If Work Is Going Remote, Why Is Big Tech Still Building? ⋆ Mighty Millennium

Google, Facebook, and others promise more flexibility to work from home. But they’re charging ahead with plans for more offices.

Kim Walesh has lived steps from downtown San Jose for two decades, and she readily admits that her neighborhood is not what you’d expect for the so-called “capital” of Silicon Valley—“small” and “undeveloped” are her first words to describe it. But Walesh, who directs economic development for the city, has long worked to enliven it, and four years ago she helped secure a crown jewel: a new Google campus on the west side of downtown. Unlike the region’s infamously cloistered office parks, Google’s plan embraced a newer model integrating tech offices with housing, transit, and public spaces. These brought with them concerns about gentrification and crowding, but after years of difficult negotiations with the developers and community groups, the city was nearing an agreement. “There was this sense of, ‘Oh my gosh, this is actually going to happen,’” Walesh says.

Instead, Covid-19 happened. Offices closed. Sharks hockey games—one of downtown’s big draws—abruptly ended. Beloved stores and restaurants were boarded up, their fates thrown into question. The same could be said for the much larger fate of the San Francisco Bay Area, home to large numbers of tech workers with the option and means to work from anywhere. Investors and startup founders, vowing to make their sabbaticals permanent, share their schadenfreude via tweet from the beaches of San Diego and Miami under the hashtag #techexodus. They have plenty of ammo: Companies including Pinterest, Dropbox, Twitter, and Yelp have charted out a hard pivot from swanky, perk-filled offices to embrace remote-working futures, while larger firms, like Facebook and Salesforce, have said they plan on more flexible schedules. And so, as her own staff pivoted to Zoom, Walesh couldn’t help but wonder about the big plans she had helped put in place for Google and San Jose. A remote work revolution was upon us. If people didn’t need offices anymore, did they need downtowns either?

One year later, Walesh is feeling something surprising: optimism. The city is—at least, in some imagined post-pandemic future—booming. Speaking earlier this month, she quickly ticked off roughly a dozen major developments that remain on track, a number of which had come into focus mid-pandemic. That didn’t factor in Google, which, after a six-month delay, will be up for a final city council vote in May. Altogether, the projects amount to millions of square feet of new office space and capacity for thousands of workers in downtown San Jose. And so, looking at decades of growth in the pipeline, Walesh was skeptical of the predictions of her city’s and region’s impending demise. The death of Silicon Valley, she believes, has been exaggerated. “It always is,” she says.

A surprising element of the pandemic is the endurance of tech’s real estate ambitions. Outside of San Jose, Google said in October that it would expand its existing office leases on the San Francisco waterfront by nearly a third, and would continue major new developments in Mountain View and Sunnyvale. The plans were conceived before the pandemic, but together they anticipate decades of growth. In an earnings call earlier this month, Ruth Porat, chief financial officer of Google’s parent company, Alphabet, said that spending on building and upgrading offices would be “normalized” in 2021. “We believe that in-office collaboration will be just as important to Google’s future as it’s been to our past,” CEO Sundar Pichai wrote in a recent email to staff. The company plans to give its employees the option to come into the office three days a week when they return beginning in September.

Facebook, meanwhile, has been more aggressively planning to let its workers toil from anywhere. In May, after long emphasizing the importance of engineering hubs, Facebook CEO Mark Zuckerberg floated a new goal of 50 percent remote work. The same month, Facebook unveiled a refreshed design for its new campus in Menlo Park, dubbed Willow Village, with space for 3,400 workers and 1,700 homes. The company continues to expand its presence in other Bay Area cities, and Zuckerberg told employees that Facebook still saw a use for all of its current and planned space.

So what gives? It comes down, in large part, to simple math: Silicon Valley’s giants are growing too fast to loosen their grip on physical space—even if, in some cases, they might want to. At the time of Zuckerberg’s remote work comments, internal surveys showed that most employees were eager to get back to the office, and Zuckerberg said the transition to remote work could take 10 years. Meanwhile, in the last year alone, Facebook grew its headcount by 13,000, mostly in product and engineering, putting the total number of employees at more than 58,000. Alphabet added 16,000 for a total of 135,000. Those figures don’t include thousands of contractors who keep their campuses running.

In the depths of the pandemic, “it’s easy to lose track of the bigger picture,” says Mark Muro, a senior fellow at the Brookings Institution who studies how cities attract high-tech development. For decades, Muro has been searching for evidence of decentralization—the spreading out of talent and wealth enabled by the so-called “death of distance.” The idea was that technology would make it possible for people to work from anywhere, making offices and cities less relevant. What we got was the opposite. Fast-growing tech firms clustered in a few cities, as did what Muro defines as “innovation” jobs in science and technology. Other cities grew, and technology companies did expand elsewhere. But tech hubs like San Jose and Seattle simply grew faster.

The latest wave of growth in those places was largely defined by Big Tech, but it builds on past advantages, explains Margaret O’Mara, a historian at the University of Washington who has chronicled Silicon Valley’s many presumed deaths since the 1950s. The tech companies of today grew out of the benefits of an unusual setting—universities, infrastructure, the wealth and talent of the local semiconductor industry (itself seeded by lucrative government contracts). Those new companies then applied the benefits of proximity to their workplaces. She points to early plans for Pixar’s campus, when founder Steve Jobs conceived of a single, centrally located bank of bathrooms. The point? Serendipitous innovation. (Other bathrooms would be built.) Companies like Google would come to set the agenda for a generation of offices in which built-in perks and services blurred the lines between work and life.

This emphasis on face-to-face collaboration turned these growing offices into centers of gravity themselves—nuclei for investors hunting for Google talent, marketing firms that fiddle with the Twitter logo, manufacturing firms that help Apple fabricate new prototypes. Then there are the startups, which emerge and draw from the big tech talent pool and often are absorbed back in. Despite perennial complaints about the Bay Area—its high costs and taxes, its social problems—that engine continues to hum along nicely. “It’s not just proximity to the big companies,” O’Mara says. “It’s proximity to the ecosystem that the big companies grew out of. The whole jam.”

The pandemic has accelerated changing ideas about proximity, but many were already afoot pre-pandemic, she adds. A natural consequence of success is that companies do spread out. They establish bases elsewhere—often choosing relevant academic hubs for specialized teams, and perhaps bigger hubs in major cities home to a broad swath of talent. (Hence the recent midtown Manhattan buying sprees of Amazon, Facebook, and Google.) Remote work was on the upswing prior to the pandemic, especially among smaller firms. For now, though, the decampments tend to be exceptions—often larger, older companies that need to slim down and cut costs. As San Jose’s Walesh notes, the most high-profile pandemic departure from her city—the headquarters of HP Enterprise to Houston—wasn’t much of a departure at all. The tech workers are mostly staying; the difference is where the taxes are filed.

With most people still working remotely, it’s hard to draw long-term conclusions, says Robert Sammons, director of Bay Area research for Cushman & Wakefield, a real estate brokerage. One thing that is known, he says, is that markets like San Francisco were overheated before the virus. Costs were little barrier to wealthy tech giants, but smaller companies were being pushed out, and even the largest firms had trouble finding enough space downtown. The tech campuses were changing too. They had become more dispersed, reflecting a desire to be closer to where people actually live. New proposals have included more housing and less office space, often in response to pressure from communities facing spiraling housing costs, but also reflecting the changing needs for the companies themselves. Google’s San Jose project is typical of that model: closer to where many of its workers live, and not every inch of space needs to hold a desk.

In the near term, it might be more prudent to focus less on who’s leaving for Texas, and more on the changes happening within the Bay Area. Workers given remote options may take them. But it’s hard to uproot yourself from your home, your work life, without a real tug to someplace else. Flexible work is another matter. You might figure a long commute is more tolerable if it’s done twice a week, and that it’s time to buy a bigger place with room for an office, or live in a preferred school district. With a company like Salesforce, it’s hard not to wonder what will become of its enormous tower, which came to symbolize the harnessing of San Francisco’s fate to tech—and what that will mean for the surrounding area. “How many climbing gyms can you put in a 61-story tower?” O’Mara asks. Individual neighborhoods may be reshaped depending on who comes back and what form that return takes.

The companies, for their part, say they’re still working that out. Maria Noel Fernandez, campaign director for Silicon Valley Rising, a labor group that works with facilities workers on tech campuses is skeptical that flexible work will mean much change for staffing. Employees will still want the perks: good food, day care, the ability to hop on a Wi-Fi-enabled bus and be in the office any time of day. For the most part, workers who keep tech campuses running have continued to be paid through the pandemic. (The notable exceptions have included layoffs of workers at Cisco and Verizon.) With a possible end to the pandemic in sight and more plans for growth, that’s led to cautious optimism that the plans for those spaces—and for the people who work within them—have not changed much.

In the meantime, it’s a matter of getting to the other side of the pandemic. “It feels so horrible right now,” says Walesh. Recently, the chief matter on her agenda was how to keep the small businesses in her neighborhood afloat—the ones that might employ four people and were carrying on unsure of what workers would be brought back by the tech companies in six months, let alone as part of multi-decade development plans. But Walesh was confident her neighborhood, at least, was poised to bounce back—better than ever, she thought. She’s retiring in March but says she has no plans to depart. “My husband and I are planning to age in place forever,” she says.

If Work Is Going Remote, Why Is Big Tech Still Building?

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