Tech Layoffs Aren’t An Office Disaster Everywhere

In 2022, Q4 proved a diving platform for tech office usage. Leasing dropped by 57% from activity the previous quarter, according to Savills’ Q4 Tech Tenant report. Large layoffs have been loudly in the news. According to the site Layoffs.fyi, there were 159,756 tech layoffs across 1044 companies during the entirety of 2022. In the small part of 2023 that has taken place, 326 companies laid off 98,100 — 61% of last year’s total.

But, as always, the danger of averages and national performance is that it’s easy to miss how things vary locally and where conditions are better or worse.

A new analysis by Moody’s Analytics data scientist David Caputo shows how tech office performance can vary significantly. The firm has been tracking tech market CRE performance since at least April 2022 with its report, Tech Markets to Watch and Why the Field’s Getting Competitive. Then, the firm could write, “In a time of great uncertainty around the workplace of the future, tech companies have taken the opposite approach of typical professional service firms by increasing their footprint instead of scaling back.”

Well, perhaps not so much today. But the latest Moody’s report, Tech Markets to Watch Update: Q4 2022 Office Market, takes a more geographically nuanced view.

The greater environment is office in general, where, according to the firm, vacancies shot up to 18.7% last quarter and rents climbed only 0.3%.

However, continuing on from the previous report and the breakdown of tech into emerging, special mention, and national, “emerging markets didn’t see an uptick in occupancy, but did outperform the rest of the market by staying flat as tech markets and special mentions rose by 20 bps and 30 bps, respectively,” Caputo wrote. “Established markets and special mentions were more in line with what the national average was showing as it too rose by 30 bps. This continues the recent trend of emerging market vacancies trumping established markets as they also did over the past two quarters.”

Some examples were Raleigh-Durham, a tech region, that saw an overall vacancy drop of 100 basis points. Emerging office markets such as Miami and Ventura County saw vacancy rates drop by 80 and 40 basis points each. Special mention sites Sacramento and Salt Lake City were down 40 basis points each.

National tech centers of Colorado Springs, San Francisco, and Los Angeles had vacancies drop respectively by 80, 20, and 10 basis points each.

However, on a national basis, tech vacancy growth was up 0.20%; for special mentions, 0.30%; and emerging was flat.