Big Tech Bets Big On Silicon Valley: LinkedIn's New $75 Million Office Space Is a Shot In The Arm For The Area's Office Real Estate

LinkedIn, the employment and networking social media juggernaut, has just closed a $74 million deal to purchase a 120,000-square-foot property in Sunnyvale, California, CoStar reports. This represents a vote of confidence for Silicon Valley’s office real estate, which has yet to fully recover from the pandemic-induced remote working phenomenon.

“Pruning Underutilized Assets”

The property, located at 1022 W. Maude Ave, was previously owned by another tech company, Synopsys SNPS, which purchased it almost seven years ago but needed to sell it to adapt to a leaner post-pandemic holding strategy.

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“We actively manage our real estate footprint based on market conditions and other factors,” a Synopsys spokesperson told CoStar. Those factors included “pruning underutilized assets to drive value, which is the case here,” Synopsis said.

LinkedIn was also forced to prune its assets post-pandemic. In late 2021, it paid almost $123 million for two office and research properties at 810-820 and 870 Maude Ave., close to its Silicon Valley corporate hub, CoStar reports. The company also finalized a lease for a 195,000-square-foot office building at 684 Maude Ave., the first building at the development, which broke ground in mid-2019.

Eighteen months later, however, as the commercial real estate downturn took hold, it sold a property at 880-888 W. Maude Ave. for $23 million and attempted to sublease over 63,500 square feet of its corporate hub in downtown San Francisco amid waves of layoffs.

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Office Expansion Amid Employment Cuts

The company’s newest acquisition comes at a time when other large-scale tech companies, such as Meta META and Google, are still making employment cuts. Leasing activity has also dropped in Silicon Valley, resulting in a record-high vacancy rate of about 15.5%, according to CoStar data.

That said, tech companies were still responsible for 30% of the 100 biggest office deals last year, according to commercial real estate brokerage CBRE. In its November report, CBRE stated that tech firms leased 9.9 million square feet of office space during the third quarter, up from 8 million in the second quarter, the highest amount since the fourth quarter of 2021.

Hybrid Working: A New Reckoning

However, hybrid working policies have meant that overall, current leasing figures are still way off 5.4% growth in 2021, the CBRE report said. Colin Yasukoch, head of CBRE’s Tech Insights Center, told The Wall Street Journal that AI companies backed by venture capital money have leased 6 million square feet in the top six markets since 2019. “Some companies are moving [to new locations] to create more efficient space,” Yasukochi said. “But they’re taking less of it.”

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AI-Driven Growth

Whitley Collins, CBRE's global president of occupier advisory & transaction services, was bullish on the overall effect of AI on office leasing, saying in his company's November report, “AI will generate more jobs than it eliminates. The growth of that subsector as well as any continued tech job growth overall should provide a spark for office leasing activity.” She went on to say. “It is also encouraging that, even though many tech companies have reduced their office footprints due to hybrid work, the industry’s cumulative square footage leased so far this year leads all other industries.”

If AI-heavy companies are a benchmark for office growth, Nvidia‘s NVDA recent purchase of a 100,600-square-foot building at 300 Holger Way augurs well. Other recent major Silicon Valley leasing deals include those with Snowflake SNOW, Amazon AMZN, Astera Labs ALAB, and Robinhood HOOD.

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