The Seattle area’s softening office market just got a little softer.
Salesforce, the tech giant owner of Seattle-based Tableau, is giving up major chunks of office space in two Tableau buildings in Seattle and Kirkland, Salesforce confirmed Thursday.
San Francisco-based Salesforce will sublease nearly 120,000 square feet at the Data 1 building in Seattle’s Fremont neighborhood, close to Tableau’s headquarters, and an additional 92,000 square feet at Kirkland Urban, a mixed-use development. Salesforce acquired Tableau, maker of data management and analytics tools, in 2019 for $15.7 billion.
The subleases, which will substantially boost office vacancy in both Kirkland and Fremont, are part of a cost-cutting plan that includes around 8,000 layoffs and “select real estate exits and office space reductions” announced by Salesforce in January filings in response to a drop in sales.
But real estate insiders expected some office cuts since the sale to Salesforce, which was known for a long-standing culture of aggressive growth through acquisitions. When one tech firm buys another, the larger firm usually retains key technologies and top talent while reducing the acquired firm to cut costs.
That downsizing seems to have accelerated after Salesforce’s recent sales decline. That poor performance prompted activist investors to pressure Salesforce to switch from aggressive growth and costly acquisitions to cost-cutting through layoffs and reducing its real estate footprint.
High-level executives also left Tableau, including CEO Mark Nelson, who stepped down after two years in December.
Salesforce declined to say where the Tableau employees working out of the two closing offices would be moved to. In a statement, a Salesforce spokesperson said Tableau is an important part of the tech giant’s business.
“We remain fully committed to our Seattle-based home and employees,” the spokesperson said. “They will always have access to a vibrant office environment.”
Salesforce has a 70,000-square-foot office space in downtown Bellevue, which is considered its second headquarters.
GeekWire and other outlets reported in January that some Tableau employees were being cut as part of the announced reductions. Salesforce on Thursday didn’t respond to questions about Tableau layoffs and no record of layoffs was found in Washington’s layoff notification system.
The subleasing of Tableau space comes at sensitive time for the Seattle area.
The recent tech slowdown led to thousands of layoffs and prompted some employers to reduce their office footprints. Remote hybrid work has also led employers to lease less, or to sublease space they aren’t using but are still under contract for.
In January, for example, Facebook parent Meta and Microsoft announced plans to vacate Seattle-area office buildings.
In Seattle, overall office vacancy, which includes both unleased and subleased space, is around 22%, according to industry reports. It’s around 14% in downtown Bellevue.
While Kirkland and Fremont have so far fared better, the Tableau subleases will have an effect. In Kirkland, the Tableau sublease will boost overall vacancy from 7.6% to 10.4%, according to an analysis by commercial real estate firm Colliers. In Fremont, which is more residential, overall vacancy will more than double, from 7.1% to 14.7%, as a result of the sublease.
Still, several brokers said they expected both subleases to be snapped up quickly once the market improves, given their locations and that newer office space is still seeing some demand despite the downturn.
The Tableau offices in the Seattle area weren’t Salesforce’s only real estate cuts. So far this year, Salesforce listed its entire office space in the Salesforce East location in San Francisco and six floors of its main Salesforce Tower for sublease.
The closing Fremont office, according to CBRE’s website, will be available for sublease starting in February 2024. The Kirkland space is available immediately. The Puget Sound Business Journal and Daily Journal of Commerce first reported the news.
Salesforce and Tableau’s revenues grew in the most recently reported quarter to $8.38 billion and $636 million, respectively. Still, Tableau’s revenue growth rate was lower compared with previous years.
