Tech giants are busy laying off workers and reducing office space. In the process, they could also spark the emergence of new entrepreneurs and startups — who will be able to collaborate on suddenly affordable commercial real estate.
Angel investor Jason Kalakanis predicted All in podcast that the big business winners of 2023 will be “fired tech workers who decide to take control of their own destiny and start companies.”
“I think the tech workers who get laid off and get together in groups of two, three or four—developers, product managers, people who actually build things—and start companies together are going to be extremely successful, and they’re going to make an incredible lemonade out of these lemons of these big tech companies.” layoffs,” he said earlier this month.
From employee to entrepreneur
Some of those employees who became entrepreneurs could come, for example, from Meta, which recently laid off about 11,000 workers. The Facebook owner is also losing office space, both to cut costs and to embrace remote work. On Friday, he confirmed that he will sublease office space in Seattle that he no longer needs, he says Seattle Times. She also recently divested herself of real estate in New York.
Subleased office space typically rents at a discount, which could allow startups that otherwise couldn’t afford it to move in, noted Colliers leasing expert Connor McClain. Seattle Times.
As Bloomberg reported this week, the technology’s retreat is causing problems for landlords in cities like New York and San Francisco that have already struggled with vacant buildings in the wake of the pandemic and the shift to flexible work arrangements.
It is not only Meta that has recently laid off workers and real estate. So are many other big tech companies, including Microsoft, Salesforce and Twitter.
Salesforce recently announced layoffs — about 10% of its staff — while also indicating it would shed properties. “This is a bigger cost restructuring moment, we’re looking to take … somewhere between $3 billion and $5 billion out of the business,” CEO Marc Benioff said at the joint meeting. “When we look at how we’re going to do that, real estate is going to be a big part of that.”
Office rents will ‘fall lower’
Salesforce is headquartered in San Francisco. An exchange on Jan. 7 between PayPal co-founder David Sachs and Tesla CEO Elon Musk highlighted the commercial real estate situation there. Sacks tweeted“I just got offered an office space in San Francisco (SOMA) for the same price as 2009. Holy shit.”
Musk replied, “It’s going to go lower.”
As it does, entrepreneurs emerging from tech layoffs could take advantage of cheaper real estate to house new businesses.
Of course, some startups may decide to save money by not renting commercial real estate and having everyone work from home, especially if the recession many fear comes. But as the CEOs of major companies like Disney and Starbucks recently argued — while pushing for remote workers to return to the office — there are clear business benefits to face-to-face collaboration.
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 physically living together.”
That might be especially true for tech entrepreneurs determined to make lemonade out of layoff lemons.
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