One of Silicon Valley's largest sublease listings has a taker now that the online arm of global retailer Walmart agreed to take over the massive chunk of space that Facebook parent company Meta no longer wants.
Walmart.com will take over the entire four-building Moffett Green campus in Sunnyvale, California, as part of a deal that marks one of the largest lease agreements signed since the pandemic's early 2020 outbreak, according to four local real estate brokers with knowledge of the deal but who were not authorized to speak publicly about it.
Walmart representatives did not immediately respond to CoStar News' requests for comment, and Meta declined to discuss the deal.
Meta decided to dump the roughly 720,000-square-foot campus shortly after it signed the deal to occupy the Silicon Valley campus itself in December 2021, then the largest private sector office lease of the year. The company, despite having recently adopted a lenient remote-work policy, finalized the deal for the former NetApp headquarters complex with then landlord Tishman Speyer.
The international developer sold Moffett Green to Los Angeles investment firm CommonWealth Partners for $707 million in June 2022, a purchase price largely reflective upon Meta's tenancy at the complex.
The Mountain View, California-based tech giant had initially signed the Moffett Park deal to help cut down on employees' commute times and help support public transit, Meta spokesperson Chloe Meyere told CoStar News at the time. While many of its workers then were still allowed to operate remotely, she said they would be expected to return at least part time starting in 2022 unless granted an extension.
Spatial Advantage
Like other tech giants, the Facebook parent has been on an aggressive cutting spree since the beginning of the year, reversing a decade-long expansion as demand for its products and services soared and the company had to lease, develop or acquire large swaths of space to accommodate its record headcount growth.
The tables have quickly turned, however, and Meta has since responded to slowing revenue growth and mounting economic uncertainty by shifting priorities to profitability over expansion.
Meta and other tech companies such as Alphabet, Salesforce and Amazon 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 responded by making deep cuts to their property holdings 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.
For Meta, that has resulted in a swift downsizing that reversed a yearslong stretch of blockbuster leases and high-profile expansions. Within the past year Meta has been trying to shed millions of square feet of office space it no longer uses, needs or wants to pay for. The company estimated it would take a roughly $2 billion hit before the end of 2023 related to consolidating its offices and exiting space.
The company has terminated leases for two office buildings it had in Mountain View, California. Earlier this year it listed for sublease all 431,879 square feet it occupies in the 181 Fremont St. high rise in downtown San Francisco. The company is also marketing a 113,585-square-foot building it has been leasing across the San Francisco Bay in Fremont, California.
The deal with Walmart, however — reported earlier by The Registry — proves not all tenants are in such strict cost-cutting modes.
Record amounts of sublease availabilities has provided companies looking to expand an often cheaper alternative to leasing directly from landlords. Major sublease listings dumped by tech companies such as Meta and Google have pushed Silicon Valley's availability rate to surpass 19%, according to CoStar data.
There is now more than 8.2 million square feet of sublease space sitting on the tech-concentrated market, a record high.
The move to Moffett Green would be an expansion for Walmart's digital arm, which currently leases about 600,000 square feet in the Sunnyvale Business Park at 840 West California Ave. The fate of that space has yet to be disclosed.