Facebook parent Meta is wielding a big ax to cut real estate costs around the world as it ends leases and incurs other expenses related to consolidating its office space.
The Menlo Park, California-based social media company expects to pay up to $5 billion in total restructuring expenses throughout 2023 to close workspaces, pull out of agreements and reduce its headcount as it pursues what CEO Mark Zuckerberg has called its “year of efficiency.”
Meta reported about $807 million in charges related to its real estate consolidation plans for the first three months of the year, a figure it expects to grow in coming months.
“Increasing our organizational efficiency is vital to our long-term success,” Chief Financial Officer Susan Li said on the company’s earnings call Wednesday. “A lot of this work we’re undertaking is driven by operational efficiency.”
The company reported revenue of $28.6 billion for the first three months of the year, up 3% for the same time in 2022 and ahead of analysts’ expectations. The restructuring expenses come in addition to the roughly $550 million Meta paid in the second half of last year as it became increasingly aggressive in its cost-cutting efforts.
Despite ending a nearly yearlong streak of slowing revenue growth, the Silicon Valley tech giant plans to keep shrinking real estate that has already endured several rounds of downsizing. Company executives warned it would continue “to assess facilities consolidation,” a foreboding sign for an office market that is already struggling with record amounts of sublease space and a dwindling pool of tenants willing to take it.
Meta has been among a pool of other tech giants that posted meteoric rises in revenue, users and advertising spending through the first couple of years of the pandemic but are now contending with a challenging economic outlook that is bringing them back to earth.
The company is in the process of laying off 10,000 employees, adding to the 11,000 positions Meta eliminated late last year.
The moves have been a worrisome sign for the national commercial real estate market, which has come to rely on blockbuster tech leases and ongoing headcount growth in such major cities as San Francisco, New York, Seattle and Los Angeles for rent growth.
Meta, which expects to revisit its hiring freeze later this year, said it anticipates 2023 expenses of $86 billion to $90 billion, lower than its previous outlook of up to $100 billion.