Meta paid £149 million to end its lease at a major London development near Regent’s Park, as hybrid working leads big tech companies to reduce their office space .
British Land, which owns the building at 1 Triton Square, warned on Tuesday of a short-term impact on profits as it will now have to find a new tenant for the eight-storey building in a challenging housing market. London offices.
“It’s a staggering amount of money. In my 20s, I can’t think of a tenant paying [tanto] to give back space it doesn’t occupy,” said Matthew Saperia, analyst at Peel Hunt.
The news is the latest sign of big tech companies’ determination to cut costs by cutting office space as more employees work from home. The contraction affected cities like San Francisco, in the United States, which rely heavily on technology companies. Office tenants and European markets, including Dublin and London, were also not spared.
Colm Lauder, a property analyst at Goodbody, estimated that Meta is now proposing to sublet or return about 1 million square feet (about 93,000 square meters) of office space in Europe, mainly in London and Dublin.
British Land said Meta’s departure would hit its earnings per share by 0.6 points in the six months to March next year, but maintained its full-year 2024 earnings expectations, crediting the better-than-expected collection of late rent during the pandemic.
According to analysts at BNP Paribas Exane, Meta had 18 years left on its lease and had paid the equivalent of around seven years’ rent to get out of the obligation, which could allow British Land to re-lease the property for a higher.
The Facebook owner’s action provides a cash injection for British Land. CEO Simon Carter said this “allows us to accelerate our plans to reposition” the office complex near Regent’s Park as a location for life sciences companies.
Meta never moved into 1 Triton Square, but left the space in 2021 after a major renovation. CEO Mark Zuckerberg embarked on drastic cuts at the company, laying off tens of thousands of employees. He also committed to reducing office space by asking hybrid employees to share desks.
The Silicon Valley-based company said in a recent U.S. regulatory filing that it recorded $3.35 billion in restructuring costs related to facility consolidation after beginning the cost-cutting program last year. That makes early terminations of leases and other office-related costs the largest component of a scheme that has already incurred a total of $5.41 billion in restructuring charges to date.
In December last year, Meta said it would not occupy Triton Square and would instead sublease the space. The company also owns a second British Land office building nearby, at 10 Brock Street, and recently occupied all 10 floors.
Last year, Meta ended leases in New York and paused an expansion plan in Austin, Texas. Previously, the company told the Financial Times that it was evaluating its “global real estate footprint as a whole” as “the last few years have brought new possibilities around the role of the office, and we are prioritizing focused and balanced investments to support our long-term strategic priorities most important deadlines”.
British Land said it let 262,000 square feet across its London office portfolio over the past five months to the end of August, with rents 8% above valuers’ estimates. The company this month reported better-than-expected performance at its out-of-town retail parks. The company’s shares rose 3% on Tuesday afternoon.
Meta declined to comment.