Unfulfilled investment promises of Google and Microsoft
2023.02.14 12:57
Unfulfilled investment promises of Google and Microsoft
By Kristina Sobol
Budrigannews.com – In February 2021, Microsoft President Brad Smith made the bold announcement that the tech giant had purchased a 90-acre plot of land in Atlanta’s westside: He stated that the company would put the community “on the path toward becoming one of Microsoft’s largest hubs” in the United States by investing in it.
The announcement, which received enthusiastic coverage in the local media, promised to build affordable housing, support historically Black colleges and universities, new funding for local nonprofits, affordable broadband for more Atlantans, and programs to help public school students develop digital skills.
Smith wrote, “Our biggest question right now is not what Atlanta can do to support Microsoft.” Microsoft can support Atlanta in this way.
Two years later, Microsoft announced a number of cost-cutting initiatives, including the elimination of 10,000 jobs, alterations to its hardware portfolio, and the consolidation of leases. A spokesperson for Microsoft confirmed to CNN that the company had put the development of its Atlanta campus on hold this month as part of those actions.
According to Jasmine Hope, a local resident and chair of her neighborhood planning unit, the decision to halt plans feels like a “broken promise” that caught many residents of the predominantly Black neighborhood where Microsoft planned to build the campus off guard.
She stated to CNN that “all the promises of, ‘We’re going to put a grocery store here, we’re going to bring jobs to the area, and we’re going to have a pipeline between the schools and Microsoft to create jobs’ seem to be out of the window.” However, the neighborhood is still feeling the effects.
The property is not for sale, according to a Microsoft spokesperson, “and we still aim to set aside a quarter of the 90 acres for community needs.” The spokesperson added that Microsoft will continue to work “to create a positive impact in the region and be a contributing community partner.”
Cities all over the country competed to become tech hubs over the past decade as the US tech industry grew rapidly. In the hope of bringing jobs and other benefits that cash-strapped local governments might struggle to fund on their own, state and city officials competed with Silicon Valley giants to bring offices, data centers, and warehouses to their communities. In 2017, 238 communities put in bids to be the site of Amazon’s second headquarters. Some of them offered substantial tax breaks or even proposed renaming the land “city of Amazon,” which is perhaps the most significant illustration of this.
After years of seemingly endless hiring and expansion, a number of large tech companies are now reevaluating their costs. The cause: a synergy of fluctuating pandemic demand for online services, rising interest rates, and concerns about a coming recession. The long list of layoffs has been the focus of this tech downturn so far, but companies have also hinted at plans to drastically cut real estate costs across the country.
According to recent corporate announcements, filings, and local news reports, Facebook’s parent company Meta, Microsoft, Salesforce, and Snap have all closed offices or announced plans to reduce their real estate investments. Leases might be allowed to expire or be completely remote, according to some tech companies. Mark Zuckerberg, the chief executive officer of Meta, stated that the company is “transitioning to desk-sharing for people who already spend the majority of their time outside of the office.”
From New York City, where Meta reportedly reduced its real estate footprint in the Hudson Yards neighborhood, to San Francisco, where some local businesses say they are experiencing the ripple effects of remote work and multiple tech office closures, the effects of those pullbacks are already being felt across the nation.
Colin Yasukochi, executive director of the Tech Insights Center at CBRE, stated, “Tech had pretty much gained market share to become the top industry leasing office space across the US, and that started back in 2012, 2013.” CBRE is a commercial real estate company. However, according to CBRE’s data, finance and insurance companies will overtake the tech industry for the highest share of US office leases in 2022.
He continued, “Really, you’ve seen the tech industry decrease its leasing activity pretty significantly over the last couple of quarters.” I believe that is the most significant effect that these layoffs and austerity measures have had on you: the tech industry’s slowdown in leasing activity.”
However, communities with less developed tech hubs may feel the pullback the most.
On the westside of Atlanta, Quarry Yards has offered both hope and disappointment. As part of their pitch to the e-commerce giant, Georgia officials included the formerly industrial area on a list of places where Amazon could build its second headquarters in 2017. In the end, Amazon went with other cities, but four years later, another tech company in Seattle bought the land.
Microsoft said that Quarry Yards had “wide, tree-lined streets” but “broken sidewalks” after the purchase. Microsoft described the region as a “food desert without a grocery store, pharmacy, or bank.”
Hope claims that there are “a lot of elderly, Black neighbors” in the community. She stated that these residents have been concerned for years about gentrification and displacement in the metro Atlanta region, where housing prices and property taxes are rising.
She stated that “just the announcement of Microsoft coming into town” brought in new developers and buyers, escalating these long-standing concerns. According to Zillow data, the neighborhood’s average home value increased significantly faster than that of Atlanta as a whole between January 2020 and December 2022.
Hope claims, however, that residents also expressed cautious optimism regarding Microsoft’s promises to the community. The community now has higher prices, but neither the promised enhancements nor economic opportunities have materialized. We won’t see any advantages and just arrangement with the outcomes,” she said.
She stated, “It seems like the community is going to be burdened by this now.”
The community of Hope is not the only one dealing with the shock of Silicon Valley’s real estate pullback. In a press release issued late last month, the city of Kirkland, Washington, stated that it had been informed by Google that the company will not be moving forward with its proposed redevelopment project, which had originally intended to bring a massive new campus to the city.
Google representatives teased a slew of community benefits from the build at a Kirkland City Council meeting in the summer, including an investment of more than $12 million in affordable housing and infrastructure improvements like the creation of bike lanes and pedestrian trails. Since the fall of 2020, Google and the city had been working together on a plan.
A Google spokesperson, Ryan Lamont, stated in a statement to CNN, “As we continue to shape our future workplace experience, we’re working to ensure that our real estate investments meet the current and future needs of our workforce.” We remain committed to our long-term presence in Washington state, as our campuses are at the heart of our community.”
Even San Francisco, whose fortunes are more closely linked to Silicon Valley than any other city, is experiencing strain as a result of the shift to remote work and the closing of offices.
According to CBRE, office vacancy rates in the city reached a record high of 27.6% in the final three months of last year, up from 3.7% prior to the pandemic.
CBRE’s Yasukochi told CNN, “The previous high was about 20%, after the Dotcom bust.” Our records show that we are at our highest point.
Yasukochi stated that the rise of hybrid and remote work had been a major factor in tech giants cutting back on their real estate investments. The recent cost-cutting measures followed.
Owners of local businesses claim to be experiencing the effects now.
Mark Nagle, the 21-year-old owner of The Chieftain, a downtown San Francisco Irish pub and restaurant, stated that he has recently witnessed a “cascade of closures” of tech and corporate offices in his neighborhood, including the closing of a Snapchat office just down the street.
Nagle stated, “We’re normally in a great location, we’re downtown.” However, his business is now surrounded by numerous under construction lots and vacant retail spaces.
According to Nagle, neither his company nor the number of workers regularly entering the area has increased since the pandemic began. According to Nagle, in addition to workers stopping by for a drink at the end of the day, nearby businesses frequently held events and meetings at The Chieftain. However, these events and meetings have substantially decreased.
He stated that at least six bars and restaurants within two blocks of him have closed in recent years.
He went on to say, “You’re making do with less, and it has made the business so much more unpredictable.” And we are one of the fortunate ones whose doors remain open.”
