When Meta, fresh off a wave of brutal layoffs and adjusting to a new normal of hybrid work, decided to give up a massive London office lease last year, it did so by parting ways with $181 million as part of a gargantuan “surrender fee.”
The social media group’s landlord may have cheered the nine-figure lump sum and looked nervously to the future as the U.K. capital endured a torrid corporate real estate market.
Now things once again appear to be looking up for the company that once called Meta its tenant.
British Land, Meta’s former landlord at 1 Triton Square, has sold 50% of its bulging Regent Street space as part of a joint venture with Royal London Asset Management Property (RLAMP) to turn it into an industry-leading science laboratory.
The group will earn £192.5 million ($244 million) by selling half its stake in the office space in addition to Meta’s surrender fee.
Combined, British Land is expected to enjoy a £341.5 million ($431 million) windfall as a result of Meta vacating its office space.
“We proactively took 1 Triton Square back from Meta to reposition it for science and innovation customers, with the expectation of unlocking significantly higher rents, whilst benefitting from a considerable surrender premium to further improve the economics,” said British Land CEO Simon Carter.
“This transaction is another example of how we drive value through establishing innovative JV (joint venture) partnerships, enabling us to flex our balance sheet, share the risk and crystallise the value created from Meta’s surrender premium.”
Meta departure fuels bumper payday
Meta’s decision to vacate one of its London office spaces—the group has three other locations dotted across the capital—came as a shock to investors and hammered home the shifting dial in office working patterns.
“It is a staggering amount of money,” Matthew Saperia, analyst at Peel Hunt, told the Financial Times last September following Meta’s announcement. “In my 20 years, I can’t think of a tenant paying [so much] to give back space they don’t occupy.”
There was mass speculation over Meta’s move to cancel its lease at 1 Triton Square, though there was a broad consensus that falling headcount, both in the office and at the company more broadly, was a big motivator.
Meta announced plans to lay off 10,000 staffers in March last year, which followed a November 2022 plan to cut 11,000 jobs.
The company pulled back its headcount after a bumper hiring spree during the COVID-19 pandemic, spurred by rising online activity.
The pandemic also had the effect of transforming office working patterns that increasingly appear likely to create a new normal of hybrid work.
Meta clamped down on fully remote work last year when Mark Zuckerberg ordered staffers back to the office three days a week. It hasn’t since publicized plans to up staffers’ quota.
That position is likely motivated by a cost-cutting drive that could reposition the typical office week as three days.
Speaking to Fortune in February, Sue Aspey Price, EMEA CEO for real estate services group Jones Lang LaSalle, said many companies calling for a return to the office no longer had the real estate footprint to accommodate all their workers being together.
“When we see a company say four days a week back in the office, usually they’re expecting around three, so that means they’re now going to be planning their portfolio, their footprint, and the type of space they need around that three day a week model,” Aspey Price told Fortune.
