Meta paid £149mn for the right to terminate its lease at a major London project near Regent’s Park. The move comes as big tech companies reduce their office space due to hybrid working.
British Land which owns 1 Triton Square on Tuesday warned of a short-term loss in earnings due to the need to find a tenant for the 8-storey building, especially as the London office market is currently challenging.
It is an incredible amount of money. Matthew Saperia is an analyst at Peel Hunt.
This is just the latest example of Big Tech’s desire to cut costs through reducing office space, as more employees work from home. San Francisco, which is heavily dependent on tech companies, has been hit by the contraction. The contraction has affected office tenants in Europe, including Dublin and London .
Colm Lauder of Goodbody’s real estate department estimated that Meta would now propose to sublet or surrender over 1m sq ft in Europe. This space is mainly located in London and Dublin.
British Land stated that the exit of Meta would reduce its earnings per share for the six-month period ending in March next year by 0.6p, but maintained its full-year earning expectations for 2024. It attributed this to the better than expected recovery of rent due from the pandemic.
Meta reportedly had 18 more years left on its lease, and it paid an equivalent amount of seven years’ rent to be released from the contract, according to BNP Paribas Exane analyst. This could have allowed British Land to rent the property out at a higher rate.
British Land receives a financial boost from the Facebook owner. Simon Carter, the chief executive of British Land, said that it would “enable us to accelerate” our plans to reposition Regent’s Park’s office estate as a place for life sciences firms.
Meta did not move into 1 Triton Square, but leased the space after a major renovation in 2021. Mark Zuckerberg, the chief executive of Facebook, has cut tens and thousands of employees from his company. He has also pledged to reduce its office space. Hybrid workers will be asked to share desks.
In a recent US regulatory document, the Silicon Valley-based firm said that it had incurred $3.35bn of restructuring costs relating to facility consolidation since initiating its cost-cutting program last year. Early terminations of office leases and related costs are the biggest component of the scheme, which has resulted in a total restructuring charge of $5.41bn.
Meta announced in December of last year that it would sublet Triton Square instead. The company has taken over all 10 floors of a British Land building at 10 Brock Street.
Meta terminated leases last year in New York, and put on hold plans to expand into Austin, Texas. It had previously stated that it was assessing “its entire global real estate footprint”, as “the last few years have brought about new possibilities in the role of an office and we are prioritising focused, balanced investment to support our most strategically long-term goals”.
British Land reported that it had rented 262,000 sq ft of office space in London over the last five months, with rents eight per cent higher than valuers’ expectations. This month, the company reported higher than expected performance in its out-oftown retail parks. By Tuesday afternoon, shares of the company had risen by 3 percent.
Meta declined to make a comment.