Facebook and Instagram parent Meta plans to spend $3 billion in the next 13 months consolidating its office spaces and terminating leases as a growing number of employees, including top executives, choose to work remotely from home.
The company plans to shrink its office footprint globally. Getting out of leases is part of Meta’s cost-cutting strategy, executives said in the firm’s third-quarter earnings call on Oct. 26.
After the company released updated third-quarter financial information, the price of Meta shares fell almost 25 percent, taking its market cap to $263 billion — less than Home Depot’s. Meta shares are down more than $700 billion since 16 months ago when they briefly exceeding $1 trillion.
“We have increased scrutiny on all areas of operating expenses,” said Dave Wehner, Meta’s chief financial officer. “Some steps, like the ongoing rationalization of our office footprint, will lead to incremental costs in the near term.”
Meta spent $413 million in the third quarter to terminate office leases, including at 225 Park Avenue South in Manhattan, and expects to spend $900 million in the fourth quarter “to align our office facilities footprint with our anticipated operating needs,” said Meta Chief Financial Officer Dave Wehner.
The company has not named other locations that have seen or are due for lease terminations, but it forecast that it will spend an “estimated $2 billion in charges related to consolidating our office facilities footprint,” Wehner said.
In New York City alone, Meta has leases on 1.2 million square feet at 50 Hudson Yards, 265,000 square feet at 30 Hudson Yards, 57,000 square feet at 55 Hudson Yards, 95,000 square feet at 335 Madison Avenue and another 730,000 square feet at the Farley Building, Commercial Observer reported.
Even as the company reorients around remote work and cuts costs through hiring freezes, it expects to continue to grow in the city, according to Michael Cohen, president of Colliers’ tri-state region, which brokered Facebook’s Park Avenue South deal in New York.
The company has also been bailing out of office space in Silicon Valley.
Meta’s data center footprint tells another story — it’s expected to grow. Meta has 10 operational data centers in the U.S., and had another seven in development as of May 2022.
The data center market has seen huge demand and historically low vacancy rates, according to The Real Deal. Meta spent $9.5 billion in the third quarter on capital expenditures, with much of that cost driven by leases for its servers, data centers and other network infrastructure upgrades, Wehner said.
Meta’s projected 2023 total expenses are expected to be between $96 billion and $101 billion, with $2 billion going towards consolidating its office footprint.
Meta has embraced remote work, The Wall Street Journal reported — especially its senior executives. CEO Mark Zuckerberg likes to work from his compound in Hawaii, and Instagram boss Adam Mosseri has recently traveled and worked remotely from Los Angeles, Cape Cod, and Hawaii.