back to article Meta spends $181M to get out of lease at vacant London offices

Meta is paying £149 million ($181 million) to release itself earlier than planned from a lease on an eight-story office block in London signed two years ago, which still lies vacant. The antisocial media biz took out a 20-year lease on 1 Triton Square near Regent's Park in the north-west of England's capital in 2021, something …

  1. elsergiovolador Silver badge

    Meta

    They could have 3D scanned it and deployed in metaverse and have it "forever".

  2. Anonymous Coward
    Anonymous Coward

    a 20-year lease ? WTF ?

    Well that was bad advice wasn't it ?

    I'm reminded of the terminal patient advised not to buy any LP records ...

    1. DS999 Silver badge

      Re: a 20-year lease ? WTF ?

      I thought corporate leases were a series of 5 year options, so a 20 year lease is actually a 5 year lease with three 5 year options. At least that's how they are all written around here. Maybe it is different in London, or different in the world of really pricey real estate in major cities?

      If they signed it in 2019 I could understand, but in 2021? After they knew about covid and whole work from home thing?? What kind of morons made this decision???

      1. Richard 12 Silver badge

        Re: a 20-year lease ? WTF ?

        Given that they paid 7 years worth to get out of it roughly two years in, it definitely wasn't a five year lease with five year options!

        A business can buy leases of pretty much any length. To be fair, 10 and 20 years are pretty common for physically large lets, especially if you're intending to spend a decent chunk on outfitting the place.

        Though it was fairly obvious back then that there would be a significant pause if not a downturn or recession after the pent-up demand of the pandemic was fulfilled. Opinions varied wildly on the length and depth, but not that it was coming.

        You'd think an organisation the size of Meta would employ at least two economists.

        1. John Brown (no body) Silver badge

          Re: a 20-year lease ? WTF ?

          "You'd think an organisation the size of Meta would employ at least two economists."

          They do. But for true redundancy you need three in case one is giving you bad data. Meta are good with redundancies, but I'm not so sure the rule of three applies to economist as if you ask three economists for an opinion each, you'll get at least four different answers :-)

      2. CowHorseFrog Silver badge

        Re: a 20-year lease ? WTF ?

        The morons who signed these leases are the same morons who get all the bonuses.

      3. tmTM

        Re: What kind of morons made this decision???

        You're asking that of a company that just this last year has hosed over $20 billion up the walls on a failing Metaverse project?

        1. John Brown (no body) Silver badge
          Joke

          Re: What kind of morons made this decision???

          ...and are now touting "AI" with "personality". I wonder who they will be modelled on? Previous attempts to emulate the Zucks personality were wildly successful so I see great things ahead for Meta AI :-)

  3. Randy Hudson

    Correction

    Equivalent of 7 years?! I think you mean 7 months.

    1. Roland6 Silver badge

      Re: Correction

      Is that £21m a month or per year?

      Some sources think it’s per year, so it represents about 50% of the full value of the lease.

      Expect British Land (the building’s owners) to have someone else in the building well within 10 years.

      1. John Brown (no body) Silver badge

        Re: Correction

        I suspect "buying out" of a lease has got more expensive in recent years since it's now much harder to replace an existing tenant. I wonder how well exit clauses are specified in tenancy agreements? I suspect the fallout will be to tighten up the exit clauses, making it harder to get out without great expense. Which will likely lead to potential tenants being a lot more wary of what they are signing. No one wants to admit their great enterprise might fail, but many will need to face the cold hard facts of how much failure or downsizing could cost them. And if the tenancy agreements are harder to get out of, the landlords will have even more difficulty renting out the space. It all seems rather Catch 22.

        On the other hand, I see many businesses looking at the empty space and instead of reacting to and dealing with the problem and making changes to match the Brave New World that brings, many are now moving back their "bad old ways" and forcing people back in to actually use that space. I understand that in the USA it's common to get tax breaks on occupied buildings so having it below a certain occupancy threshold can cost the company money. AFAIK, in the UK, the opposite is true. You pay "rates" (local tax) on the value of the building, but unoccupied buildings attract a lower tax because if the building isn't used, then it's not costing the town/city anything in providing services. I'm not sure exactly how that works, but I have a feeling that lower tax is only for a couple of years, hence why empty shops/stores in town centre are often occupied by charities selling 2nd hand stuff on cheap, short(ish) term contracts. If the landlord is paying full rates, they may as well rent it out at "cost" or a little more rather than leave it empty at a loss.

        I wonder if sub-let clauses will become popular?

  4. spold Silver badge

    Given the layoffs...

    ...surprised they didn't repurpose it as a space for the homeless. OK an Airbnb might be more likely.

    1. Roland6 Silver badge

      Re: Given the layoffs...

      British land now have the monies to do exactly that… expect the planning application for change of use to go in shortly…

      1. Richard 12 Silver badge

        Re: Given the layoffs...

        They can probably do that under permitted development.

      2. EvilDrSmith Silver badge

        Re: Given the layoffs...

        The suggestion seems to be that BL will re-purpose for a Life-Sciences tenant (lab space).

        I am aware of at least one tower block going up in London that has exactly that usage, and there seems to be a shortage of lab space relative to demand..

        1. Korev Silver badge
          Boffin

          Re: Given the layoffs...

          I am aware of at least one tower block going up in London that has exactly that usage, and there seems to be a shortage of lab space relative to demand..

          There's also a shortage of science jobs that pay enough to live in London....

    2. SundogUK Silver badge

      Re: Given the layoffs...

      It's extraordinarily expensive to re-purpose commercial property as residential. The plumbing and wiring is all wrong and there are completely different H&S rules. It's usually cheaper to knock it down and start again.

      1. John Brown (no body) Silver badge

        Re: Given the layoffs...

        In the case of a tower block, is that always the case? Could it be cheaper to strip it back to the skeleton and then just rebuild the interior/exterior?

        1. SundogUK Silver badge

          Re: Given the layoffs...

          Given the financing involved it's cheaper to demo it and start again.

  5. aerogems Silver badge

    The Real Reason

    And here we have the real reason behind the marching orders for peons to return to the office. If they have to pay to get out of a lease, that shows up on their balance sheet, which might mean missing quarterly targets, so no bonus. If employees have to pay to commute to the office, that comes out of the employee's bank account, and they only have silly things like mortgage payments and food to pay for, they don't need to make payments on their yacht like the top executives! Won't anyone think of the yacht sellers!?

    1. Timo

      Re: The Real Reason

      I think the first counter-point to your point is that they'd pay the lease whether employees are in the office or not, so its a false economy to have people come in to the office.

      Second counter-point: the company is actually saving money over the lifetime of the lease. One of the other posts here calculates the lump-sum vs. the total lease payments. They just elected to buy it out in one lump sum.

      1. aerogems Silver badge

        Re: The Real Reason

        Exactly. They've signed a lease and now they're paying for this empty building to just sit there, so they force the peons to march back to the office. And as for your second counterpoint, while true, no one thinks past the next quarter anymore, which I already covered.

  6. Marty McFly Silver badge
    Thumb Up

    Using badges to track attendance....

    Sounds like an opportunity for a side-hustle by one of the people who prefers to come to the office every day.

    1. aerogems Silver badge
      Holmes

      Re: Using badges to track attendance....

      There's always some deadwood in every office, who seem to have no job other than attending random meetings. Wouldn't surprise me at all if at least one of them has already hit on this idea and they just wander around the building all day randomly swiping badges for people for a nominal fee.

      1. CowHorseFrog Silver badge

        Re: Using badges to track attendance....

        Are you referring to all managers ?

  7. Dan 55 Silver badge
    Devil

    What?

    "More diverse work styles have impacted employee productivity, satisfaction and customer experience"

    The analyst has run out of money, we have to insert another coin if we want to know whether that's for better or for worse.

    1. John Brown (no body) Silver badge

      Re: What?

      I thought exactly the same. What does that even mean? Sounds like a consultant hedging their bets over which way to jump depending on what the next client would like to hear.

  8. abend0c4 Silver badge

    Said Adam Hotly, principal analyst at Omdia

    Well, that clinches it then.

  9. ecofeco Silver badge

    I just love happy ending!

    I just love happy endings where the antagonists shoots themselves in the foot!

  10. ThinkingMonkey

    Losing sleep

    over the fact that the owners of premium office space used to gouging the life out of businesses for their office space now have empty, un-rentable real estate all over the place. I hope they recover soon and can get back to their $20 million per month rentals. I was the victim of that but at a smaller scale when my landlord used to ask me how my (IT-related) business was going. "Great!" I always said. Big mistake. In two years, he raised the rent 4 times. It was for a 2-year lease with "rent adjustments" every 6 months in the contract. Those adjustments were never in my favor, naturally. I finally moved and the place has been sitting empty ever since. Oddly, many people seem to have never heard of the "Kill not the goose that lays the golden egg" idiom.

    1. CowHorseFrog Silver badge

      Re: Losing sleep

      So you complain about landlords and then you hope they get more business ?

      WHY ?

      1. Michael Strorm Silver badge

        Re: Losing sleep

        OP's obvious sarcasm wasn't *quite* blindingly obvious enough for you to have noticed it?

    2. M.V. Lipvig Silver badge

      Re: Losing sleep

      Back when I rented I would always tell the landlord a couple of months before renewal that I was having a hard time making it and could he see his way to reducing the rent? More often than not, it meant no increase that year. These days I own outright so no landlord problems.

  11. keithpeter Silver badge
    Windows

    Ironic...

    "Regent's Park in the north-west of England's capital"

    ...or just spotty sub-editing? I'm sure another phrase would be clearer such as 'in the north-west of the capital city'.

    PS: 5 years rent paid up front is a nice little earner. Suggest furnishing the ground floor and make some spaces available to startups as a gesture towards enticing people back into the centre of London. While converting upper floors into nice flats for fair rent to retired gentlefolk. I can dream.

    1. Roland6 Silver badge

      Re: Ironic...

      >” While converting upper floors into nice flats for fair rent to retired gentlefolk”

      Housing for the “over 50s” is nice renumerative con. It counts as social housing and so can be built in places where other styles of housing would not get planning, plus it cares a nice price premium, in part because there are a large number of single 50+ people who have money, who like the idea of independent living within a sheltered accomodation complex. Obviously having these people with time and disposable income within a city should benefit local shops, cafes etc.

      1. Claverhouse Silver badge

        Re: Ironic...

        They could easily purpose the upper floors for the gentlefolk while the lower floors host the homeless.

        1. M.V. Lipvig Silver badge

          Re: Ironic...

          That would leave them with unleased upper floors and lower floors earning nothing.

    2. John Brown (no body) Silver badge
      Thumb Up

      Re: Ironic...

      "Regent's Park in the north-west of England's capital"

      ...or just spotty sub-editing? I'm sure another phrase would be clearer such as 'in the north-west of the capital city'.

      I must admit to reading that and wondering when Facebook/Meta had set up a large presence in Manchester!

      (yeah, ok, it's "Regent Retail Park", not quite the same, but it's "double North West", ie North West of England and also in the North West of Manchester, or very nearly)

  12. wyatt

    Any lengthy contract will have a break clause in it. You can try to negotiate one before these points with the landlord, generally it'll cost you though.

    Buildings generally come with maintenance liabilities, you can realise a saving in the above costs by not having to pay these, I'm sure the bean counters will have been all over it, whilst keeping away from windows.

  13. Anonymous Coward
    Anonymous Coward

    Aren't they allowed to sublet?

    Rather than paying to get out of a long lease, wouldn't it make more sense to sublet the offices to other companies? or is that just not allowed in their contract?

  14. Claverhouse Silver badge

    Meta Remains

    "We remain fully committed to London, as evident by the recent opening of our King’s Cross office further anchoring our local footprint."

    As a Briton, don't feel obligated on my account.

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