As Meta pay £149 million to British Land, to get out of their lease obligations at 1 Triton Square, what are the real costs involved and to whom?
As far as British Land are concerned, the exit will knock earnings per share by 0.6p for the six months to next March but other factors should keep its full-year earnings for 2024 as expected. Whilst now may not be seen as the best time to be getting back 360,000 sq ft of offices in London, British Land have received the equivalent of seven years rent in cash and the options of; re-letting at a higher rent (Meta was believed to have agreed circa £60/sq ft against estimated values of high £80s), or to renovate the space as part of plans to reposition Regents Place as London’s premier innovation and life sciences campus. Bearing in mind Meta have never actually occupied the space, actually getting bodies into Triton Square would be good for the Regents Place campus as a whole with more people in cafes, shops and the likes.
This lease surrender has obviously cost Meta a considerable sum of money and the need to do so is most probably a reflection of them losing around 20% of staff globally. Chief executive Mark Zuckerberg has embarked on dramatic cuts to the company, in terms of tens of thousands of staff and commitments to shrinking its office space. The Silicon Valley-based company said, in a recent US regulatory filing, that it had recorded $3.35bn in restructuring costs related to facilities consolidation after implementing the cost-cutting programme last year. It is estimated Meta are proposing to sublet or surrender close to 1m sq ft of office space in Europe, mostly in London and Dublin.
With regard to the wider implications on the property market itself, this news is the latest sign of the determination of the Tech Giants to reduce costs by cutting office space as more staff work from home. The contraction has hit cities worldwide, especially those such as San Francisco that rely heavily on tech companies. Office tenants in European markets including London & Dublin along with Paris, Berlin, Stockholm and Amsterdam are also set to feel the on-going effects.
Bottom line; £149 million lease surrender (7 years rent), seem excessive? Should landlords be worried?