Microsoft plans to cut nearly 9% of its video game division, the latest in a series of corporate cuts among tech giants and other companies that are further eroding demand for office space.
The Redmond, Washington-based company expects to lay off 1,900 employees, including staff from Activision Blizzard, the video game holding company that Microsoft acquired in a deal valued at $69 billion more than three months ago.
The job cuts are expected to include staff from the company’s Xbox and ZeniMax teams, reducing “areas of overlap” identified since Microsoft absorbed Activision Blizzard and its 13,000 employees. Microsoft Gaming CEO Phil Spencer said in the article that it is part of a larger plan for Internal memo obtained by multiple news organizations.
“As part of this process, we have made the difficult decision to reduce the size of our gaming workforce by approximately 1,900 roles out of our team’s 22,000 people,” Spencer said in the memo.
Microsoft did not immediately respond to CoStar News’ questions about which offices would be affected by the layoffs.
activision blizzard has workplace hubs in North America, the UK and Europe.The head office is pen factory The Santa Monica, California office complex is approximately 88,000 square feet and the Blizzard Entertainment division is based in Irvine, California.
Despite the cooling of the national physical workstation market, one such building in Santa Monica sold for $178 million. Highest price sales in 2023 In the Los Angeles metropolitan area.
One year ago, Microsoft, one of the largest companies in the United States by total revenue, announced the following goals: eliminate 10,000 jobs The company will hire nearly 5% of its workforce by the end of September and consolidate real estate leases “to increase overall workplace density.”
Microsoft’s plans to cut Activision’s workforce are unlikely to have an immediate impact on the tech giant’s real estate portfolio, but we expect recent layoff news to further dampen the company’s demand for additional office space. has been done.
Nationwide, companies including eBay, Wayfair, Amazon and Alphabet’s Google have collectively cut thousands of positions since the beginning of the year. While the full impact of these cuts is not yet known, they are consistent with an unprecedented move to prioritize profitable growth over risky expansion and have so far reduced the scope of companies’ real estate portfolios. This has led to significant reductions.
“These job cuts come at the same time as a number of other cost-saving measures,” said Phil Mobley, CoStar’s director of national office analysis. “Some tenants are still paying rent for their spaces even though attendance numbers are significantly lower than seating capacity. Many of them want to save on occupancy costs when their leases are up. That’s what I think.”
A growing number of companies are scrutinizing their real estate needs and existing contracts, a focus that is leading to smaller leases and reduced demand for space in some of the country’s older buildings.
Microsoft, for example, plans to vacate 2.7 million square feet of land in downtown Bellevue and Interstate 90 in the Seattle metropolitan area. The company is moving many of its operations to its headquarters near Redmond, where it is completing a major expansion project.
Tenants collectively returned more than 65 million square feet of office space throughout 2023, bringing the total since the beginning of 2020 to more than 180 million square feet, according to CoStar data.
This far exceeds the cuts reported through both the Great Recession and the so-called dot-com bust a few years ago.
Low office attendance and slowing employment growth have pushed office vacancy rates nationwide to an all-time high of more than 13.5%, according to CoStar data.