Salesforce, the tech giant that owns Seattle-based Tableau, is further contributing to the softening office market in the area by giving up significant amounts of office space in two Tableau buildings located in Seattle and Kirkland, according to a report in the Seattle Times. The company confirmed the news in April, revealing plans to sublease almost 120,000 square feet at the Data 1 building in Seattle’s Fremont neighborhood, close to Tableau’s headquarters, as well as an additional 92,000 square feet at Kirkland Urban, a mixed-use development.
The move is part of a cost-cutting strategy that Salesforce announced earlier this year in response to a decline in sales, which includes around 8,000 layoffs and “select real estate exits and office space reductions.” The subleases are expected to significantly increase office vacancy in both Kirkland and Fremont. The downsizing has accelerated since Salesforce’s sales performance deteriorated, prompting activist investors to pressure the company to shift from its aggressive growth and costly acquisition strategy to cost-cutting measures such as layoffs and reducing its real estate footprint.
The downsizing was expected since Salesforce acquired Tableau, a company known for its culture of aggressive growth through acquisitions, where the larger company usually retains key technologies and top talent while reducing the acquired firm to cut costs. Furthermore, high-level executives left Tableau, including former CEO Mark Nelson, who stepped down in December after spending two years with the newly acquired entity. Salesforce purchased Tableau in 2019 for $15.7 billion.
Salesforce declined to disclose where the Tableau employees from the closing offices will be relocated, but the company reassured that Tableau remains an important part of the firm’s business and that the organization is fully committed to its Seattle-based home and employees. Salesforce currently has a 70,000-square-foot office space in downtown Bellevue, which serves as its second headquarters.
The subleasing of Tableau’s office space comes at a sensitive time for the Seattle area, which is already grappling with a softening office market. Microsoft just announced earlier this month that it was vacating 497,193 square feet in Redmond’s Millennium Corporate Park. 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.
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.
