European office space loses charm for big tech

Europe is becoming increasingly less attractive for the physical headquarters of big tech companies after years of expansion and growth, with major offices in London and Dublin being mothballed for a variety of economic and business reasons.

The Financial Times reports that organizations including Google and Facebook's parent companies Alphabet and Meta are leading the way in abandoning their leased premises in the two cities.

Rising interest rates and an increased desire for home working having made office space less of a requirement and more of a financial burden, and in many cases companies are now seeking to cut their losses by subletting floor space.

Google was already planning to move the majority of its staff to a new London base but is now reportedly shutting down its former HQ altogether, as well as looking for tenants for its premises.

"Walk round any of those (big tech) offices and there is a huge amount of space given over to non-fee-generating functions which look very generous," Chris Lewis, of property company DeVono Cresa, told the FT. "The amount of space taken was taken by a really ambitious view of headcount."

The Times newspaper also reports that over a year ago, Facebook's owner Meta agreed a 20-year lease on a high-profile London office, which was interpreted as a sign of business confidence post-pandemic, but as of December 2022, it remains unoccupied, and it has been confirmed that the company will try to sublet it, a situation that is being repeated at its European headquarters in Dublin, for which the company signed a 25-year lease in 2018.

The Techradar website said this follows on from the company subletting a building in Austin, Texas, and terminating the leases on two of its three offices in Manhattan.

In recent years the growth of the tech sector has been a safe bet for British property investors, so the drying up of demand will hit landlords particularly hard, when combined with rising interest rates.

Aaron Guy, a property analyst at Citi, told the Times that over the next couple of years, London office space value could fall by up to one-third, "driven primarily by recessionary impacts on higher unemployment and continued work-from-home office shrinkage".

The position of another of the big tech companies, Twitter, remains unclear amid the on-going upheaval caused by its recent takeover by Elon Musk, and significant job cuts and calls for remaining staff to return to offices, but the FT noted that the company's real estate vice-president had recently left the organization.

More optimistic news comes from TikTok, which is owned by China's ByteDance.

Since September 2022, it has insisted that staff be present in the office two to three days a week. And it is reportedly close to agreeing deals to occupy Verdant, a major new office development in the city of London, and expand its presence in Dublin, which has long been a popular destination for tech companies.