Salesforce is making good on its promise to aggressively cut its real estate footprint in its pursuit of more profitable growth, putting another chunk of space on the sublease market as it reduces its stake in a high-profile office tower.
The San Francisco-based tech giant, the world's biggest maker of software to manage sales leads, confirmed it has listed six floors, or about 125,000 square feet, at Salesforce Tower in downtown San Francisco.
The company has enlisted help from CBRE to market the offices, which brings the total amount of space Salesforce is looking to offload in the city to more than 1 million square feet.
Salesforce has leased roughly 820,000 square feet of the 61-story property — the second-tallest office building in California — for its global headquarters since it was developed by Boston Properties about half a decade ago.
The latest sublease decision is rooted in a widespread restructuring plan the company revealed earlier this year as Salesforce struggled in the face of slowing consumer sales and the realization that executives didn't have need for all the staff they had hired to keep pace with soaring demand in the early days of the pandemic.
Salesforce laid off about 10% of its workforce in January and said it would make substantial cuts to its previously vast global real estate portfolio, all in a bid to readjust its operations to account for a souring economic climate.
`Necessary Step'
"Our long-term restructuring is absolutely a necessary step to reach our goals," Salesforce Chief Financial Officer Amy Weaver told analysts on the company's recent earnings call. "We have already taken a difficult action on decreasing our workforce, and we are consolidating our real estate footprint. I want to emphasize that these are just the first steps."
Salesforce executives have previously said they expect the company to incur up to $650 million in charges associated with office space reductions.
Salesforce isn't the only global tech giant to be caught by surprise by the sudden reversal of pandemic-related growth. Others including Meta, Google, Amazon, Microsoft and Twitter hired aggressively in the early years of the global health crisis and are now walking back investments they had made that no longer line up with their headcounts or real estate needs.
Within the past several months, Salesforce has severed ties with the 75-acre Trailblazer Ranch in Scotts Valley, California, that it had leased in early 2022 to help with onboarding remote employees.
In addition the company pulled out of a lease commitment to anchor the 325,000-square-foot Transbay Parcel F, an office tower that has yet to break ground blocks away from the company's San Francisco headquarters.
That deal has been listed for sublease more than 750,000 square feet of space across its Salesforce East and Salesforce West towers, and has made it clear that additional cuts are likely as it attempts to ward off activist pressure and turnaround slumping sales growth.
"There has been a lot we've been doing leading up to this with discipline across the company, looking for savings," Weaver said of the company's goal this quarter to surpass 30% sales growth. "We took two major steps in January, and one was the real estate. We announced that we are going to be shrinking our global real estate considerably over the upcoming years."
Salesforce, founded in 1999, occupies roughly 3.8 million square feet across the U.S. It leases millions of square feet of premier office space for corporate hubs in Chicago, New York, London, Dublin, Dallas, Sydney, Toronto and Tokyo. The company declined to comment on questions from CoStar News on the additional properties it plans to leave.
The company expects its real estate restructuring to be completed by 2026.