Salesforce, one of the largest companies in the Bay Area, continued to vacate San Francisco this week by completely moving out of the Salesforce East tower, with all of their formerly occupied floors going to lease.
Founded in San Francisco in 1999, the cloud-based software company quickly became one of the tech darlings of the Bay area, with its sales, customer service, and e-commerce products boosted to having an IPO in 2004 and passing the $1 billion revenues mark in 2009 – during the height of the Great Recession. Through the 2010’s, Salesforce continued their dominance, including Salesforce Tower being the name behind the tallest building in San Francisco. They grew so much that they took over another skyscraper, 350 Market, with the name changing to Salesforce East.
However, the COVID-19 pandemic, high rent costs, multiple changes in leadership, and a growing work-form-home force took its toll on the company in the 2020s. Salesforce began large cuts in 2022, with the company largely pulling out of Salesforce Tower, subleasing half of their former headquarters in July 2022. While a growing work-form-home force had the company leave more and more office space, many employee cuts were also announced. Multiple rounds of firings occurred in late 2022 and early 2023, including a large 10% across the board cut occurring in January as a result of too many people coming on board during a jump in sales during the pandemic.
“As one ‘Ohana, over the last 23 years, Salesforce has built the #1 CRM that drives incredible customer success across every line of business for every industry around the world,” CEO Marc Benioff wrote in January. “We have never been more mission-critical to our customers. We have an unparalleled ecosystem, with thousands of partners and millions of Trailblazers building their companies on our platform.”
“However, the environment remains challenging and our customers are taking a more measured approach to their purchasing decisions. With this in mind, we’ve made the very difficult decision to reduce our workforce by about 10 percent, mostly over the coming weeks. I’ve been thinking a lot about how we came to this moment. As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that.”
This led to the announcement that Salesforce would be completely leaving Salesforce East, the building that bears its name. All 104,051 square feet currently leased is now up for sublease. With the announcement, Salesforce currently has 709,000 square feet of office space for sublease currently available in San Francisco, leading Airbnb by over 200,000 square feet due to Salesforce having space available in two of San Francisco’s largest office buildings.
“This is not great news for many people,” Michelle Duggan, a building occupancy researcher, told the Globe on Wednesday. “The city is screwed because this is just more empty office space with no one coming in and supporting downtown businesses. Office vacancy is still around 30%, which is really bad, especially because it was under 1% before the pandemic. The city is not doing anything, despite trying, to keep these businesses downtown either. The obvious answer is major tax cuts to entice them downtown again, as any lost revenue there would come back through spending, but they aren’t doing the smart thing. They are looking into converting space for housing, but that is still years away from being viable.”
“But it’s also bad for tech companies like Salesforce. They haven’t figured out the right work-form-home/office balance just yet, and many are still shedding employees because of costs. Salesforce abandoning a building which they named after it is a big red flag that things are wrong in San Francisco and the tech world right now. All this empty space is just going to continue hurting everyone.”
More large vacancies are expected to be announced soon as more leases are getting close to end-of-lease dates.
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