Tech giant Microsoft Corp. (Nasdaq: MSFT) has announced plans to further downsize its Eastside office space by subleasing all six buildings at Millennium Corporate Park in Redmond, according to a recent report by the Puget Sound Business Journal. Commercial real estate services firm CBRE is marketing the property and stated that the space will be available in June. Microsoft’s decision to sublease the space comes as part of its ongoing efforts to consolidate its office footprint and cut costs following a slowdown in customer spending. CEO Satya Nadella announced plans to lay off 10,000 employees earlier this year.
New York City-based Vanbarton Group purchased the Millennium Corporate Park, located at 18200-18700 NE Union Rd. in Redmond for $217 million in December of 2020, according to previous reporting by The Registry. The seller was TPG Group, and major tenants in the property include Microsoft, Nintendo and Honeywell.
Although Microsoft doesn’t lease all of Millennium Corporate Park, it currently occupies most of the space. CBRE is marketing up to 497,193 square feet of the 537,000-square-foot campus, with full-building leases available for buildings C, D, E, and F. The move follows Microsoft’s earlier plans to reduce its office space by nearly 1.7 million square feet in Bellevue and Issaquah by not renewing multiple leases scheduled to expire between 2023 and 2024. In addition, Microsoft has put on hold the development of a campus expansion project, which was separate from its main campus refresh project.
Microsoft’s decision to downsize its office space is not unique in the tech industry. Facebook parent company Meta Platforms Inc. is also subleasing the Arbor Block 333 in Seattle’s South Lake Union neighborhood, moving out of downtown Bellevue office space, and backing out of plans to occupy one of the Spring District buildings. Amazon.com Inc. declined to renew its sizable lease in Seattle’s West 8th office tower, and Salesforce is giving up two buildings in Seattle and Kirkland, which house its data visualization brand Tableau.
Data for the first quarter of 2023 office leasing shows another spike in regional vacancy going from 10.52 percent at year-end 2022 to 11.21 percent currently, a 69 basis points jump, according to a recent industry market report by Kidder Mathews. The office market has seen a rise in vacancy for 11 of the last 13 quarters, with a 542 basis point upward swing in vacancy since the 2nd quarter of 2019’s low mark of 5.79 percent. The report states that the surging regional vacancy has been fueled by significant amounts of negative net office absorption in the region since the end of 2020. This has amplified sublease vacancy. The regional availability rate ended the 1st quarter of 2023 at 15.93 percent, up from 14.12 percent at the end of 2022 and above the 12.18 percent mark at the end of 2021.