Microsoft and Google promised to invest in these communities. Now they’re backtracking

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CNN Business
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When Microsoft President Brad Smith announced in February 2021 that the tech giant had purchased a 90-acre plot of land in Atlanta’s westside, he laid out a bold vision: The company, he said, would invest in the community and put it “on the path toward becoming one of Microsoft’s largest hubs” in the United States.

The announcement, which was met with enthusiastic coverage in local media, promised the construction of affordable housing, programs to help public school children develop digital skills, support for historically Black colleges and universities, new funding for local nonprofits, and affordable broadband for more people in Atlanta.

“Our biggest question today is not what Atlanta can do to support Microsoft,” Smith wrote. “It’s what Microsoft can do to support Atlanta.”

Two years later, Microsoft announced a series of cost-cutting efforts, including eliminating 10,000 jobs, making changes to its hardware portfolio and consolidating leases. As part of those moves, Microsoft put development of its Atlanta campus on pause this month, a spokesperson confirmed to CNN.

The decision to pause plans feels like a “broken promise” that caught many residents of the predominately Black neighborhood where Microsoft planned to build the campus off-guard, according to Jasmine Hope, a local resident and chair of her neighborhood planning unit.

“All the promises of, ‘We’re going to put a grocery store here, we’re going to bring jobs to the area, we’re going to have a pipeline between the schools and Microsoft to create jobs,’ all that seems like it’s out the window,” she told CNN. “But the consequences are still being felt by the neighborhood.”

A Microsoft spokesperson said the land is not for sale, “and we still aim to set aside a quarter of the 90 acres for community needs.” Microsoft will continue efforts “to create a positive impact in the region and be a contributing community partner,” the spokesperson added.

As the tech industry boomed in the United States throughout the past decade, cities across the country vied to become tech hubs. State and city officials competed for Silicon Valley giants to bring offices, data centers and warehouses to their communities in hopes of creating jobs and bringing other benefits that cash-strapped local governments might struggle to fund on their own. In perhaps the biggest example of this, 238 communities submitted bids in 2017 to be home to Amazon’s second headquarters, with some offering major tax breaks or even to rename land “city of Amazon.”

But now, a number of large tech companies are rethinking their costs, after years of seemingly limitless hiring and expansion. The reason: a perfect storm of shifting pandemic demand for online services, rising interest rates and fears of a looming recession. Much of the focus of this tech downturn so far has been on the long list of layoffs, but companies have also teased plans to dramatically reduce real estate expenses across the country.

Facebook-parent Meta, Microsoft, Salesforce and Snap have each shuttered offices or announced plans to cut back on real estate, according to recent corporate announcements, filings and local news reports. Some tech companies have said they’ll let leases expire or go fully remote. Meta CEO Mark Zuckerberg said his company is “transitioning to desk-sharing for people who already spend most of their time outside the office.”

The effect of those pullbacks can already be felt across the country, from New York City, where Meta reportedly scaled back its real estate footprint in the Hudson Yards neighborhood, to San Francisco, where some local businesses say they are facing the ripple effects of remote work and multiple tech office closures.

“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,” said Colin Yasukochi, the executive director of the Tech Insights Center at CBRE, a commercial real estate firm. In 2022, however, finance and insurance companies overtook the tech industry for the highest share of US office leases, according to CBRE’s data.

“Really, over the last couple of quarters, you’ve seen the tech industry decrease its leasing activity pretty significantly,” he added. “That’s really, I think, the biggest impact that you’ve seen regarding these layoffs and austerity measures: the leasing activity pullback by the tech industry.”

But the impact of that pullback is perhaps most stark in the communities with less robust tech hubs.

Quarry Yards, on Atlanta’s westside, has been a source of some promise and dashed hopes. In 2017, Georgia officials included the formerly industrial area on a list of sites where Amazon could build its second headquarters, as part of its pitch to the e-commerce giant. Amazon ultimately went with other cities, but four years later, another Seattle tech giant scooped up the land.

After the purchase, Microsoft described Quarry Yards as a place with “wide, tree-lined streets” but “broken sidewalks.” The area, Microsoft said, is “food desert with no grocery store, pharmacy or bank.”

The community, according to Hope, consists of “a lot of elderly, Black neighbors.” These residents, she said, have been worried about gentrification and displacement for years as housing prices and property taxes surge in the metro Atlanta region.

Jasmine Hope, PhD, Department of Rehabilitation Medicine, Motions Analysis Laboratory, Emory University.

“Just the announcement of Microsoft coming into town” brought new buyers and developers into the area, she said, exacerbating these longstanding concerns. Data from Zillow indicates average home values in the neighborhood surged more at a significantly faster pace between January 2020 and December 2022 than Atlanta as a whole.

But residents also had cautious optimism about the benefits Microsoft promised to the community, according to Hope. Now, the community is left with higher prices but none of the promised improvements or economic opportunities. “We’re not going to see any benefits and only deal with the consequences,” she said.

“It feels like the community is now going to be burdened by this,” she said.

Hope’s community isn’t alone in confronting the whiplash of Silicon Valley’s real estate pullback. Late last month, the city of Kirkland, Washington, said in a press release that it had been notified by Google that the company will not be proceeding with its proposed redevelopment project that initially aimed to bring a massive new campus to the city.

In a Kirkland City Council meeting held just last summer, representatives from Google teased a slew of community benefits from the build — including infrastructure improvements, such as the creation of bike lanes and pedestrian trails, as well as a more than $12 million investment in affordable housing. The planning process between Google and the city had been taking place since the fall of 2020.

“As we continue to shape our future workplace experience, we’re working to ensure our real estate investments meet the current and future needs of our workforce,” Ryan Lamont, a Google spokesperson, told CNN in a statement. “Our campuses are at the heart of our Google community, and we remain committed to our long-term presence in Washington state.”

Even San Francisco, whose fortunes are tied to Silicon Valley more than any other city, is showing signs of strain from the one-two punch of the shift to remote work and office closures.

Office vacancy rates in the city hit a record high of 27.6% in the final three months of last year, according to CBRE, compared to the pre-pandemic figure of 3.7%.

“The previous high was about 20%, after the Dotcom bust,” Yasukochi, of CBRE, told CNN. “We’re at the highest point that our records have shown.”

The rise of remote and hybrid work had been a major driver in tech giants cutting back on their real estate investments, Yasukochi said. Then came the recent cost-cutting measures.

Local business owners say they are now feeling the impacts.

An office sits vacant on October 27, 2022 in San Francisco, California. According to a report by commercial real estate firm CBRE, the city of San Francisco has a record 27.1 million square feet of office space available as the city struggles to rebound from the Covid-19 pandemic. The US Census Bureau reports an estimated 35% of employees in San Francisco and San Jose continue to work from home.

Mark Nagle, the owner of a 21-year-old Irish pub and restaurant in downtown San Francisco called The Chieftain, told CNN he has witnessed a “cascade of closures” of tech and corporate offices in his neighborhood recently — including the shuttering of a Snapchat office just down the street.

“We’re in a great location normally, we’re downtown,” Nagle said. But now his business is surrounded by several vacant retail spaces and multiple lots that are under construction.

The number of workers regularly coming into the area has not bounced back since the start of the pandemic, Nagle said, and neither has his business. Nagle said that in addition to workers stopping by for a drink at the end of their days, nearby companies would frequently hold events and meetings at The Chieftain, but that those have also largely dropped off.

At least six bars and restaurants in a two-block radius of him have shuttered in recent years, he said.

“You’re making do with less and it’s made the business so much more unpredictable,” he added. “And we’re one of the lucky ones that can keep their doors open.”

– CNN’s Clare Duffy contributed to this report.



Source : CNN