Wave of Tech, Media Layoffs Delivers New Blows to L.A. Office Market
By Greg Cornfield January 26, 2024 10:10 am
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It’s safe to say this wasn’t the way office brokers in Los Angeles wanted to start the new year.
Many name-brand tech and media companies — which drove office leasing in L.A. in the pre-pandemic days — have spent the past week extending employee layoffs. About 60 tech companies in the U.S. have cut almost 12,000 employees since the start of 2024, according to Layoffs.fyi, which tracks tech labor reductions.
The cost-cutting measures signal reduced need for workplace real estate, further hamstringing an already hindered office market.
Microsoft (MSFT) announced Thursday it would lay off 1,900 employees, or almost 9 percent of its video game divisions, including at L.A.-based Activision Blizzard (which Microsoft acquired for $69 billion about three months ago). Activision is headquartered at The Pen Factory in Santa Monica (which JPMorgan acquired in one of L.A.’s priciest office transactions in 2023, CO first reported) and has offices and studios in El Segundo, Woodland Hills, Sherman Oaks and Irvine, according to its website.
Other companies that make up a once-surging video game development and e-sports submarket have also announced layoffs this month. Earlier this week, L.A.-based video game developer Riot Games announced 530 layoffs — about 11 percent of its staff — after more than doubling its headcount over the past several years.
Social media firms are also slimming down. This week, TikTok, one of the most popular platforms, announced about 60 layoffs affecting offices in L.A., New York, Austin and abroad. The firm’s parent company recently signed one of the most notable expansions of 2023, adding more than 143,000 square feet to its footprint in Culver City.
Earlier this month, Amazon (AMZN) cut hundreds of employees in its streaming service and studio division, including in Culver City (after eliminating 27,000 positions nationwide in 2022 and 2023). Google also laid off another 1,000 employees this year as it spends large sums of money cutting its real estate footprint, and recently ditched plans to move into a landmark office project at the former Westside Pavilion in L.A.
The full impact of the layoffs and cost cutting remains to be seen, and will play out this year. But it certainly shows softening demand for space. More than 15 percent of the available sublease space in L.A. as of the third quarter of 2023 was from tech companies, according to data from Savills.
“With the current correction in the technology sector resulting in continued layoffs, high-profile office spaces are being put on the [Los Angeles] market for sublease, or leases are being terminated altogether,” Savills reported.
Mass media firms with a major presence in L.A. are also taking big hits. Paramount Global announced Thursday it will endure layoffs but didn’t say how many. (Last summer, Paramount’s Showtime network terminated a 10-year, 50,000-square-foot lease in West Hollywood.) The Los Angeles Times, which famously moved its office from Downtown L.A. to El Segundo in 2018, laid off 115 people on Tuesday.
Office availability is already at a record high in L.A. after the end of 2023. L.A.’s office occupancy is below 48 percent, according to security firm Kastle System’s most recent “back-to-work barometer” report.
In November, L.A.’s office-using employment was already down by 27,100 jobs compared to 12 months prior, according to a report by Newmark (NMRK). Most losses came from the information sector, where tech and media companies are generally grouped. Meta, Hulu, Netflix, Amazon, Google, Roku and Spotify were part of significant layoffs in 2023.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
