Tech giants are busy laying off employees and reducing office space. In doing so, they could also ignite the emergence of new entrepreneurs and start-ups – who will be able to collaborate on prime commercial real estate that is suddenly affordable.
Angel investor Jason Calacanis predicted in the All-In podcast that big company winners in 2023 will be “dismissed tech workers who choose to take control of their destiny and start companies.”
“I think that if laid-off techs get together in groups of twos, threes, fours — developers, product managers, people who actually build something — and start companies together, they’ll become extremely successful and make a lot of incredible lemonade from these lemons of these big ones Tech layoffs,” he said earlier this month.
From employee to entrepreneur
Some of those employees-turned-entrepreneurs might come from Meta, for example, which recently laid off about 11,000 employees. The Facebook owner is also shedding office space, both to cut costs and because he is committed to remote work. According to the Seattle Times, the company confirmed on Friday that it will sublet Seattle office space it no longer needs. It also recently gave up properties in New York City.
Subleased office space is typically rented at a discount, which could allow startups who otherwise couldn’t afford it to move in, Colliers leasing expert Connor McClain noted to the Seattle Times.
As Bloomberg reported this week, the tech retreat is threatening landlords in cities like New York and San Francisco, who were already struggling with empty buildings in the wake of the pandemic and the shift to flexible working arrangements.
It’s not just Meta that has both laid off workers and given up properties recently. The same is true of many other big tech companies, including Microsoft, Salesforce, and Twitter.
Salesforce recently announced layoffs — about 10% of its workforce — while also citing real estate downsizing. “This is a major cost restructuring moment, we want to … take somewhere between $3 billion and $5 billion out of business,” CEO Marc Benioff said in an all-hands meeting. “As we look at how we’re going to do that, real estate is going to be a big part of it.”
The story goes on
Office rents “will fall”
Salesforce is headquartered in San Francisco. A Jan. 7 exchange between PayPal co-founder David Sacks and Tesla CEO Elon Musk highlighted the situation of commercial real estate there. bags tweeted“I’ve just been offered office space in San Francisco (SOMA) at the same price as 2009. Oops.”
Musk replied, “It’s going to go deeper.”
At the same time, entrepreneurs born from the tech layoffs could use the cheaper real estate to house new businesses.
Of course, some startups could save money by not renting commercial properties and letting everyone work from home, especially if a widely feared recession hits. But as CEOs of big companies like Disney and Starbucks have recently argued — while insisting remote workers are returning to the office — face-to-face collaboration has clear business benefits.
As Disney CEO Bob Iger wrote in a recent memo to employees, “In a creative company like ours, nothing can replace the ability to connect, observe and create with peers that comes from being physically together. “
That could be especially true for tech entrepreneurs determined to make lemonade from the lemons of a layoff.
This story was originally featured on Fortune.com
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