Layoffs, vacancies continue in San Mateo County

That’s not cause for alarm though, said Ben Paul, vice chairman at Cushman & Wakefield, noting that, given the economic landscape, funding levels are in a stable position and particularly strong for generative AI firms in the Bay Area. But that capital is largely being deployed toward financing computer power necessary to train AI models, rather than hiring employees. 

“Venture numbers aren’t bad, but they’re not resulting in what we refer to as butts-in-seats, or jobs,” said Paul, adding that will hopefully change in the not-so-distant future. 

The correlation as it relates to the commercial real estate market is clear, with projections showing a continued increase in office vacancy rates within certain sectors, such as technology, a recent Cushman & Wakefield report said. Redwood City-based firm Box’s 75,000 square feet of office space took the top spot as the largest block of sublease space to go on the market in the first quarter. And the county saw a roughly 4% year-over-year increase in office vacancy rates, although they dipped slightly from the end of last year. 

Layoffs are also not slowing down as many hoped — with Google and Apple slashing hundreds of roles this year — and the industry also faces unique challenges in getting their workers back to the office, another element negatively affecting the commercial market. 

But downsizing hasn’t only impacted technology firms. In the last two months alone, South City life science giants Genentech and Sanofi announced they were cutting nearly 600 people from their workforce altogether. Janssen, which is also cutting roles this year, announced the closure of its research and development facility in Brisbane less than two years after its opening, according to the San Francisco Business Times. 

Out of the roughly 17 job cut announcements so far this year in the county, almost half were from life science firms. Despite what some may consider a less pessimistic attitude about the economy compared to last year — anticipated interest rate cuts, a strong stock market, slightly cooler inflation —  the number of layoff notices published so far this year in San Mateo County is a bit higher compared to the same time period in 2023, according to WARN notices. The Peninsula maintains a lower unemployment rate compared to some of its neighboring counties, and even statewide, but the 3.7% figure, as of February, is still the highest it’s been since the end of 2021. 

Rosanne Foust, president and CEO of the San Mateo County Economic Development Association, said that speaks to the mismatch between the workers in the county and the available jobs, which has been exacerbated by the pandemic.

“We still have 16,000 people unemployed,” she said. “There isn’t an alignment between the jobs available and the people that are either unemployed or underemployed, and that’s what we need to dig in to much further.”

The labor force has certainly changed since COVID-19, as companies’ rapid growth and subsequent downsizing occurred over the course of a couple of years, and in many cases, accelerated the already decreasing population trend in the area.

Now, some experts, including Foust, say those firms are undergoing a rebalancing process, finding the right level of investment throughout their divisions. Biotech firms, in particular, scaled up a lot during the pandemic, and the job cuts are a way of rightsizing. 

Paul said high interest rates particularly affect life science firms, as they take longer than other industries to see returns, requiring more time for discovery and necessary approvals. 

But there is room for optimism. Some of the top venture deals in the country went to San Mateo County-based firms, including Alumis — securing a $259 million round — and Freenome, receiving $254 million. And compared to the regular office market, which often comprises technology or other firms that don’t require research and development space, biotech real estate demand has picked up. 

“It’s stronger than the office market, but it’s running about 60% to 70% of what it should be. We’re actually seeing more R&D deals, more lab deals getting done,” Paul said. “What [the county] has as an advantage is the 40 million square feet of office and 30 million square feet of lab space. Most places in Silicon Valley don’t have that balance.”

alyse@smdailyjournal.com

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