No one can argue that the disruptions of the past two years didn’t upend lives and routines, forcing companies across all sectors and their employees to quickly pivot to a completely different style of working. The tech industry was no exception.
Yet even as people had to rethink the way they worked, shopped, and socialized, essentially migrating all these activities to online platforms, the tech industry thrived. After all, companies and individuals needed the technology tools to conduct business and leisure safely — via Zoom and other meeting platforms and much more.
What has tech done with some of its profits? Continued to invest in real estate. While Microsoft, Meta (formerly Facebook), Google, Apple, and others saw the benefits to a fully remote workforce, the companies are still spending billions of dollars to expand office space. Several factors have contributed to this trend including the race to attract (and retain) the best talent and an overall hiring boom. According to one real estate company, tech companies leased 76% more office space in Q2 – Q4 2021 than it did during 2020.
A Return to the Office
While many companies have needed to rethink their return-to-office dates, thanks to the Omicron variant, most experts agree that a majority of businesses will expect employees to return to the office — even if on a hybrid basis.
There is a bit of a sticking point, however, with some employees saying they’ve been more productive and happier at home as they’ve navigated the past two years and found a better work-life balance. People cite cancelled commutes, more flexibility, an opportunity to use daytime lunch breaks to run an errand or complete other chores that otherwise ate into limited free time as reasons to remain remote — or at least working from home part time.
Many personnel, however, also say they’re excited to return to the office. They’ve missed those spontaneous watercooler chats, lunches with colleagues, and opportunities to brainstorm and collaborate with their teams — certainly easier to do in person than via the Brady Bunch squares of a Zoom screen.
Even those people who do want to return to the office, however, have expressed overwhelmingly a desire for flexible schedules working perhaps two days from home and three days in the office. This flexibility allows people to work at their own pace, focused and without interruption, while still taking advantage of shared team time to work on projects with their teams.
Some companies have incorporated different perks into their spaces, as they renovate or build new offices. Some buildings — like New York developer Silverstein Properties — have gone higher tech, adding a contactless entry system for its tenants at Manhattan’s 7 World Trade Center. Employees can use badges stored in their Apple Wallet to access the office and its amenities.
Other tech companies have incorporated amenities to create a work “experience” for their employees, developing destination spaces designed to facilitate culture- and team-building and support employees. Spaces include:
- Private offices and workstations purposed as collaborative spaces
- Library-type areas or smaller cubicles for more focused, concentrated work
- Hoteling areas instead of individual assigned stations
- Meditation rooms and other wellness offerings
- On- and off-site childcare
Seeking Bigger Spaces
As tech companies do find newer, bigger offices, they’re structuring them differently — with expansions that include more places for people to work together than sit in cubicles staring at screens all day. This approach makes sense, since — as many have argued — why spend the time commuting in traffic to sit at a computer? The office is evolving into a different use than what virtual platforms provide. More companies are viewing and using actual and virtual spaces as complements to each other.
Tech companies are spreading out — with Meta, for example, leasing 730,000 square feet in Midtown Manhattan while also adding office space in Austin, Bellevue, Boston, Chicago, and Silicon Valley. Google spent about $7 billion last year to expand and build offices and data centers in Atlanta, Boulder, Durham, London, Manhattan, Pittsburgh, and Silicon Valley. Microsoft added office space in Arlington, Atlanta, Hillsboro, Houston, Miami, and New York. Apple and Salesforce have also increased their office footprints.
The tech sector’s land search has been so extensive that it’s extended well beyond the traditional tech hubs like Silicon Valley and New York. Up and coming hubs include Atlanta, Dallas-Fort Worth, Chicago, Colorado Springs, Denver, and Phoenix.
In Phoenix, for example, tech leasing grew over 300% between 2020 and 2021. One CRE company found new leases, subleases, and renewals increased from 260,000 square feet in 2020 to over one million square feet between Q2 and Q3 2021. Vancouver saw tech leasing activity double to 561,000 square feet last year as did leases in Charlotte, from 71,000 to over 143,000 square feet.
The main reason companies give for expanding into other cities? Access to a wider and more diverse talent pool, more flexibility for future and current employees, and additional jobs and economic opportunities nationwide.
What About Smaller Tech Companies?
The smaller tech companies, whose pockets aren’t as deep, may need to compromise, choosing whether to embrace more flexible operating models or to invest in physical spaces. Some — like Twitter, Electronic Arts, and Epic Games — have expanded. Others, like Zynga, have cut back.
Ultimately, the future of office space within tech may very well come down to what employees want. For some, productivity decreases when they’re working at home whereas others thrive in that environment. Regardless, physical space — wherever it’s located — does have a significant impact on culture, comfort, and much more.
Did the pandemic “kill” the office vibe? No. It disrupted and changed the dynamic. And the dynamic will continue to evolve as companies and their workforces navigate the uncertainty of a future where COVID-19 may become endemic or remain epidemic. In either case, all companies — regardless of their sector — will need to continue planning to support flexible, agile workforces. In the case of the tech industry, at least for now, that flexibility includes adding, rather than subtracting, office space.
Are you a commercial real estate investor or looking for a specific property to meet your company’s needs? We invite you to talk to the professionals at CREA United: an organization of CRE professionals from 81 firms representing all disciplines within the CRE industry, from brokers to subcontractors, financial services to security systems, interior designers to architects, movers to IT, and more.
