To be clear, layoffs and more general upheaval at many of the large tech companies do not mean the entire sector is in a doom spiral. Smaller firms such as hospitality-focused ResortPass, whose CEO is committed to in-person work, and QR codemaker Beaconstac have both raised more than $20 million in funding recently. And health-tech firm Progyny is opening another floor in its Midtown South office, indicating that growth and an accompanying appetite for office space have not totally vanished in the city.
But companies at this stage of development still may be years away from needing the amount of office space necessitated by corporations like Alphabet and Meta. In fact, given that they are raising this money in an environment where hybrid work has become the norm, it seems unlikely that they will ever seek to amass a real estate portfolio the size of that of the current tech giants. Simply becoming an anchor tenant in an office building seems like a much more likely ceiling for their office plans following almost three years of remote work.
In other words, the future of office space for tech companies is starting to look a lot like the future of office space for pretty much any type of company. Given the recent cycle of tech firms’ rapid growth followed by large-scale layoffs, targeting a firm to take a few floors in one of your properties on a 10-year lease is a much more reasonable proposition for landlords than waiting for one to, say, announce ambitious plans to build a sprawling second headquarters somewhere in the United States, choose Long Island City and then back out amid fierce pushback over the deal they received, to pick just one totally random and hypothetical scenario.
The major tech companies are facing challenges that go far beyond how much they can or can’t help New York’s office market, and the size of their footprints in the city is likely not among their top concerns. The pipeline of new office leases in the sector is unlikely to dry up completely, but anticipating more deals where tech takes on hundreds of thousands of square feet is no longer a smart bet.