Meta employs about 900 people in Israel at two main Tel Aviv sites: Aviv Group’s Rothschild 22, and Azrieli Group’s Sarona Tower. The Facebook parent company has also signed a lease on 51,000 square meters of office space on 20 floors in the Landmark TLV project in the Sarona district of Tel Aviv. The project is owned by Melisron (TASE: MLSR), controlled by Liora Ofer, and AFI Properties Ltd. (TASE: AFPR), controlled by Big Shopping Centers (2004) Ltd. (TASE:BIG). The leasing deal is estimated to be worth NIS 750 million.
As far as is known, the layoffs that Meta plans in Israel, which will probably affect a few dozen employees only, will not mean any change in the company’s office space plans, although industry insiders have raised eyebrows over the company’s enthusiasm for continuing to rent more space in Tel Aviv. Meta itself has said that it is reviewing existing leases and plans for new offices.
Meta’s vice president of global facilities and real estate John Tenanes told "The Wall Street Journal" last month that the company was examining ways of downsizing its office space, and that Meta might not renew leases in certain buildings and could consolidate offices spread over several floors on a single floor. He said that occupation of buildings where Meta was not yet located and construction of new space were being reconsidered.
Could Meta cancel the lease with Melisron and AFI Properties? Probably not, but it could sublet the space rather than occupy it itself, just as happened last week in Austin, Texas. Meta decided that it would not occupy 54,700 square meters of office space under construction, in what has been described as the city’s biggest ever leasing deal. Instead, it will sublet the space at prices expected to be lower than it is paying for the head lease.
In a call with investors Meta announced that it would invest $3 billion in reducing its office space. In the last quarter, the company spent $413 million to terminate lease contracts, and it is expected to spend $900 million on that in the current quarter.
Meta is closing its flagship offices on Park Avenue in New York, and terminating its lease on two WeWork buildings in Silicon Valley. Nevertheless, the company did recently open a branch in central Manhattan and it has opened a center in San Diego.
It is not at all certain that Meta needs all the office space it has leased around the world. The company still allows its employees to work from home without limitation, or to choose a hybrid working model, as they wish. According to Tenanes, its offices are generally less than half occupied. Even before the Covid-19 pandemic, occupancy was only about 75% on any given day.
Nevertheless, as far as the Landmark TLV owners are concerned, it’s business as usual. "A lease agreement has been signed between Facebook and the companies for the Landmark project. We are not aware of any change in the agreement," Melisron and AFI Properties stated.
So far, there seems to be no effect on Facebook’s current offices at Rothschild 22 either. Sources inform "Globes" that the company has given no indication that it intends to reduce the extent of its office space in the building. As far as the offices in the Azrieli Sarona Tower are concerned, there too there is a long-term lease with many years left to run, and at present, as far as "Globes" has been able to ascertain, there is no indication of change or reduction in the amount of space that Meta rents. All the same, Meta is liable not to renew some of its leases when they come to an end, as has happened in the US.
Published by Globes, Israel business news - en.globes.co.il - on November 8, 2022.
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