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Google To Incur $500M In Costs Related To Office Space Downsizing

Googleplex in Mountain View, California

Tech giant and Google parent company Alphabet will incur about $500M in expenses in the first quarter associated with leaving office space it occupies, according to a filing with the Securities and Exchange Commission.

The company characterized the move as “actions to optimize our global office space,” but didn't report how much space it would vacate and presumably return to various markets. Alphabet didn't immediately respond to a query from Bisnow.

Shrinking tech company space usage could come as a serious blow to already beleaguered office markets, since the industry and its growth have accounted for a large portion of total U.S. office leasing in the last decade, according to CBRE data released in early 2022.

Google has more than 70 offices in 50 countries, including a major footprint in its headquarters in Mountain View, California, but also such cities as San Diego, Seattle, Atlanta, New York and Boston.

In its filing, Alphabet left open the possibility that it would further cut office space usage. At the same time, the company will increase capital expenditures in its technical infrastructure, Chief Financial Officer Ruth Porat said during Alphabet's earnings call Thursday. She didn't specify a total for capital investment in data centers, however.

Alphabet reported its operating income for the quarter was $18.2B, down 17% versus last year, and the company experienced a drop in ad revenues for the quarter as well.

The announcement came not long after Google decided to lay off 12,000 workers, in the largest staff reduction in the company's history. Other major tech companies are likewise letting thousands go as the industry faces a rough patch of unknown duration.

The reduction in Google space usage is a turnaround from the search giant's actions in recent years. In April 2022, the company said that it planned to invest about $9.5B in U.S. offices and data centers for the year, up from $7B in similar investments in 2021.