What Twitter’s Move to Shutter Offices Signals for Big Tech

Aug 3, 2022 7:00 AM

What Twitter’s Move to Shutter Offices Signals for Big Tech

Companies are cutting costs by embracing remote setups, but what happens to the hubs they leave behind?

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Photograph: Igishevamaria/Getty Images

Twitter executives can currently travel the world by globe-trotting among the company’s 38 offices, from San Francisco, Sydney, and Seoul to New Delhi, London, and Dublin.

But not for much longer. On July 27, the company sent a memo to employees saying that one office in San Francisco would be shuttered; plans for a new office in Oakland, California, would be abandoned; and the future of seven locations was being carefully considered as part of a cost-cutting measure. Five other offices globally would definitely be downsized. It’s all part of an attempt to prepare the company for purchase by Elon Musk and tighten expenditure as much as possible.

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Twitter isn’t the first to cut down its office space. In early June, Yahoo was rumored to be getting rid of its 650,000 square foot San Jose campus, which was only completed at the end of 2021. Later that month, Yelp announced it was edging closer to being fully remote, and closing 450,000 square feet of office space across the United States. It was followed a week later by Netflix, who said it plans to sublease around 180,000 square feet of property in California as part of a broader company downsizing. That echoed Salesforce, which put up half of its eponymous San Francisco tower block for sublease in mid-July.

Twitter is likely to be one of many companies making the same decision, says Daniel Ismail, senior analyst at real estate research company Green Street. “Even for technology companies, which are some of the most profitable and valuable companies in the world, the office is still an expense—and one that may not be critical in the future.”

Big Tech companies have been at the forefront of some of the bigger issues that are throwing the future of the world of work in flux. From the ability to work remotely from anywhere, which Meta has embraced, to simply spending less time in the office and more time at home, Big Tech companies—by dint of the fact that they’re often developing the infrastructure and products that enable remote work—have been more willing to trial the concept ahead of traditional businesses. US Bureau of Labor Statistics data shows that 27 percent of American workers in “computer and mathematical occupations” worked remotely at some point in the last four weeks. “The pandemic showed that remote working was not only quite viable for many companies, but also something many employees really like, and could be productive doing,” says Ismail. It’s having an impact not just on rank-and-file workers, but stretching all the way up to the upper echelons of management. On August 2, the Financial Timesreported that Instagram boss Adam Mosseri would be moving to London, away from Meta’s headquarters in California. Mosseri follows colleagues like Javier Olivan, who is spending more time in Spain since replacing Sheryl Sandberg as chief operating officer, and Guy Rosen, vice president of integrity, who had planned to move to Israel.

Phil Ryan, director of city futures and global insight at real estate advisors JLL, says that although many Big Tech companies are drawing down their workspace portfolio, others are continuing to buy, making it a mixed market. Those purchases are often coming outside the traditional homes for Big Tech on the coasts, moving inland to places like the suburbs of Phoenix, Arizona. However, Ryan does acknowledge that there has been what he terms a “rationalization” of office space among some larger companies. “There are a lot of companies, particularly in the Bay Area, with multiple locations in a specific metro area that will consolidate that space,” he says.

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Consolidation has been particularly prevalent in San Francisco, where Mayor London Breed estimates one in three workers who used to be in the city have now gone remote. According to JLL, the office vacancy rate in San Francisco stood at 22 percent at the end of the first quarter of 2022. In Dallas, where other tech companies have created outposts, more than one in four office spaces are vacant.

That has huge ramifications for the broader real estate market in the US and abroad. Tech companies account for between one fifth and one quarter of all activity in the office sector space, according to both Ismail and Ryan. Their departure leaves huge amounts of office space unoccupied, with knock-on effects on the broader city and services set up to support those workspaces. “If you think about the jobs themselves, it has a big impact on the local economy,” says Ismail. “Tech jobs tend to create more office jobs around them—so it’s quite important for many office markets to have a robust tech sector.” As businesses disappear, so does the vibrancy of a city, with knock-on impacts on everything from tourism to food, drink, and entertainment.

The tech industry contributes $516 billion to California’s economy alone, according to one analysis by the Computing Technology Industry Association, with 3.4 million people employed in the tech sector across the US to support the tech professionals who work on developing software and architecting networks.

And while Twitter says that its office shifts have “no impact” on jobs, that’s only true to a point. All those who support office workers, from cleaners to security staff to caterers, lose out. “It worries me that smart people can’t come up with a way to make hybrid working work, because other places seem to be doing it,” says one Twitter employee, who asked not to be named because they are not authorized to speak to the press. “It’s people who staff the perks that bring people to the office who are going to be hurt the most.”

Big Tech’s impact looms large over the rest of the world. “Over the span of at least a decade, tech has been the leading single driver of leasing activity throughout the US,” says Ryan. But that’s changing. While he’s still analyzing the data, Ryan suggests the second quarter data indicates that may be changing. “Tech and finance were basically tied,” he says, “which is a little unusual, and speaks to the fragility of the market that we’re still in right now.”

Ryan believes that Big Tech will continue to lease office space at significant levels, and will remain one of the major contributors to real estate activity for years to come. But it’ll be in markets that perhaps aren’t traditionally equated with the industry. “We’re going to continue to see this focus on places like River North in Denver, East Austin, Wynwood in Miami—not really traditionally corporate or even active areas at all that are becoming the biggest bright spots in the office market, and that’s almost entirely a result of tech-led investment,” he says.

That comes at the expense of the more traditional areas in and around Silicon Valley, which have historically relied on the tech sector. But rather than a one-and-done overhaul, Ismail equates the change in how we work to a “slow bleed.” “It won’t happen all at once,” he says. “It’ll happen over time—and that’s what we’re seeing as time goes on.”

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