As part of its ongoing cost-reduction strategy, Roku recently announced plans to sublease a 163,000-square-foot office building within its sprawling San Jose headquarters, according to The Real Deal. The move comes on the heels of the streaming media giant's decision to lay off 6% of its workforce and exit unoccupied office spaces in an effort to save up to $35 million.
The building in question, located at 1143 Coleman Avenue, is part of the broader Coleman Highline tech campus and is now listed for sublease at a rate of nearly $48 per square foot. Roku initially rented the building in 2019 with plans to move in by early 2021, but it never actually occupied the space. Brokers Paul McManus and Blake Zamudio of Colliers are handling the listing.
While the San Jose-based firm saw a 13% increase in net revenue last year, its net loss more than doubled to $498 million, making cost-cutting measures an absolute priority. The decision to sublease the unoccupied Coleman Avenue building is directly in line with Roku's ongoing efforts to streamline its operations, as reported by The Registry.
Currently, Roku leases over 730,000 square feet at the Coleman Highline complex, including three other office buildings (1173, 1167, and 1155 Coleman Avenue) and a 23,000-square-foot amenities building. These leases run through 2029. However, the vacant building at 1143 Coleman Avenue became an ideal candidate for subleasing as part of Roku's cost-cutting initiatives.
Interestingly, Roku isn't the only tenant in the Coleman Highline development reconsidering its office space requirements and turning to subleasing options. The Gensler-designed campus, once completed, will boast an impressive 1.5 million square feet of office space. In 2021, Yahoo signed a 15-year lease for over 600,000 square feet of that space, but changed its plans under new ownership and ultimately subleased it to ByteDance—the Chinese parent company of the popular social media platform TikTok.
Roku's unused San Jose office space is just one of many instances where companies have reevaluated their real estate needs in the wake of the pandemic. Yet despite the uncertainty surrounding the future of office spaces, investor sentiment regarding the Coleman Highline development remains positive. Hunter Storm, a unit of Hunter Properties, sold two of its Coleman Avenue buildings (1143 and 1155) to a real estate investment trust affiliated with Blackrock in 2020 for $275 million, amounting to $770 per square foot, The Registry reported.
In another instance, Hunter Properties and Sansome Partners sold the portion of the development previously leased by Yahoo to London-based investor AGC Equity Partners for a staggering $780 million, or $1,185 per square foot. This demonstrates the continued resilience of the Coleman Highline development and commercial real estate market despite the challenges faced by companies during the pandemic.
