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Facebook, Microsoft pulling out of more Seattle-area offices

In the latest sign of change in the tech sector — and softness in the office market here — Facebook parent Meta and Microsoft are separately vacating office buildings in Seattle and Bellevue.

On Friday, Facebook confirmed plans to sublease its offices at the six-story Arbor Block 333, on Eighth Avenue North in downtown Seattle, and in the 11-story Block 6 of the Spring District in Bellevue. The Menlo Park, California-based social media giant said it is also reviewing leases for other Seattle-area office buildings.

The same day, Redmond-based Microsoft confirmed reports that it won’t renew its lease at the 26-story City Center Plaza in Bellevue when that lease ends in June 2024.

The announcements come as the continued popularity of remote work and a tech slowdown with massive layoffs have both cut into demand for office space in Seattle and elsewhere.

Both Meta and Microsoft have embraced remote work while paring back their workforces as the tech sector swoons.

In November, Meta announced layoffs of 726 Seattle-area workers.

Meta spokesperson Tracy Clayton said the leasing decisions were primarily driven by the company’s move toward remote, or “distributed,” work. But he acknowledged that, “given the economic climate, ” Meta was also “trying to be … financially prudent.”

Meta currently occupies all of Arbor Block 333 and would have occupied all of Block 6, which is scheduled to open later this year. The company still has offices in 29 buildings, and nearly 8,000 workers, in the Seattle area, which remains the company’s second-largest engineering hub outside of its Menlo Park headquarters, Clayton said.

A Microsoft spokesperson characterized its decision about City Center Plaza as part of an ongoing evaluation of the firm’s “real estate portfolio to ensure we provide an exceptional place to work and create greater collaboration and community for our employees.”

The City Center Plaza decision also comes amid a massive remodeling of Microsoft’s Redmond campus, part of which will be completed in late 2023.

But Friday’s news adds to an already downbeat forecast for the Seattle-area office market as it struggles against economic headwinds and the sluggish return of remote office workers.

That struggle is most visible in downtown Seattle, where total office vacancy now stands at around 25%, according to a new report by commercial real estate agency Colliers.

Even non-vacant offices are often half empty, thanks to remote work. Since last summer, downtown Seattle has only around 40% of the workers present before the pandemic, according to cellphone location data from posted by the Downtown Seattle Association.

Connor McClain, senior vice president and leasing expert at Colliers, said office industry insiders have been anticipating more leasing decisions like these as tech firms extend their remote work policies and cut their body count.

“Given the macroeconomic conditions and the hybrid work trend, we believe we’ll see an uptick in office vacancy over the next couple of quarters,” McClain said.

Friday’s news wasn’t a big surprise on the Eastside, either. Although Bellevue has fared better than its cross-lake rival — total downtown vacancy is just 12%, according to Colliers — it has also seen several high-profile departures.

Last year, Microsoft announced plans to not renew leases at several Eastside buildings, including Advanta Office Commons on 160th Avenue Southeast and in Lincoln Square North. In July, Amazon paused construction at some of its Bellevue campus.

“Like most urban centers, we expect to see increasing vacancy rates because of hybrid work,” said Patrick Bannon, president of the Bellevue Downtown Association, in an emailed statement.

He added that City Center Plaza’s “amenities … and proximity to the transit center, future light rail and I-405″ will make it attractive to new tenants.

Some real estate industry insiders expect to hear more leasing news in the near future, given continued softness in the tech sector and uncertainty over the future of remote work.

But some also see silver linings.

Because subleased office space is typically leased at a discount, Meta’s moves at Arbor Block 333 and Block 6 could mean openings for firms otherwise priced out, said Colliers’ McClain.

“This creates opportunity for local startups or for large out-of-market companies who typically couldn’t afford it here,” he said. The Seattle Times

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