Salesforce is listing part of its San Francisco offices at 350 Mission St. for sublease after canceling a separate deal at a nearby Transbay project, two of the largest tech real estate reductions during the pandemic.
The announcements come as business is booming for Salesforce, with annual revenue up 24% to over $21.2 billion in the past fiscal year. But the company is shedding space with a permanent plan for most workers to stay remote for one to four days a week.
“We continue to evaluate our global real estate strategy to align with our business needs. With our employees planning to return to the office with more flexibility, we’re reducing our footprint,” Salesforce said in a statement to The Chronicle.
Roughly half of the 450,000-square-foot 350 Mission St. tower, branded as Salesforce East, will be listed for sublease, according to a person familiar with the property. Prior to the pandemic, around 1,000 workers could have fit in that much space, but many companies plan to space out desks in the future. Salesforce has 10,000 workers in San Francisco.
Salesforce also canceled a 2018 lease for 325,000 square feet of office space at 542-550 Howard St., a project that has yet to be approved. It had planned to have 1,500 workers in the tower.
The tech giant leases 881,000 square feet at Salesforce Tower, the city’s tallest building, and owns the 817,000-square-foot 50 Fremont St. and 440-450 Mission St. buildings. There are no plans to downsize offices in those buildings, which Salesforce shares with other tenants, the company said.
Salesforce is the anchor of the Transbay neighborhood, a symbol of the tech boom of the past decade. Most of the energy on the previously bustling streets has vanished over the past 12 months, as shelter in place hits its one-year anniversary next week and nonessential offices remain closed.
Because it doesn’t have corporate cafeterias, Salesforce employees were the largest set of patrons for local restaurants and coffee shops before the pandemic. The absence of workers has been devastating, with downtown San Francisco’s sales taxes plunging by more than 70% in the second quarter of 2020 compared to the prior year.
Now the company leaders throughout the tech industry see an even more distributed economy.
“We can all, I think, agree that this pandemic has forever changed our world and how we are working and living and educating ourselves from anywhere,” Salesforce CEO Marc Benioff said on an earnings call last month. “Salesforce is accelerating at such a rapid speed because we are already in this work-from-anywhere world.”
With its cloud-computing marketing products, Salesforce has benefited from heightened consumer demand during remote work. The 54,000-person company is hiring 12,000 additional people globally this year, including some in San Francisco.
Facebook CEO Mark Zuckerberg said last year that remote work “lets us access talent pools outside of traditional tech hubs in big cities — and that should help spread economic opportunity much more widely around the country and world while also helping us build a more diverse company.”
Facebook leases all the office space in Transbay’s Park Tower and at 181 Fremont, and has not downsized any of its local real estate.
Salesforce has been a corporate leader in local philanthropy and provided 180 San Francisco small businesses with $10,000 grants late last year. The company said its efforts will continue.
“As San Francisco’s largest private employer, we’re committed to continued growth and giving back to the community in the years to come,” Salesforce said.
Kilroy Realty, one of the city’s largest office landlords, owns 350 Mission St. Kilroy is selling another property leased by Dropbox for $1.08 billion, despite Dropbox’s own shift to remote work and sublease plans. Office tenants are required to pay rent even as city health orders have closed most buildings, and if a subtenant can’t be found, tenants are obligated to pay for leased space even if it isn’t being used.
Sublease space has piled up in San Francisco, accounting for more than half of the office vacancy rate of around 18.2% at the end of February, according to Cushman & Wakefield. When shelter in place began, the office vacancy rate was around 6.7%.
Roland Li is a San Francisco Chronicle staff writer. Email: roland.li@sfchronicle.com Twitter: @rolandlisf
