In Silicon Valley, the transition from offices to smart working is not painless

In Silicon Valley, the transition from offices to smart working is not painless

In Silicon Valley

Currently Twitter executives can travel around the world working from any of the company's 38 offices, spread across San Francisco, Sydney, Seoul, New Delhi, London, and Dublin.

But things are destined to change soon. On July 27, the company sent a note to employees communicating the closure of an office in San Francisco, the abandonment of plans for a new space in Oakland, California, and that the future of seven locations is underway. careful evaluation as part of a cost reduction. The company also announced the downsizing of an additional five offices globally. The decisions are part of an attempt to prepare the company for Elon Musk's acquisition and to reduce expenses as much as possible.

Common trend Twitter is not the first company to give up some of its offices. In early June, according to rumors, Yahoo was on the verge of moving away from its 60,000-square-foot California campus in San Jose, which had been completed in late 2021. In the same month, Yelp announced that it was close to introducing the total smart working for all its employees and that it would have closed over 40 thousand square meters of offices in the United States. A week later it was Netflix's turn, which said it wanted to sublet more than 15,000 square feet of office space in California as part of a larger corporate downsizing. Similarly, in mid-July Salesforce sublet half of its San Francisco skyscraper.

According to Daniel Ismail, an analyst at real estate research firm Green Street, Twitter is likely to follow the path many other companies have taken in the industry: "Even for tech companies, which have some of the highest profits and valuations in the world, the office is still an expense, which may no longer be essential in the future."

On some of the major issues that are rapidly changing the future of the world of work, the big tech companies have found themselves at the forefront. From the possibility of working remotely from anywhere, adopted by Meta among others, to the tendency to spend less time in the office and more at home, big techs have shown themselves willing to experiment to a greater extent and in advance than traditional companies, also by virtue of the fact that it is often these companies that develop the infrastructure and products that make remote work possible. In the United States, data from the Bureau of Labor Statistics shows that 27 percent of American workers with "computer and math occupations" have worked remotely over the past four weeks. "The pandemic has shown that remote working is not only feasible for many companies, but that many employees really enjoy it and can be productive," says Ismail. It is not only the workers who benefit from it, but also the top management. On August 2, the Financial Times reported that Instagram boss Adam Mosseri will move to London and will not work from Meta's California headquarters. Mosseri follows in the footsteps of colleagues such as Javier Olivan - who spends more time in Spain since replacing Sheryl Sandberg as Meta's number two - and Guy Rosen, the company's security manager, who planned to move to Israel.

According to Phil Ryan of real estate consultancy Jll, while many technology companies are reducing the number of their workspaces, others continue to buy properties. New purchases often concentrate away from the places where big techs traditionally establish their headquarters, moving from the coasts of the United States to areas more inland in the country, such as the suburbs of Phoenix, Arizona. Ryan, however, acknowledges that some large corporations have put into practice what he calls a "streamlining" of office space.

This consolidation trend is particularly prevalent in San Francisco, where Mayor London Breed estimates that one in three people who previously worked in the city is now in smart working. According to Jll, the vacancy rate in San Francisco was 22 percent at the end of the first quarter of 2022. In Dallas, Texas, where several technology companies have opened offices, more than one in four offices are vacant. br>
Chain reaction The phenomenon has great repercussions on the real estate market in the United States and abroad. According to Ismail and Ryan, tech companies are responsible for between twenty and twenty-five percent of all business in the office sector. Their renunciation of working spaces means that there are a huge number of unused offices, triggering a domino effect on the cities and on the services created to support the spaces. "If you think about the jobs themselves, there is a strong impact on the local economy - says Ismail -. Jobs in the tech sector tend to create more white-collar jobs, so for many markets in the office sector. it is very important to have a robust technological sector ". When companies withdraw from their offices, a city loses vitality, with full effects on all sectors, from tourism to catering, passing through entertainment.

According to an analysis by the Computing technology industry association, the 'The technology industry contributes $ 516 billion to the economy of California alone, while in the United States the technology sector employs 3.4 million people in support of software development and network architecture professionals. br>
Twitter claims its new office policy will "have no impact" on jobs. However, the company's statements represent half the truth. In fact, all the people who support those who work in the offices, from cleaners to security personnel and catering, will lose. "The fact that smart people can't find a way to make hybrid work work worries me, because it seems other places are doing it," says a Twitter employee, who asked to remain anonymous because he doesn't have permission to talk to the press.

According to Ryan, big techs will continue to rent offices at significant levels and will remain one of the main factors contributing to real estate activity in the years to come, even if in markets that are traditionally not associated to the technology sector. The areas in and around Silicon Valley, which historically rely on the technology sector, will pay the price. Ismail, however, is convinced that the change will be gradual: "It will not happen all at once - he explains -, but over time".

This article originally appeared on UK.

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