Friday, May 14, 2021
Big companies are taking big hits in San Francisco real estate
Cloudera exited its downtown San Francisco office early last year with plans to sublease the space and move its employees south to the software company’s Silicon Valley headquarters.
But the pandemic left the company with nobody to take over the office, forcing it to take a substantial real estate write-down.
At DoorDash’s nearby former headquarters, a tenant defaulted on rent a month into lockdown, resulting in lost income for the food delivery company, which was doubling as a landlord.
Airbnb said in its earnings report on Thursday that it took a $113 million impairment in the first quarter “related to office space in San Francisco that we deemed no longer necessary.”
Combined, those three companies have recorded nearly $200 million in real estate impairments in the past year after Covid-19 turned the Bay Area office market into a dead zone. That dollar figure swells to almost $1 billion when adding in lease-related write-downs from large tech employers Salesforce, Dropbox, Uber, PayPal and Zendesk.
While software and internet companies continued their stratospheric ascent in 2020, the plush offices they call home sat dormant, leaving San Francisco’s commercial real estate market with an unfamiliar supply glut. Much of the financial fallout was borne by the very tech companies that led a decade-plus bull market and expansion spree, snapping up massive amounts of space at record prices and often subleasing out full floors to start-ups and out-of-town businesses that were seeking a Bay Area outpost.
Read the rest here.