Expensive tech campuses were designed to attract talent, but what happens when the best benefit is working from home?
By Heather Kelly Oct. 2, 2020 at 3:00 a.m. PDT
SAN FRANCISCO — For years, they weren’t much to look at. The Silicon Valley tech companies famously started in garages eventually upgraded to low, beige office parks that bloated outward as more employees were hired. Bland on the outside, lucrative and increasingly crammed with college-like perks on the inside, they were the standard tech headquarters for years.
Over the past decade, however, tech giants have invested in real estate and proper headquarters. The kind of buildings and campuses that draw attention and lure thousands of employees to commute five days a week to work inside their open floor plans. Generous on-site benefits give those workers little reason to leave for a meal, a trip to the bank or even to get dry cleaning.
Forty five miles south of San Francisco, Apple has its still-new $5 billion, 175-acre, circular “spaceship” campus in Cupertino. Amazon placed giant, glass-dome greenhouses at the base of its main tower in downtown Seattle, part of a $4 billion city campus. Enterprise software company Salesforce changed the San Francisco skyline with its massive billion-dollar skyscraper, topped with moving animations like dancing silhouettes and the Eye of Sauron. Also in Silicon Valley, the stretch of land between San Jose and San Francisco, Google is building the circus-tentlike 595,000-square-foot Charleston East building in Mountain View, which is expected to be completed next year. And by a marsh on the bay in Menlo Park, Facebook erected boxy Frank Gehry buildings topped with trees at around $300 million each, according to Build Zoom.
In March, the commutes stopped. Many tech company offices in the United States have been fully or partially closed since the coronavirus pandemic took hold here, and some of the largest like Google and Facebook have told employees they can continue to work remotely until at least summer 2021. A handful, including Twitter and Slack, have gone so far as to say working from home, even in another part of the country, will be an option for some or all employees indefinitely.
Google CEO Sundar Pichai said the company was looking at more flexible hybrid models of in-person and remote work in a recent interview with Time magazine, after an internal survey found that 62 percent of employees wanted to come back to work in the office just “some days.” Even Apple seems to be embracing the shift, although still unofficially. CEO Tim Cook said that 10 to 15 percent of employees have come back to the office but that things won’t entirely return to the way they were. A recent video presentation of its latest gadgets showed a largely empty campus.
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It is too early to know what trends will stick. It could all depend on what makes the next generation of employees happy.
“Amazon and other tech companies are competing for, not average talent, but the best of the best talent. The talent that is going to be producing patents or intellectual property that is going to be the next iPhone or next Alexa or next Netflix,” said Mike Grella, founder of Grella Partnership Strategies and a former Amazon executive who works in economic development.
While perks like YouTube’s giant indoor slide, Google’s college-like campus complete with bikes and Facebook’s free food were appealing in the past, covid-19 has changed what may employees expect.
Housing costs in Silicon Valley and Seattle are still some of the highest in the country, and strict zoning laws — plus surrounding bodies of water — have made it nearly impossible to build enough new homes to keep up with the demand exhausted by tech companies. To compensate, tech employees receive high salaries on top of the generous perks, and sometimes even get help from the companies finding housing.AD
During the pandemic, some tech workers found a way to pay less. They have moved from major cities to suburbs, or even away from the states where their companies are based. Their decisions are often driven by the desire for more space and a lower cost of living, but also wanting to be closer to family. Once people get used to having more flexibility with where they live, it could be hard for tech companies to enforce old norms like coming in and meeting in conference rooms or chatting over low cubicle walls.
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Some tech companies have changed their real estate plans. Pinterest paid an $89.5 million termination fee for the 490,000-square-foot office space it was planning on moving into in San Francisco. The company, which is keeping its current offices in the city, said covid-19 was making it possible to have a more distributed workforce.
Twitter is subleasing 100,000 square feet of its downtown San Francisco office space after the company announced employees could choose to work from home permanently.
Companies have long cycled in and out of the Bay Area, but it’s too early to tell if their decisions are part of a larger shift or just a blip.
“Are we still going to see the Bay Area create new companies to take the place of the ones that have left?” said Nick Josefowitz, chief of policy at SPUR, an urban-planning think tank in the Bay Area. “We’ve taken that for granted for a while. We can’t take for granted anymore that we’re going to be the center of this tech ecosystem.”AD
Many of the tech giants are still pushing forward with existing real estate expansions, including a new generation of campuses that goes in the opposite direction. They’re the modern version of company towns, mixing public spaces, stores and housing with traditional offices. If you live next door to the company where you work, the remote work decisions are suddenly less complicated.
Willow Village is the quaint-sounding name of Facebook’s planned 59-acre campus in Menlo Park that has been at least three years in the making. What’s notable about the plan, which is still in the review phase, isn’t how much is dedicated office space — currently 1.25 million square feet — but how much is for other uses. There’s a grocery store and pharmacy, a hotel, an elevated park, a “town square,” bike paths, stores, a visitors center and a dog park. There are also plans for up to 1,735 units of housing, about 20 percent of which would be made available at “below market rates.”
“Half our employees could be remote within the decade. We’re also growing fast. We continue to invest in additional office space around the world and remain committed to our Bay Area offices,” said Chloe Meyere, a Facebook company spokesperson.AD
Google is attempting something similar in Mountain View, with a new proposal for a 40-acre “live-work” neighborhood called Middlefield Park. It envisions a mix of office space, stores and up to 1,850 units of housing with ample green areas where non-Googlers would be allowed, as well. Construction is expected to begin with the housing in 2022, and the first phase could be completed between 2025 and 2026.
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Farther south in San Jose, the company is working on plans for its 80-acre Downtown West mega campus, which would include up to 7.3 million square feet of office space and around 4,000 housing units, along with the mix of public spaces and parks that go hand-in-hand with these proposals. Construction could start in the next few years, pending city approval.
These kinds of campuses could help the companies get more control in their communities, while also offering benefits for non-employee residents. With claims of community connections and environmentally friendly design, they’re also an attempt to appeal to the values of potential employees, Grella said.
“Part of it is that appeal to a millennial sense of wanting open space,” Grella said. “There’s a strong bend among millennials in caring about sustainable development and sustainable place-making and open spaces. I think that is a very intentional appeal to those employees.”
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Amazon changed how people think about headquarters by forcing them to think about headquarters nonstop for much of 2018. The company launched a nationwide search to find a location for a second corporate base, which would cost $5 billion and employ up to 50,000 people. Dubbed HQ2, the search quickly became a media-ready contest among cities trying to woo the company and its promise of economic revitalization with tax breaks and other incentives.
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The dramatic buildup ended with a fizzle after Amazon chose Long Island City for half of the promised campus, then pulled out after objections from community groups and lawmakers over nearly $3 billion in planned tax breaks for the company.
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The idea of diversifying office locations stuck for the company, which has gone ahead with plans for a base in the Crystal City area of Virginia. And diversifying locations is becoming more appealing for other tech companies, as talent scatters during the pandemic.AD
Many of the major tech players are investing in smaller “hubs,” or big offices outside their base locations. Facebook just purchased outdoor company REI’s 400,000-square-foot Bellevue, Wash., campus for $367.6 million. Amazon in August announced plans to hire more people at offices in Dallas, Detroit, Denver, New York, Phoenix and San Diego. It is also expanding closer to home, with newly announced plans to add 25,000 employees in Bellevue, a Seattle suburb. Google is opening new offices in Houston and recently expanded in Atlanta, Chicago and Madison, Wis.
Will Hunsinger, CEO of Silicon Valley executive-recruiting company Riviera Partners, says he has clients trying to recruit talent from the Bay Area by selling the benefits of their less-obvious locations, like Austin; Boulder, Colo.; and even Bozeman, Mont.
In general, the tech companies he works with are on the fence about going all-in on remote work. It could be a tempting perk to lure talented employees, but most companies still prefer to have people in the offices, he said. Smaller organizations might try it first, because it could save them money on real estate while being perceived as a perk. Companies can also offer lower salaries to employees living outside of costly coastal cities.AD
“For the senior executives, proximity is more important. For the individual or more junior folks, they’re the ones who probably are going to gain ground at the end of the day,” Hunsinger said.
In the communities already forever altered by their presence, by soaring housing prices, gentrification and investments in infrastructure, the future of these headquarters is complicated. If they stay and grow, problems of inequality, housing shortages and gentrification could be exacerbated. If the companies pull out, they could take a piece of the local economy with them.
“Who’s impacted the most, oddly it’s not the high-skilled service worker, it’s the property owners, the small business,” said Adie Tomer, a fellow at the Brookings Institution. “They can take a real hit, that can create a negative cycle.”
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The housing issues in these cities aren’t going away anytime soon, even if local and state governments are able to loosen existing zoning laws. That creates an opportunity for other cities with more ample supplies of housing in dense neighborhoods, office space and access to nature. However, those same cities could end up in similar situations to Silicon Valley and Seattle if they don’t plan for housing ahead of time.AD
“There becomes this symbiotic, parasitic relationship between the companies and the cities, they really do rely on them at that scale,” Tomer said.
The companies and their employees are an important tax base for the cities where they are located. While the cost of some housing would go down, the cost of delivering the social services the communities rely on would not, said SPUR’s Josefowitz.
“What you’re going to see is there’s just generally less tax revenue to invest in essential social services that our communities rely on,” Josefowitz said.