Tech layoffs trigger financial worries throughout San Francisco, Seattle, and New York

There has been a bloodbath of layoffs in the tech industry since last fall.

The Google parent company Alphabet has cut 12,000 jobs and thus terminated the 11,000 jobs announced by Microsoft. Salesforce plans to cut 9,000 employees while Meta parting ways with 11,000. Meanwhile, Amazon is cutting 18,000 people across the country. Yoy

The string of cuts, fueled by recession fears, could have a major impact on big-footprint cities like San Francisco, New York and Seattle, where corporate office workers make up an important part of the inner-city economy, observers say.

“This tech downturn is going to be devastating for Washington, and the long-term impact is going to be pretty profound,” University of Washington marketing professor Jeff Shulman told Bloomberg of the impact of cuts at Microsoft and Amazon. both of which have large employee bases in the state. “Tech companies have fueled so much growth and change that if they slam on the brakes and back up, everything else is in jeopardy.”

Cost-cutting at some companies like Salesforce and Meta includes explicit plans to slash expensive real estate, with the latter abandoning a recently built Manhattan expansion.

In 2022, rental demand was well below historical averages, with San Francisco’s office vacancy rate at more than 27 percent, up from 3.7 before the pandemic, and New York just 0.4 percent below the pandemic-era vacancy record of 19, 6 percent, according to a report by the CBRE Group.

Some fear the layoffs will not only reduce demand for office space, but also slow demand for housing overall.

“If people are afraid of being laid off, they will almost certainly put off making new, huge financial purchases — and buying a home is typically the largest financial transaction in most people’s lives,” said Patrick Carlisle, chief market analyst at Compass , opposite The Real Deal.

It’s worth pointing out, however, that even in places like the Bay Area, just because technology is laid off, economic apocalypse isn’t inevitable.

The story goes on

“So far, the job growth is positive and the unemployment rate is really very low, although that could change in the short term,” Stephen Levy, director and senior economist at the Center for Continuing Study of the California Economy, told the San Francisco Chronicle.

Mr. Levy also pointed out that some of the layoffs in the tech space have come as companies laid off additional staff during a pandemic-era boom, such as Salesforce, which nearly doubled its workforce as companies looked for new software solutions.

“So if they drop 10,000, they will still be 21,000 above pre-pandemic levels,” the economist added.

Still, landlords, from homes to businesses, could face tough times.

“It’s an extremely difficult time to be a landlord,” Ruth Colp-Haber, chief executive officer of brokerage firm Wharton Property Advisors, told Bloomberg. “All the costs of running their buildings are increasing, the cost of construction and labor is increasing. That’s all of their day-to-day costs just to open up their buildings for business. Then, on the income side, rents will fall. It’s a real witch’s brew.”

And in 2023, tech layoffs have already exceeded the pace of 2022, reports SFGate.