Wednesday, July 29, 2020

Facebook Says Added Office Space Reflects Tight LA Market

Facebook has signed a lease for more space at a 4-year-old office complex in Los Angeles' Playa Vista neighborhood, a sign that technology companies are still scooping up real estate in competitive areas even as the pandemic prompts businesses to let more employees work from home permanently.

The Menlo Park, California-based social media company is boosting its space by about 23%. It's taking an additional 85,000 square feet at developer Tishman Speyer's The Brickyard, a luxury, two-building complex spanning more than 425,000 square feet in the heart of an area dubbed Silicon Beach because of its concentration of tech and media firms such as search engine provider Google and software maker Microsoft.

It comes as most of Facebook's employees are working remotely because of the coronavirus pandemic, including those who normally are in the office at The Brickyard. In May, Facebook CEO Mark Zuckerberg said that roughly half of its 48,000-strong workforce would transition to a work-from-home model on a permanent basis over the next five to 10 years.

The new lease was signed as other tech giants let staff work off site: On Monday, for instance, Google said it would allow workers to stay home through summer 2021 after announcing it would be pulling back on plans to grow its real estate and data center footprint.

The Facebook move is a sign that companies with a large office workforce won't stop signing office leases even if they are establishing permanent work-from-home policies. Many office space agreements run for multiple years that can easily transcend a one- or two-year disruption as a result of the pandemic, and growing companies need to plan for space based on potential workforce expansion.

Facebook was the sole tenant at the property's six-story, 122,000-square-foot structure at 12126 W. Waterfront Drive, according to CoStar data. Up to now, it also was the dominant tenant at its twin, a 297,000-square-foot building at 12105 W. Waterfront Drive where it leased about 140,000 square feet, that data shows. The new lease allows it to expand at the 12105 building. The company now accounts for about 83% of the total area at the property.

In an email to CoStar News, Facebook spokesman Tracy Clayton said the new lease was a hedge of sorts.

"Given the competitive real estate market in the region we are always on the lookout for opportunities to accommodate our growth," Clayton wrote. "The recent Brickyard lease was a natural expansion at an address we already call home."

Though Playa Vista's vacancy rate for office space is relatively high, according to CoStar analytics, top-shelf property there is still highly sought after and rents continue to be among the highest in the Los Angeles region.

Facebook also has about 49,000 square feet at another nearby property, an office complex at 12777 W. Jefferson Blvd. That, combined with its enhanced presence at The Brickyard, would bring its total office footprint in the Los Angeles area to just under 400,000 square feet in all from roughly 325,000 square feet, according to CoStar data.

"Facebook clearly thinks it will still need a sizable footprint in L.A. post pandemic despite publicly saying workers will be able to work remotely in perpetuity," said Ryan Patap, CoStar's director of market analytics for the Los Angeles region. "Facebook must think they will need the extra space over the long term, and some workers will want to return to offices. Working from home isn’t for everybody."

In May, Zuckerberg clarified in an interview with The Verge that his statement was more of a prediction than a hard and fast policy, and that it would largely be driven by existing employees' own preferences and Facebook's desire to untether its recruiting and hiring efforts from the areas where it currently has the largest presence: the San Francisco Bay, Silicon Valley, Seattle, New York and other regions where the cost of living is high.

"We ran these surveys and asked people what they want to do. Twenty percent of our existing employees said that they were extremely or very interested in working remotely full time," Zuckerberg said in May. "And another 20 percent on top of that said that they were somewhat interested. So I think what’s basically going to happen is that, because it’s going to take a while to get everyone back into the office, you have like 40 percent of employees already who were fairly willing to work remotely."

In any case, it will be some time before Facebook's full staff returns, physically, to its L.A. locations. Clayton said the company's employees will be working from home for the remainder of the year.

The landlord, New York City-based real estate firm Tishman Speyer, did not respond to a request from CoStar for a comment.

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