LinkedIn is joining a crowded field of Silicon Valley tech giants slashing their real estate footprints across the U.S. in an effort to rein in expenses and adjust to a new economic reality following a decade of explosive growth.
The Sunnyvale, California-based professional social network, which is owned by Microsoft but operates independently, has listed for sublease a more than 63,500-square-foot chunk of its corporate hub in downtown San Francisco, according to marketing materials. The move coincides with the company's plan to lay off nearly 700 employees as part of a second round of job cuts after letting go of about 715 workers earlier this year.
"Talent changes are a difficult, but necessary and regular part of managing our business," the company wrote in a corporate post. "While we are adapting our organizational structures and streamlining our decision-making, we are continuing to invest in strategic priorities for our future and to ensure we continue to deliver value for our members and customers."
The company has 19,500 employees across 36 offices globally.
LinkedIn preleased the entire 450,000-square-foot tower at 222 Second St. in 2014 from developer Tishman Speyer before the building’s completion the following year. The downtown space was intended to consolidate LinkedIn’s San Francisco workforce under one roof, and the deal was among the largest in the city’s history.
Fast forward nearly a decade, however, and companies across the global tech industry are now contending with a reversal of fortune after pandemic-fueled growth has been forced to evolve into a renewed focus on profitability.
LinkedIn declined to comment on its latest sublease decision or provide details about its long-term real estate strategy.
Post-Pandemic Cuts
While tech companies such as LinkedIn, Block, Salesforce, Meta, Amazon and Google have implemented widespread cuts to their previously vast real estate portfolios, the impact of those decisions has been most acute in the San Francisco and Silicon Valley areas, where many are headquartered and operate in a more concentrated amount of space.
After roughly a decade of fueling record-high spikes in rent growth and demand — often leasing up space before it was even built — tech giants are now responding to slowing growth 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 — which have also been fueled by significant layoffs and permanently adopted remote-work policies — have loaded up the Bay Area's real estate market with millions of square feet of available sublease space or have downsized offices as leases come due.
In downtown San Francisco, the average vacancy rate among leased office buildings has jumped past 25% from less than 7% reported in 2019, according to CoStar data. Large tech companies have contributed hefty chunks to the nearly 13 million square feet of available sublease space across the market, adding even more pressure to declining rents and landlords competing with empty listings.
About 40% of LinkedIn’s nearly 20,000-person workforce was hired throughout the earlier years of the pandemic. In 2022, the Silicon Valley company adopted a flexible work policy that allows employees to work from home as often as they choose, with about 10% of its workforce transitioning to a fully remote model and the rest returning to the office at least part of the time.
Shortly after enacting the flexible policy, the company leveraged the extensive perks and amenities available at the 222 Second St. tower to gently entice employees back to physical office space. The office building includes free coffee bars, a corporate gym, interview rooms and a cafeteria, some of which will remain available to any future subtenant.
“We trust all of our employees to make the decision of where it makes the most sense for them to do their work, what works best for them and their teams,” LinkedIn Chief People Officer Teuila Hanson previously said.
The company has enlisted Colliers to help market the five-floor sublet availability, which is available for immediate occupancy.