This week’s third-quarter earnings call from a technology giant bluntly solidified what was perhaps one of the worst fears that the commercial real estate industry has been anticipating over the last two and half years—corporations are not interested in going back to the office as they did in the before times. Marc Benioff, the founder, chairman and co-CEO of Salesforce made his proclamation as clear as possible during the call with analysts and assessed the state of the corporate office market going forward.
“There’s a lot of things pre-pandemic that we had in our company that are expenses that we don’t need post-pandemic,” Benioff stated. “So before the pandemic, the percentage of remote workers for Salesforce was approximately 20 percent. For other companies now, we’re seeing that normalize at somewhere around 50 percent even with mandatory workdays.”
This new normal is not hurting businesses like Salesforce, which continue to look for ways to innovate the way their teams work. And the results speak for themselves; the top-line revenue for the company continued its growth trajectory from $13.2 billion at the end of January 2019, to $17.1 billion the year after, $21.3 billion in January 2021 and $26.5 billion at the end of the fiscal year in January 2022. The trailing 12 months of this year brought in $29.3 billion.
At the same time, Benioff stated that the company hit a record 22.7 percent operating margin in its last quarter showing is resiliency through the pandemic and now into what seems like a new normal.
The remarkable thing about this is that the company is well aware of the challenges posed by the work-from-home environment, yet it looks at that as an opportunity. “And I will call out one more thing, which is probably one of the most successful things we’ve done is come up with new ways to work,” Benioff stated. “You have to have a beginner’s mind, and we’re finding our way through this.”
The company’s President and Chief Operating Office, Brian Millham sees the need for the presence in the office to be stronger, and he values the benefits of a collaborative environment that an office location fosters. “I really believe that being together drives more learning, better collaboration, better networking and better enablement,” he said. “I like that connection that we have to one another, I think, it’s part of our culture and how we operate, I’ve asked my team recently to spend more time in the office.”
However, the company is looking very closely at rebalancing how things are done in the office, Benioff said. He acknowledged that there are people who need to be in the office, workers who perform core functions, or employees who are not indoctrinated into the organizational culture or need mentorship and can benefit from an office environment.
“But we’re never going back to how it was. We all know that,” Benioff concluded.
In its hometown of San Francisco, Salesforce just this year placed 412,000 square feet on the sublease market at 50 Fremont, roughly half of the building which is across the street from the Salesforce Tower in the city’s downtown core. That was followed by another sublease that Salesforce offered at 350 Mission Street, also in the City’s downtown where it occupied 450,000 square feet and placed roughly 225,000 square feet on the market in early 2021.
Slack, the instant messaging service company that Salesforce purchased also put on the sublease market 208,460 square feet of space at 45 Fremont Street in early 2022. Its CEO also did not mince words when asked about his employees returning to work.
“When I see headlines about CEOs trying to lure employees back to the office, I feel like it’s probably a doomed approach,” explained Slack CEO and Co-Founder Stewart Butterfield to The Washington Post in December of 2021. “Work is no longer a place you go. It’s something you do.”