Big tech makes a big bet: Offices are still the future
By Kellen Browning
Early in the pandemic, when shops along Mill Avenue in downtown Tempe closed their doors and students at nearby Arizona State University were asked to go home, the roar of construction continued to fill the air. Now, gleaming in the sunlight and stuffed with amenities, towering glass office buildings have sprouted up all over the Phoenix metropolitan area.
Arizonans are about to have new next-door neighbors. And they include some of the technology industry’s biggest names.
DoorDash, the food delivery company, moved into a new building on the edge of a Tempe reservoir in the summer of 2020. Robinhood, the financial trading platform, rented out a floor in an office nearby. On a February morning, construction workers were putting the finishing touches on a 17-story Tempe office building expected to add 550 Amazon workers to the 5,000 already in the area.
The frenetic activity in the Phoenix suburbs is one of the most visible signs of a nationwide recovery in commercial office real estate fueled by the tech industry, which has enjoyed unchecked growth and soaring profits as the pandemic has forced more people to shop, work and socialize online.
Big tech companies like Meta and Google were among the first to allow some employees to work from home permanently, but they have simultaneously been spending billions of dollars expanding their office spaces. Doubling down on offices may seem counterintuitive to the many tech workers who continue to work remotely. In January, 48% of people in computer and math fields and 35% of those in architecture or engineering said they had worked from home at some point because of the pandemic, according to the Bureau of Labor Statistics.
But companies, real estate analysts and workplace experts said several factors were propelling the trend, including a hiring boom, a race to attract and retain top talent and a sense that offices will play a key role in the future of work. In the last three quarters of 2021, the tech industry leased 76% more office space than it did a year earlier, according to the real estate company CBRE.
“I think there are a lot more companies that are saying, ‘You’re coming back to work’ — it’s not ‘if,’ it’s ‘when,’” said Victor Coleman, CEO of Hudson Pacific Properties, a real estate investment group. “The reality is that most companies are currently working from home but are wanting and planning to come back to the office.”
Google said early last year that it would spend $7 billion on new and expanded offices and data centers around the country in 2021, including $2.1 billion to buy a Manhattan office building by the Hudson River, and growth in Atlanta; Silicon Valley; Boulder, Colorado; Durham, North Carolina; and Pittsburgh. Google also said in January that it would spend $1 billion on a London office building.
Offices “remain an important part of supporting our hybrid approach to work in the future,” Google said in a statement.
During the pandemic, Microsoft has expanded in Houston; Miami; Atlanta; New York; Arlington, Virginia; and Hillsboro, Oregon. The company was growing to accommodate the many new employees it has hired over the last two years, said Jared Spataro, the vice president of modern work for Microsoft.
“The pandemic, I think, has just changed people’s perception of what’s possible in terms of geographic distribution,” Spataro said.
In April, Apple said it would build a campus near Raleigh, North Carolina, and has added space in San Diego and Silicon Valley. The company, which has battled with its employees over its plan for a majority of workers to return to offices most days each week, referred to its April news release about expansion but declined to comment further.
The industry’s search for land has been so extensive that it has surged through longtime tech hubs like Silicon Valley and into areas not traditionally known for their tech scenes.
In Phoenix, for instance, tech leasing activity grew more than 300% from mid-2020 to mid-2021. New leases, subleases and renewals in the area totaled more than 1 million square feet from April through September last year, up from about 260,000 square feet a year earlier, according to CBRE.
Other locations not normally associated with tech also saw growth. In Vancouver, British Columbia, tech leasing activity doubled in growth in mid-2021, to 561,000 square feet from 268,000, as did activity in Charlotte, North Carolina, to 143,000 square feet from 71,000.
Amazon has been one of the most prolific in expansion, announcing in 2020 that it would increase its white-collar workforce in half a dozen cities. In Phoenix, its logo is ubiquitous, and it will occupy five floors in the new Tempe office building expected to be finished this year.
Holly Sullivan, Amazon’s vice president of economic development, said adding to its regional hubs allowed the company “to tap into wider and more diverse talent pools, provide increased flexibility for current and future employees, and create more jobs and economic opportunity across the country.”
In Tempe, the two-floor WeWork coworking space at the Watermark, one of the premier office spaces, was buzzing with activity on a recent afternoon. Upstairs, Amazon has rented an entire floor.
Below, amid leafy plants and colorful lighting, employees at tech startups clacked away on MacBooks and sketched on whiteboards. Many said it had become more crowded in recent months, and more companies were renting the small office spaces within the WeWork.
Sam Jones, a co-founder of a nonfungible token startup, Honey Haus, said his company had been renting a four-person space within WeWork for $1,850 a month since October.
“I am just way less productive at home,” Jones said. “People are definitely, I think, realizing that physical space just has something special to it.”