Tech giants are busy laying off employees and shrinking office space. In the process, a new breed of entrepreneurs and start-ups emerged who suddenly could afford desirable commercial real estate and collaborate in the comfort of their offices.
Angel investor Jason Calacanis predicts on the All-In podcast that the big winners in business in 2023 will be those “laid-off tech workers who are at the helm of their own destiny and choose to start companies.”
“I think those tech workers who get laid off, if they start companies in groups of two, three, or four people — developers, product managers, people who actually build the product — they’re going to be in the middle of the layoffs,” he said in early January. If they are self-reliant, they will eventually succeed in their careers.”
From employee to entrepreneur
For example, some of those employees-turned-entrepreneurs may have come from Meta, which recently laid off about 11,000 workers. The company (the owner of Facebook) is also shrinking its office space, partly to reduce costs and partly because the company accepts employees to work remotely. On Jan. 13, the company confirmed it would sublease excess Seattle office space, the Seattle Times reported. The company also recently divested of real estate in New York City.
Connor McLean, a leasing expert at Colliers, told The Seattle Times that sublease office space is often rented at a discounted rate, allowing startups that could not otherwise afford to move. Come in.
Meta isn’t the only company laying off staff and ditching real estate recently. The same is true of many other large tech companies, including Microsoft (MSFT), Salesforce (Salesforce) and Twitter (Twitter).
Salesforce recently announced it would cut about 10% of its workforce, while also saying it would reduce office space. CEO Marc Benioff said at the plenary meeting.
Office space rents ‘will be lower’
“This is a big time for cost restructuring,” Benioff said. “We want to cut … $3 billion to $5 billion in costs. As we think about how to do that, one of the big moves is to cut real estate costs. “
The company is headquartered in San Francisco. The state of commercial real estate in San Francisco was highlighted by a Jan. 7 exchange between PayPal co-founder David Sachs and Tesla CEO Elon Musk. Sacks tweeted: “Just received an offer for an office space in SOMA, San Francisco, at the same price as in 2009. Unbelievable.”
Musk replied: “The rent will be lower.”
Now that office space rents are lower, entrepreneurs who emerge from the wave of layoffs in the tech world can take advantage of this to start new ventures.
Of course, some start-ups may save money by switching from leasing commercial real estate and having everyone work from home. But as the chief executives of major companies like Disney and Starbucks — who insisted on bringing remote employees back to the office — recently pointed out, the business advantages of in-person collaborations are clear.
As Disney CEO Bob Iger wrote in a recent memo to employees: “In a creative industry like ours, there is no substitute for establishing effective communication channels with peers, spotting innovation, and creating ability, and exercising such ability requires getting together with peers and communicating face-to-face.”
This may be especially true for tech entrepreneurs determined to stand on their own feet. (Fortune Chinese website)
Translator: Zhong Huiyan-Wang Fang
Tech giants are busy laying off workers and reducing office space. In the process, they might also be setting in motion the emergence of new entrepreneurs and startups—who will be able to collaborate in suddenly affordable prime commercial real estate.
Angel investor Jason Calacanis predicted on the All-In podcast that the big business winners of 2023 will be “laid-off tech workers who choose to take control of their destiny and start companies.”
“I think laid-off tech workers who get together in groups of two, three, or four—developers, product managers, people who actually build stuff—and start companies together are going to become extremely successful, and they’re going to make incredible lemonade from these lemons of these big tech layoffs,” he said earlier this month.
From employee to entrepreneur
Some of those employees-turned-entrepreneurs might come for example from Meta, which recently laid off about 11,000 workers. The Facebook owner is also shedding office space, both to reduce costs and because it’s embraced remote work. On January 13, edit it confirm will sublease office space in Seattle it no longer needs, according to the Seattle Times. It also recently gave up real estate in New York City.
Subleased office space is typically rented out at a discount, which could allow startups who otherwise couldn’t afford it to move in, noted Colliers leasing expert Connor McClain to the Seattle Times.
It isn’t just Meta that has recently both laid off workers and let go of real estate. So have plenty of other major tech companies, among them Microsoft, Salesforce, and Twitter.
Salesforce recently announced layoffs—about 10% of its staff—while also indicating it will shed real estate. CEO Marc Benioff said in an all-hands meeting.
Office rents “will go lower”
“This is a larger moment for cost restructuring, we want to take…somewhere between $3 to $5 billion out of the business,” he said. “When we look at how are we going to do that, real estate is going to be a major part of it.”
The company is headquartered in San Francisco. A Jan. 7 exchange between PayPal co-founder David Sacks and Tesla CEO Elon Musk highlighted the commercial real estate situation there. Sacks tweeted, “Just got offered office space in San Francisco (SOMA) for the same price as 2009. Yikes.”
Musk replied, “It will go lower.”
As it does, entrepreneurs emerging from the tech layoffs could take advantage of the cheaper real estate to house new businesses.
Of course, some startups might choose to save money by not renting commercial real estate and having everyone work from home. But as CEOs at large companies like Disney and Starbucks have recently indicated—while insisting remote workers return to the office—there are clear business advantages to collaborating face to face.
As Disney CEO Bob Iger wrote to employees in a recent memo, “In a creative business like ours, nothing can replace the ability to connect, observe, and create with peers that comes from being physically together.”
That might be especially true for tech entrepreneurs determined to make lemonade from the lemons of being laid off.
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