Meta has paid £149m to terminate the lease on a major development in London near Regent’s Park, as hybrid working prompts major technology groups to retreat from office space.
British Land, which owns the building at 1 Triton Square, on Tuesday announced a decline in short-term profits as it will now have to find a new tenant for the eight-storey building in London’s challenging office market.
“It’s an amazing amount of money. In my 20 years, I can’t think of a tenant who would pay (big bucks) to return space that they don’t occupy,” said Matthew Saperia, an analyst at Peel Hunt.
The news is the latest sign of big tech companies’ determination to control costs by downsizing their offices as more employees work from home. The tech downturn has hit cities like San Francisco that rely heavily on technology companies. Office tenants and European markets including Dublin and London were not spared.
Colm Loader, a property analyst at Goodbody, estimates that Meta is now proposing to lease or give away nearly 1 million square feet of office space in Europe, mostly in London and Dublin.
British Land said Meta’s exit would reduce its earnings per share by 0.6 pence for the six months to next March, but maintained its full-year earnings forecast for 2024, thanks to better-than-expected back rent collections from the Covid-19 pandemic.
Meta had another 18 years on its lease and paid the equivalent of about seven years’ worth of rent to get rid of the obligation, according to BNP Paribas Exan analysts, which could allow British Land to lease back the property at a higher rent.
The Facebook owner’s move gives British Land a cash injection. Chief executive Simon Carter said it “enables us to accelerate our plans to reposition” the office park near Regent’s Park as a location for life sciences companies.
Meta never moved into 1 Triton Square but left the space in 2021 after a major renovation. While CEO Mark Zuckerberg has embarked on deep cuts at the company, which has tens of thousands of employees, he has also committed to shrinking its real estate footprint, where hybrid workers are being asked to share offices.
In December last year, Meta said it would not occupy the building and would lease the space instead. The company still has a second British Land office building nearby, at 10 Brook Street, and has recently taken over all 10 floors.
Meta last year retreated from its US presence, ending leases in New York and pausing a plan to expand into Austin, Texas. She previously told the Financial Times that she was evaluating “her entire global real estate footprint” as “the last few years have brought new possibilities around the office role, and we are prioritizing making focused, balanced investments to support our more strategic investments over the long term.” Long term priorities.
British Land said it had leased 262,000 square feet across its London office parks in the five months to the end of August, with rents 8 per cent higher than valuers’ estimates. The company this month reported better-than-expected performance at its out-of-town retail parks. The company’s shares rose in early trading on Tuesday.
Meta declined to comment.