Friday, July 12, 2024

Snapchat Parent Co. Latest Tech Operation Leaving Offices in San Francisco

Snap, the parent company to popular social media sites such as Snapchat,  Spectacles and Bitmoji, has become the latest tech company to leave San Francisco, a casualty of the city’s soaring commercial leasing prices, but also the fact more people in the area’s workforce are opting to work from home.

About two weeks ago, according to a report published by the California Globe, San Francisco saw more retail establishments leave the city because of high crime rates, despite Mayor London Breed stepping up efforts to convince companies not to leave.

As part of a bigger, nationwide trend, companies have been backing out of pricey office spaces and accommodating more work-from-home positions, which a growing number of employees have said they want, in order to spend more time with their families and have the flexibility to pursue more leisurely activities.

That shift in worker priorities has ended up hurting cities across the country..With San Francisco’s economy being more tech-based — with a higher rate of workers switching to remote working, the city has been harder hit than most other American cities.

Therefore, as cities such as New York and Los Angeles have managed to climb back above the filled-office-space mark of 40 percent since the end of the COVID pandemic, San Francisco has been stuck with nearly two out of every three offices remaining vacant  in the metro area.

Snap had previously signed a long-term lease not set to expire until November 2024, so it wasn’t an easy decision by Snapchat to close its 33,000 square-foot office space in the city as part of its latest restructuring effort to save money. But with leasing running so high, the company figured it actually made more financial sense to pay the penalties for getting out of the lease early, rather than be stuck in the city for the next two years under a fixed lease price — set at the height of the tech boom in 2017.

The office opened in 2017 to expand, after Snapchat went public. Over 200 mostly engineers used the office for three years until the COVID pandemic hit. After that, the office was infrequently used. The digs went from being a formal office to a cooperative space for use by remote workers who needed to meet face-to-face with co-workers, albeit as infrequently as it was.

Snap has been joined by Facebook parent Meta, Twitter, Salesforce, and other companies adopting remote work policies and leaving San Francisco leases behind. Then again, the company keeping equally-expensive offices in Palo Alto and Mountain View, in Silicon Valley, about an hour’s drive south along Highway-101. It appears a testament to how much appeal San Francisco has lost in the minds of the state’s tech sector.

“Five years ago, if you were a tech company and didn’t have an office in San Francisco, it meant you were not a big player,” Walter Chen, an office leasing consultant in the Bay Area who focuses on tech companies, told the Globe. “Now, with San Francisco having a reputation as an expensive city that is high in crime, no one wants to be there. Especially with prices everywhere going up.

“Snapchat is really telling though,” Chen continued. “Their headquarters in Santa Monica outside of L.A. — Los Angeles itself. New York. Seattle. London. Dubai. Tokyo. These are not cheap places. Yet, San Francisco was the one to go out of, all of them. That’s how a lot of tech companies view San Francisco now.”

The ability to work from home “profoundly changed my life,” said Snap CEO Evan Spiegel during a conference earlier in L.A. “It was much harder before the pandemic, because I really rarely saw our kids.”

San Francisco’s downtown alone will have as many as 1,300 office leases expiring in 2024.

“We’re going into a recession and companies aren’t all enamored with San Francisco anymore,” said Chen in the Globe piece. “San Francisco is going to go through quite the rough patch.”