google spokesperson told CoStar News. "We remain committed to our longstanding presence in the Bay Area and investing in the local community."
The sublease listings include 190,000 square feet at 600 Clyde Ave., 222,000 square feet at 750 Moffett Blvd.; and more than 150,000 square feet at 620 National Ave., all of which are in Mountain View. In the nearby Silicon Valley suburb of Sunnyvale, Google is looking to shed 737,275 square feet across three buildings in the Moffett Park campus at 1000, 1020 and 1050 Enterprise Way.
The company has also listed a research and development building at 1215 Bordeaux Dr., where it has leased more than 26,615 square feet since late November 2019.
The sublease terms for each property varies, but marketing materials show they are available through as late as August 2031.
Even with the listings, earlier reported by the San Francisco Business Times, Google remains one of the largest commercial tenants in the San Francisco Bay Area. Its total footprint spans upwards of 31 million square feet of office and flex space across the region, according to CoStar data.
Prudent New Era
Google added the properties to its expansive Silicon Valley footprint in the years leading up to, and in the early stages of, the pandemic. The search engine giant signed the leases between 2016 and 2020, a period in which demand for its products and services soared and prompted the company to kick off a record hiring spurt and aggressively expand its real estate portfolio.
The tables have quickly turned, however, and Google parent Alphabet has responded to slowing revenue growth and mounting economic uncertainty by shifting its priority to profitability over expansion.
The search engine giant paid nearly $565 million in the first three months of the year on impairment charges related to restructuring its global office portfolio. That is significantly higher than the roughly $500 million the Google parent company estimated at the beginning of 2023 when it told analysts last month that it was working "to align our office space with our adjusted global headcount outlook."
Alphabet CEO Sundar Pichai said on the company's first-quarter earnings call that "we are taking concrete steps to manage our real estate portfolio to ensure it meets our current and future needs." He added that the company would continue to evaluate its global office footprint as it looks to make additional cuts.
The company also released plans earlier this year to lay off 12,000 employees — the largest round of job cuts in its history.
Google is also said to have paused progress on plans for its $1 billion Downtown West development, an 80-acre mixed-use campus that represents Google's largest real estate investment to date.
Top real estate executives with the company have also left in recent months. Jay Bechtel, who oversaw more than 30 million square feet of leases and about $20 billion in corporate real estate purchases, recently departed as Alphabet’s corporate real estate transaction executive after nearly 20 years with the organization.
Alphabet and other tech companies such as Meta, Salesforce and Amazon, to name a few, posted surging revenue, users and advertising early in the pandemic, but 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.
Silicon Valley's office market has fared far better than its counterpart in San Francisco. However, sublease space in the tech-concentrated region is still climbing past record highs. More than 7.5 million square feet of sublet office space is up for grabs, according to CoStar data, a figure that has pushed total availability past 19%.