Tech giants are busy laying off workers and cutting back on office space. In the process, they could also be kick-starting the rise of new entrepreneurs and start-ups, who will be able to collaborate on suddenly affordable prime commercial real estate.
Angel investor Jason Calacanis predicted in the all inside 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 things) and start companies together are going to be very successful and make amazing lemonade out of these lemons. of these big tech layoffs,” he said earlier this month.
From employee to entrepreneur
Some of those employee-turned-entrepreneurs could come, for example, from Meta, which recently laid off some 11,000 workers. The Facebook owner is also getting rid of office space, both to cut costs and because he has embraced remote work. On Friday, he confirmed that he will sublet office space in Seattle that he no longer needs, according to the seattle times. He also recently gave up real estate in New York City.
Subleased office space is typically rented at a discount, which could allow startups that might not otherwise be able to afford it to move in, Colliers leasing expert Connor McClain told seattle times.
As Bloomberg reported this week, the technological rollback poses a problem for landlords in cities like New York and San Francisco, who were already struggling with empty buildings after the pandemic and the shift to flexible work arrangements.
It’s not just Meta that has recently laid off workers and let go of real estate. So have many other major tech companies, including Microsoft, Salesforce, and Twitter.
Salesforce recently announced layoffs, about 10% of its staff, while also indicating that it will be laying off real estate. “This is a bigger time for cost restructuring, we want to take…$3 to $5 billion out of business,” Chief Executive Officer Marc Benioff said at a general meeting. “When we figure out how we’re going to do that, real estate is going to be a big part.”
Office rents ‘will fall’
Salesforce is headquartered in San Francisco. A Jan. 7 exchange between PayPal co-founder David Sacks and Tesla CEO Elon Musk highlighted the situation for commercial real estate there. sacks tweeted“Just got an offer for office space in San Francisco (SOMA) for the same price as 2009. Wow!”
Musk replied: “It will 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 choose to save money by not renting commercial real estate and having everyone work from home, especially if a much-dreaded recession strikes. But as CEOs of big companies like Disney and Starbucks have argued recently, while insisting that remote workers return to the office, there are clear business advantages 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 being physically together.”
That could be especially true for tech entrepreneurs determined to make lemonade out of layoff lemons.
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