Walmart is delivering a boost to Silicon Valley's office market by signing one of the region's largest leases since the onset of the pandemic as part of its national expansion plans.
The world's largest retailer is taking over two buildings in the Tech Corners campus in Sunnyvale, California, in a lease with landlord Jay Paul Cos. that spans about 338,000 square feet across 803 and 805 11th Ave. It will house the Bentonville, Arkansas-based company's e-commerce division and eventually represent more than one-third of the 957,200-square-foot campus.
"This investment in Sunnyvale strengthens our presence in a global hub of innovation and further accelerates Walmart's growth into a people-led, tech-powered retailer," Suresh Kumar, Walmart's global chief technology and development officer, said in a statement to CoStar News.
The lease is the largest new office deal signed in Silicon Valley since 2023, according to Newmark, the brokerage that represented the landlord in the deal. Walmart's new Sunnyvale space will expand its existing Silicon Valley portfolio, Newmark Executive Vice Chairman Phil Mahoney — who helped broker the deal alongside colleague Mike Saign — told CoStar News, underscoring the retailer's commitment to physical office space to help fortify its in-person requirements.
With Walmart's pair of blockbuster deals, coupled with a string of recent expansions and investments among other tech companies in the area, Silicon Valley's office market appears to be rebuilding its pre-pandemic momentum.
While Meta, Google, Salesforce, Microsoft and others have implemented widespread cuts to their previously vast real estate portfolios, the impact of those decisions has been most acute in the San Francisco and Silicon Valley areas, where many are headquartered and operate in a more concentrated amount of space.
Tech giant pullback
After roughly a decade of fueling record-high spikes in rent growth and demand — often leasing up space before it was even built — tech giants in recent years have been making deep cuts to their property holdings by shutting office locations, subleasing out unwanted space and walking away from future investments.
Those decisions, which have also been fueled by significant job cuts and the push to redirect savings to higher-priority investments, have loaded up the Bay Area's real estate market with millions of square feet of available space that, with the absence of large tenants, has been challenging to fill.
Over the past several months, however, a growing handful of companies have emerged to take on those larger vacancy blocks. That has fueled a sense of optimism that many are once again prioritizing real estate investments, and the days of move-outs, lease terminations and downsizings have reached an end.
Along with Walmart, tech companies such as Applied Intuition, Intuit, Databricks, Zscaler, SAP Labs and others have signed deals to expand their office stakes in the region. And just last month, Amazon extended its partnership with coworking operator WeWork to add roughly 141,000 square feet to its Silicon Valley footprint in a deal that will result in the Seattle-based retailer occupying 4780 Great America Parkway in Santa Clara.
While leasing across Silicon Valley is still hovering around its pandemic-era lows, the flurry of recent activity has meant the regional availability rate has fallen from a high of more than 20% to roughly 17.2%, according to CoStar data. That figure is expected to improve as the balance between offloading and taking on space continues to stabilize, a recovery process that could be sped along if demand among larger tenants builds.
Walmart's investment extends far beyond Silicon Valley. While it has shut some satellite locations in recent years, it is pumping billions of dollars into major hubs such as the San Francisco Bay area, Seattle and around its Bentonville hometown.
The retailer is also in the final stages of building a new headquarters campus in Bentonville. The 350-acre development is designed to include 12 office buildings, ground-floor retail space open to the public, an expansive health and fitness center, an employee food hall, a childcare center, an on-site hotel and other features aimed at blending employees' personal and professional lives while solidifying the company's strong preference for in-person work.
"Our values and culture are strategic differentiators for us as a company, and they are fostered by being together," Donna Morris, Walmart's chief people officer, wrote in a recent memo on the company's in-office policies. "We've already seen the benefits of having more teams working together in person [and are taking steps] that will help accelerate our momentum."