Dropbox alone dropped more than $400 million on empty downtown office space last year, as tech companies all over the Bay Area are bleeding billions to rent office spaces that are just cold sitting totally empty.
You might be more likely to see a coyote in the Financial District these days than you are to see an office worker going about their commute or grabbing lunch. And while the tech companies are making bank during the pandemic, they’re also bleeding billions over the rent they’re paying on huge office high-rises in which no one is currently working. Many of these leases were signed during commercial real estate boom times, and the common “backsies” tactic of downsizing and trying to sublease the space is not very effective when freaking no one wants to rent office space.
A new CNBC report on how much money San Francisco tech companies are blowing on empty office space since the start of the pandemic puts the staggering dollar totals into context. As we see from their chart above, Dropbox has bled $416 million during this period that included 2020, and the first quarter of 2021 according to their company’s filings. Salesforce has lost $216 million in the same period, and moreover, all the pretty things that are named after them are also unused and not getting that sweet “brand awareness” that comes with people enjoying those facilities. Frequently villainous tech firms Airbnb and Uber have also lost in the neighborhood of $100 million or more.
These companies are offering sublease space at absolute bargain prices, according to the report. Speaking to commercial real estate firm T3 Advisors co-founder Mark Cote, CNBC says that “companies paying $90 a square foot may offer subleases for $20 to $25 less and eat the difference.” Oh, you hate to see it.
The SF office vacancy rate is currently 18.6%, compared to 6% pre-pandemic, but that figure is misleading. It only counts office space that is currently not rented out at all, and does not include the space that companies leased at the height of the boom and are now desperately trying to sublease. And sure, there is some schadenfreude at seeing tech forms who got too big for their britches now paying literally hundreds of millions for having bitten off too much.
But the reality is that the tech companies will be fine. They will always have the corporate welfare of venture capital and investor money available to them, and I’m guessing that Dropbox and Salesforce executives are hardly missing many meals these days.
The real victims here are the custodial staff, the Financial District bartenders and servers, and the Lee’s Deli-type shops that now have no revenue as the FiDi is a ghost town, and it’s an open question whether the downtown economy will ever return for them.