Dropbox struggled to sublease space in its massive headquarters after signing a record lease in 2017 and then getting hit with a pandemic and market downturn.
ever in San Francisco, securing 736,000 square feet over 15 years in the city's Mission Bay neighborhood.
The combination of a global pandemic in 2020, which led to a boom in remote work, followed by a downturn in the tech market last year has turned that massive space into a financial albatross with anstatement on Thursday that it recorded an impairment in the period of $162.5 million "as a result of adverse changes in the corporate real estate market in the San Francisco Bay area." Its total real estate impairment for the year was $175.
While Dropbox was able to sublease pieces of its real estate to some biotechnology companies, there isn't enough demand to account for all of the company's empty space. Tim Regan, Dropbox's finance chief, said on Thursday that the subleasing environment has become more difficult than management had anticipated, and the company is no longer assuming it will sublease additional space in San Francisco in the next few years.
"We were relatively quick to market with our subleasing plans, but the market has deteriorated, with many companies reducing their real estate footprint," Regan said. "And there's certainly been an increase in supply for real estate for sublease, which has pushed out our anticipated time to lease." The office vacancy rate in the third quarter was 24% in San Francisco, higher than it's been since at least 2007, according to
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