Tech giant Meta has paid a staggering £149 million to terminate its lease on a prominent London development located near Regent’s Park.
The move comes as many big tech companies are reconsidering their office space needs due to the rise of hybrid work arrangements.
The building in question, 1 Triton Square, is owned by British Land, which recently announced a short-term impact on its earnings as it now faces the challenge of finding a new tenant for the eight-story property in a competitive London office market.
Matthew Saperia, an analyst at Peel Hunt, commented on the extraordinary nature of this payout, saying, “It is a staggering amount of money. In my 20 years, I can’t think of a tenant paying [so much] to give back space they don’t occupy.”
Other companies are facing the same dilemna
This development reflects the broader trend in the tech industry, where companies are actively reducing their office space to cut costs, especially as more employees embrace remote work. This trend has had significant implications for cities like San Francisco, which heavily rely on tech firms, and European office markets, including Dublin and London.
Colm Lauder, a real estate analyst at Goodbody, estimated that Meta may now be looking to sublet or relinquish nearly 1 million square feet of office space in Europe, primarily in London and Dublin.
British Land expects Meta’s exit to negatively impact its earnings per share by 0.6p for the six months ending in March. However, the company maintains its full-year earnings expectations for 2024, citing a better-than-expected collection of back rent from the pandemic period.
Meta had 18 years remaining on its lease but chose to pay an amount equivalent to about seven years of rent to exit the agreement. This move opens up the possibility for British Land to potentially lease the property at a higher rate.
The exit by Meta provides British Land with a much-needed cash infusion. CEO Simon Carter stated that this development “enables us to accelerate our plans to reposition” the office estate near Regent’s Park as a hub for life sciences companies.
Sharing desk space
Notably, Meta had never actually occupied 1 Triton Square despite leasing the space in 2021 following a significant refurbishment. The company’s CEO, Mark Zuckerberg, has undertaken substantial workforce reductions and committed to shrinking its office footprint, encouraging hybrid workers to share desk space.
In a recent U.S. regulatory filing, Meta disclosed $3.35 billion in restructuring costs related to facilities consolidation, making early lease terminations and other office-related expenses the largest component of a program that has incurred a total of $5.41 billion in restructuring charges to date.
In December of the previous year, Meta had announced its decision not to occupy Triton Square and instead intended to sublet the space. However, the company still maintains a presence in another British Land office building nearby at 10 Brock Street, where it recently expanded to occupy all 10 floors.
Meta has been terminating leases in various locations, including New York, and has paused expansion plans in Austin, Texas. The company has been assessing its global real estate footprint, acknowledging the evolving role of the office in light of recent developments and focusing on strategic, long-term priorities.
British Land reported leasing 262,000 square feet across its London office estate in the five months leading up to the end of August, with rents exceeding valuers’ estimates by 8 percent. The company also posted better-than-expected performance at its out-of-town retail parks, leading to a 3 percent increase in its share price by Tuesday afternoon.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
