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Qualcomm Layoffs Lead to Big Cuts in Office Space

Chipmaker Clearing Out of Almost 300,000 Square Feet in San Diego
July 11, 2018
Qualcomm has placed this Sorrento Mesa building on Morehouse Drive in San Diego up for sale, along with an adjacent land parcel previously entitled for new office development.



Less than three months after Qualcomm Inc. announced it was laying off 1,500 California workers, including 1,231 in its San Diego home base, the local real estate fallout is already quite stark.

Local brokers note that the wireless chipmaker has placed on the market, vacated or made plans to let lapse almost 300,000 square feet of office space in six different properties, located in the Sorrento Mesa submarket of San Diego that has long housed Qualcomm’s corporate headquarters and related operations.

According to brokers at Colliers International and Cushman & Wakefield, these are among the effects in San Diego of Qualcomm’s layoffs that were announced in April and took effect in June.

  • 5580 Morehouse Drive -- Qualcomm has placed up for sale a 72,000-square-foot building along with 4.1 acres of land, previously entitled for 330,000 square feet of new office space.

  • 6965 Lusk Blvd. -- Qualcomm has let a 75,000 square foot lease lapse, and the space is now available for direct lease from the property’s landlord.

  • 5880 Oberlin Drive -- 77,000 square feet is being marketed for sublease, with a lease expiration of September 2022.

  • 5505 Morehouse Drive -- 35,000 square feet is being marketed for sublease, expiring in December 2019.

  • 10065 Barnes Canyon -- Qualcomm is letting a 16,000-square-foot lease lapse; to be marketed for direct lease by landlord.

  • 5890 Pacific Center Blvd. -- A short term remains on 18,000 square feet; the company is most likely to let the lease lapse. Qualcomm is not marketing this space, according to Colliers.

    Brokers said Qualcomm, since its founding in 1985, has frequently expanded and contracted its local space to meet the needs of an ever-changing wireless technology landscape. This time around, however, it could be quite some time before San Diego’s largest private employer is ready to go back into real estate expansion mode, based on events of the past year.

    Ron Miller, a senior vice president in Colliers International’s San Diego office who is focused on tenant representation, noted that the space-reduction fallout of Qualcomm’s last round of layoffs, in 2015, is still being felt in places like the Towers North office property, on Mira Sorrento Place in Sorrento Mesa.

    “The outcome of Qualcomm’s last major layoff resulted in 100,000 square feet being vacated, which is still vacant today -- over three years later -- in this same project,” said Miller.

    Brett Ward, managing director in Cushman & Wakefield’s San Diego office, said much of the latest shifts by Qualcomm involved reducing and relocating large swaths of company departments, such as accounting and human resources, from leased spaces into owned spaces that are part of Qualcomm’s original main campus on Morehouse Drive in San Diego.

    He said Qualcomm for the time being will likely be focused on boosting internal efficiencies and “right-sizing” its global real estate, rather than new development or space expansions. “Qualcomm is showing Wall Street that it’s serious about reducing its operating costs,” Ward said.

    Qualcomm officials said they were not immediately available for comment on the real estate moves. In announcing the layoffs in April, the tech giant said a workforce reduction was necessary as part of global efforts to cut $1 billion in costs, as it responds to changes in demand for its products.

    Earlier this year, the White House blocked a hostile takeover of Qualcomm by Broadcom Inc., citing potential threats to national security. Qualcomm is currently bidding to acquire China’s NXP Semiconductors in a proposed $44 billion deal.

    As for what tenants might replace Qualcomm in Sorrento Mesa, Ward and Miller both said the still-bustling life science industry is a strong candidate to expand tenant demand. The key Torrey Pines submarket of La Jolla, long favored by biotech and pharmaceutical firms, has pretty much run out of space, providing opportunities for Sorrento Mesa landlords to update their properties for life science laboratory and office users.

    Major electronics firms, including Sony and Samsung, have also been boosting their real estate search activity in San Diego, though Miller noted that a recent Sorrento Mesa relocation by Sony actually amounted to a downsizing of space, from 190,000 to 120,000 square feet.

    Prior to the latest space reductions, Qualcomm occupied more than 4.2 million square feet in 33 office and industrial buildings across San Diego County. Most of its remaining space is owned by Qualcomm, and the company will maintain a large presence in San Diego even after current downsizing is completed.

    However, brokers note that it could take a while for Sorrento Mesa to rebound, since much of its office inventory is older than what is now found in competing submarkets -- such as University Town Center and Carmel Valley -- that have been stealing away tenants in recent years.

    Data from CoStar Market Analytics shows Sorrento Mesa with an office vacancy rate of 12.8 percent and an availability rate -- including space soon to be vacated -- of 15.2 percent. Those are both well above San Diego County’s overall vacancy of 9.7 percent and availability of 13 percent.

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