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Google’s Future of Work Plans are a Bright Spot for the Office Market

Google has always been a believer in the power of the office. And when giant, innovative companies like Google make waves regarding the workplace, whether it’s their design or strategies, many corporate occupiers follow suit. An example of this is open-plan offices. The roots of the much-maligned design go back further than many think, but Google popularized the concept in 2005 when they reinvented their HQ. Since then, open-plan offices have become the norm for many corporate occupiers, though that could change soon because of the intense backlash against them.

Because of Google’s outsized influence on office trends, it’s no surprise that landlords, occupiers, and investors are closely tracking their plans for the future of work. Since the pandemic started, Google has struggled like many companies to get employees back to their desks. Nevertheless, Google’s investments in office space and persistent push from top executives for a return to the office signal that the tech giant has not given up on the office by any means whatsoever.

In April, Google announced it would spend $9.5 billion in the U.S. on offices and data centers and open at least 12,000 new full-time jobs by the end of 2022. At the time, Google said the office investments would be spread out nationwide, going toward new construction and building out existing spaces. New spaces would include offices in Atlanta, Austin, and Portland as well as upgrades to their existing offices in Pittsburgh, New York, and Cambridge, Massachusetts.

‘More important than ever’

With the shift to remote work, it seemed odd that Google was investing billions into new office space. Google’s CEO Sundar Pichai has acknowledged the company would allow flexible schedules even with the significant investments. “It might seem counterintuitive to step up our investment in physical offices even as we embrace more flexibility in how we work,” Pichai said. “Yet we believe it’s more important than ever to invest in our campuses and that doing so will make for better products, a greater quality of life for our employees, and stronger communities.”

A lot has changed since April. Fears of a recession have led to a hiring slowdown among companies across the tech industry, including the big names like Amazon, Apple, and Meta. Alphabet Inc., Google’s parent company, is slowing down its recruiting efforts as well, Pichai told employees in July that, despite adding 10,000 employees in the second quarter, the company would slow hiring for the rest of the year. But despite the hiring slowdown, Google is still making big office purchases, unlike some other big tech companies.

Google will buy the Thompson Center for $105 million, a famous building in downtown Chicago. The building will be renovated, redeveloped, and turned into a new Google HQ. The company has more than 2,000 Chicago-based employees and has been seeking to expand its Chicago office presence for several months. Google is also in the market for 500,000 square feet of office space in Manhattan, according to a recent Savills tech tenant report.

The tech giant’s aggressive moves are a surprise given the recent office strategies of other big tech firms. To cut costs, Twitter is reducing its office presence in San Francisco, New York, and Sydney, Australia. Meta and Amazon are also slowing down planned New York City office expansions. The recent tech leasing slowdown has been unwelcome news for the office market because the tech sector has been such a prominent driver of office growth in the past decade. 

According to Savills, tech leasing is now at almost half of its pre-pandemic peak, falling for the third straight quarter. In Manhattan, of the 8.2 million square feet of office leases signed in the second quarter, the share of tech, advertising, media, and information tenants’ leases was 18.7 percent, down from 36 percent in the last quarter of 2019.

Yet, as other tech firms pull back, Google is still expanding. Savills’ Northeast Regional Research Director Marisha Clinton said that, despite the tech office slowdown, the requirements change often. “Companies change their requirements all the time based on anything happening in the economy, anything they decide upon based on their return-to-office policies,” Clinton said. “Things can change on a daily, weekly basis.”

The hybrid experiment

Google’s policies for return-to-office have also been closely tracked by people in the real estate industry. The company outlined its plans in March, transitioning to a hybrid model that would bring workers back to U.S. offices at least a few days a week starting the week of April 4th. Like other companies, Google had delayed its return to the office at the beginning of this year because of the Omicron variant. 

Pichai has been steadfast in pushing for a return to the office, but he’s also preached the benefits of flexibility. “We think it’s important to get people in a few days a week, but we are embracing all options,” he told the Wall Street Journal earlier this year. “I think we can be more purposeful about the time they’re in, making sure group meetings or collaboration, creative, collaborative brainstorming or community building, happens then.”

Despite Google’s flexible return-to-office approach, executives and managers have battled with employees about the return to work, much like other firms. Around two-thirds of Google workers said they were unhappy with the hybrid policy and 34 percent said they’re considering looking for another job because of it, according to a survey of nearly 1,100 verified Google employees from the professional social network Blind. Google has tried to make the transition to hybrid as smooth as possible, allowing employees to request exemptions for full-time remote work. They also dropped their vaccine mandate, though unvaccinated staffers must wear masks and get tested for COVID weekly if returning to the office.

Even though many Googlers are reluctant to return to the office, Blind’s survey showed only 27 percent said they planned to apply for a permanent remote work exemption. Only about 7 percent said they had already applied. One reason Google employees aren’t applying for the exemption is because the tech giant offers an internal tool that predicts potential pay adjustments based on location. Some employees could suffer a pay cut of as much as 25 percent if they work remotely from another city or state. Other Googlers said managers and execs have actively discouraged them from working remotely. “Some entire organizations have basically told people not to bother applying for remote work as it will be the exception rather than the rule,” a verified Google professional said on Blind.

Despite the dissatisfaction with the hybrid policy among some Google employees, the company may actually be doing better than some Big Tech counterparts. Another Blind survey revealed as many as 80 percent of tech workers are considering looking for another job, and more than half had actually applied for one. The workers in the survey included Meta, Apple, Twitter, and Uber employees. Google came in last on the list, with 59 percent of employees considering quitting, and the company had low scores in other areas, such as the percentage of workers who had contacted a recruiter, applied for a job in the past month, and had interviewed with a company.

Google’s more lenient remote work policy may have also been responsible for a major defection of a machine learning specialist from Apple. Ian Goodfellow, who was director of Apple’s machine learning division, left the company in May and cited Apple’s return-to-office policy as the reason. Goodfellow was quickly scooped up by Google, where he had worked before, and is now joining the firm’s DeepMind AI group. While not everyone at Google is getting a remote work exemption, prized employees like Goodfellow may have an easier time securing one.

The hybrid work plan for Google may be more flexible, but it also may be harder to manage. Google’s Chief People Officer, Fiona Cicconi, wants to implement a flexible policy where workers decide which days to come in. That sounds sensible, but it is also a major pain to manage. Google’s hybrid work experiment is brand new, and some employees claim it’s unfair, but no one knows if the policy will stick. That’s the case with every other corporate occupier trying hybrid work, too.

Playing the long game

Google’s strategies and plans for the future of work seem to be a bright spot for the office sector. Pichai seems committed to the office, as he has noted in numerous interviews and emails to Google staff. The reality is that Google has always been a rather fierce opponent of remote work, despite being a firm that makes many of the technologies that power working from home. Google’s shift to hybrid work signals that even they recognize the future of work will be different, but that doesn’t mean they won’t keep pushing for a return to the office as much as possible.

Some major tech firms like Airbnb have gone all-in on remote work, but that’s not the case for Google. Instead, Google continues to make big office purchases and seems to be on track to expand its office presence this year, despite fears of a recession and a recent hiring slowdown. Perhaps the best quote I’ve seen about the return to the office debate recently came from Douglas Linde, President of Boston Properties, the largest office REIT in the U.S. During the company’s second-quarter earnings call, Linde said the return to the office “is going to be a journey.” Then Linde said, “any industry experts that tell you they know how a business is going to use their space, or what they even think remote or hybrid work actually means in 2024, is grossly overestimating their expertise.”  Wise words, indeed.

Google prides itself on being a company that can predict anything, from what you want to search for online to how long it will take to commute to work to where the next earthquake will be. But if there’s one thing that’s completely unpredictable right now, it’s the future of the office. Even mighty tech firms like Google can’t collect enough data or devise the right algorithms to predict when a full return to the office will happen. But while some companies are pulling back on office investments and occupancy levels remain low in some places, it looks like Google is playing the long game and believes in the future of the office. For office landlords and investors, creating a silver lining in an otherwise brutal office market.

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