Tech giants are laying off workers and reducing office space. In the process, they can also initiate the emergence of new entrepreneurs and startups that can collaborate on unexpectedly affordable and high-quality commercial real estate.
Angel investor Jason Calacanis predicted on the All-In podcast that the big business winners of 2023 will be “laid-off tech workers who decide to take control of their own destiny and start companies.”
“I believe that the collective technical workers who come together in teams of two, three, or four—developers, product managers, people who build things and build companies together—will be very successful and make incredible lemonade from those lemons of great technology. layoffs,ve that the collective technical workers who come together in teams of two, three, or four—developers, product managers, people who build things and build companies together—will be very successful and make incredible lemonade from those lemons of great technology. layoffs,” she said earlier this month.
From employee to entrepreneur
Some of the employees who became entrepreneurs may have come from, for example, Meta, which recently laid off almost 11,000 employees. The owner of Facebook is also giving up office space, both to reduce costs and to work remotely. On Friday, it confirmed that it is subleasing office space in Seattle that it no longer needs, according to the Seattle Times. The company also recently disposed of real estate in New York.
Subleased office space is typically leased at a discount, which can allow startups that otherwise couldn’t afford it to move in, Colliers International leasing expert Connor McClain told the Seattle Times.
As Bloomberg reported this week, the tech retreat is causing problems for landlords in cities like New York and San Francisco, which have already struggled with empty buildings and the shift to flexible work arrangements after the pandemic.
Meta has neither fired employees nor given up real estate recently. So are many other big tech companies, including Microsoft, Salesforce, and Twitter.
Salesforce recently announced layoffs, affecting about 10% of its workforce, while also announcing real estate moves. “This is a bigger moment for cost restructuring, and we want to… take about $3 billion to $5 billion out of the business,” CEO Marc Benioff said at the conference. “When we look at how we do it, real estate is a big part of it.”
Office rents are “down.”
Salesforce has its headquarters in San Francisco. The January 7 exchange between PayPal founder David Sacks and Tesla CEO Elon Musk highlighted the state of commercial real estate there. Sacks tweeted: “Just got an offer on office space in San Francisco (SOMA) at the same price as 2009!” Cheers.”
Musk replied, “It’s coming down.”
Technology entrepreneurs emerging from layoffs could use cheaper real estate to invest in new companies.
Sure, some startups can save money by not renting commercial real estate and letting everyone work from home, especially after the widely feared recession passes. But as the CEOs of big companies like Disney and Starbucks recently argued—even as they invite remote workers back into the office—face-to-face collaboration has clear business benefits.
As Disney CEO Bob Iger wrote in a recent memo to employees, “In a creative company like ours, there is no substitute for being physically together to connect, observe, and create with friends.”
This can be especially true for tech entrepreneurs who have decided to make lemonade out of pooled lemons.