The days of Facebook parent Meta bolstering the office leasing of New York landlord Vornado Realty Trust look to be less concrete as the Silicon Valley tech giant offloads another chunk of its property in the city.
The company is looking to give up about 275,000 square feet at Vornado's 770 Broadway building once its lease expires in June, the latest reduction effort Meta has pursued to curb expenses and redirect capital to higher-priority investments.
The nonrenewal will land roughly a year after the Menlo Park, California-based social media provider signed on for more space in the nearly 1.2 million-square-foot NoHo building, a sign that it is still looking for ways to cut space from its previously vast real estate portfolio.
The ongoing cuts to Meta’s real estate fit alongside a backdrop of other tech companies that have offloaded space as part of an industrywide effort to pull back on certain expenses.
While the cuts aren’t likely to be as aggressive as those made in previous years, Colin Yasukochi, the director of CBRE’s Tech Insights Center, told CoStar News they’ll likely continue through 2024 as companies adjust to recent layoffs and prioritize investments in areas such as artificial intelligence.
“A lot of tech employers have cut excesses and have reprioritized projects to refocus on growth sectors,” he said. “There is still excess capacity in the system as it relates to office portfolios, and while jobs at some companies may grow in the second half of the year, that doesn’t mean office demand will grow right away.”
After adding about 300,000 square feet to its 770 Broadway footprint last year, Meta has filled more than 800,000 square feet in the building. With the latest offloading move, however, that will shrink back down by about one-third.
A Meta spokesperson did not immediately respond to CoStar News' requests to comment. Vornado, which confirmed the downsizing, said the company's remaining 500,000 square feet in the building is part of a long-term agreement that likely won't be affected by additional cuts.
The Facebook parent's shrinking real estate holdings is a reversal after years of signing some of the country's largest, most high-profile deals.
Meta signed one of New York's largest office leases of 2020 when it leased Vornado's Farley Building only to walk back initial plans to expand its footprint at Hudson Yards — the largest private U.S. real estate development. It has also ended a deal for one of its offices at 225 Park Ave. S in Gramercy Park.
Leaner Times Ahead
The cuts may not end anytime soon.
Company executives have emphasized Meta's commitment to moving forward as a smaller, more efficient business that is expected to result in slower hiring and a shrunken office portfolio.
"A lot of people looked at what we were doing as a short-term thing, but the part about making the company leaner is the most important part to take forward," Meta CEO Mark Zuckerberg said on the company's earnings call this month. "We're in a place right now where the business is performing well and the obvious question is, 'Should we invest more in things?' But the biggest thing holding me back from doing that is I've come around on thinking we operate better as a leaner company."
The company spent nearly $3.5 billion through 2023 on restructuring efforts that included office closings, severance and personnel costs, and other related expenses. That's in addition to the more than $4.6 billion Meta spent through 2022 as it raced to respond to slowing advertising revenue and mounting losses in its Reality Labs division, which produces the company's augmented and virtual reality hardware and software.
The company employed about 67,315 people by year-end 2023, a 22% drop compared to the prior year.
If Meta were to implement additional cuts to its New York portfolio, it would likely deal a heavy blow to Vornado, which counts the tech giant as its largest tenant.
Prior to its 770 Broadway downsizing, Meta leased a total of 1.45 million square feet from Vornado, according to Securities and Exchange Commission filings. All told, the company's real estate footprint spans roughly 36 million square feet, according to CoStar data, more than half of which is office space concentrated around its Silicon Valley headquarters.