When it became clear in May that the COVID-19 pandemic would not be going away in the immediate future, major tech companies including Facebook and Twitter made their work-from-home policies more flexible. Although remote work is necessary during the pandemic, why might these companies, many of which are known for amenity-filled headquarters, give up in-person work environments in the long term? The Daily spoke with Santa Clara County officials about the positives and negatives of the shift to remote work, as well as how they anticipate that it will affect the region.
In mid-May, Facebook announced that anyone who can work remotely is permitted to do so through the end of the year. Google and Zillow made similar announcements, and other companies including Amazon and Microsoft are allowing their employees (in Amazon’s case, specifically those working at the company’s headquarters) to continue working from home until at least October. Jack Dorsey, CEO of Twitter and Square, made the most striking statement of the bunch, announcing that employees at both companies who can work from home productively will be allowed to do so permanently if they wish. Other major companies embracing the work-from-home model include Shopify, Upwork and Coinbase, which are shifting toward “digital by default” and “remote-first” structures. For them, remote work will be the standard, and employees will only meet in person when necessary.
Although the shift toward working from home will likely be felt across the country, tech companies with Silicon Valley headquarters have been some of the most vocal about their remote futures. The push for remote working options has been a long time coming in the region, as issues such as bad traffic and high real-estate prices make on-site work incredibly inconvenient for employees in the technology sector. In fact, a survey at Facebook this spring found that many of the company’s employees would prefer to work from home.
“We asked our employees about their experiences working from home,” wrote CEO Mark Zuckerberg in a Facebook post on May 21. “More than half of them say they’re at least as productive as they are in the office. About 40% are interested in full-time remote work, but more than 50% want to get back into the offices as soon as possible. Of the people who want to work remotely, around 75% said they might move to another place.”
For the moment, Facebook is only letting experienced employees in jobs that are compatible with remote work apply for more prolonged absence from their Menlo Park campus. For the future, however, Zuckerberg announced that he expects up to half of the company’s 48,000 employees to be working remotely within the next 10 years.
If more companies follow this trend, the Santa Clara County community will likely see some benefits in a society centered around working from home. A recent report by the Joint Venture Silicon Valley Institute for Regional Studies stated that, “[in recent years] traffic has become an increasingly troublesome issue affecting quality of life in Silicon Valley. The amount of time wasted due to long commutes and traffic delays affect the everyday lives of Valley residents.” One silver lining of the pandemic has been the decreased need for transportation. As stated in the report, freeway vehicle miles traveled (VMT) in Silicon Valley and the Bay Area were lower this spring than any other year in the 17-year data set. In the Bay Area, this decline led to a 63% decrease in transportation-related injury crashes on highways between March and May. Additionally, air travel through the San Francisco and Mineta San Jose International Airports decreased significantly throughout the spring.
Following a similar trend, the daily hours of traffic delay were lower in April than at any other time in a data set of almost 20 years — average daily freeway delays in Silicon Valley decreased by 94%. If companies make working from home more accessible, fewer employees will need to commute, and as a result, those that still need to do so will likely face less traffic. People can use the time they normally spend commuting to look after children, care for family members and get more work done.
The decline in transportation has also positively impacted the environment.
“We’ve seen our animal population flourishing because there are less car strikes,” said Cindy Chavez, president of the Santa Clara County Board of Supervisors, in an interview with The Daily. The county is also experiencing much cleaner air, Chavez added. The Joint Venture Silicon Valley Report states that the decrease in VMT will lead to decreased greenhouse gas emissions in the region, especially given that Silicon Valley uses relatively clean electricity sources, so overall emissions are very dependent on transportation. In more concrete terms, emissions could decline by between 0.6 and 1.6 million metric tons of carbon dioxide equivalent this year. Fine particulate matter emissions have declined as well, increasing visibility and likely contributing to the improvement in the Silicon Valley Air Quality Index this spring, as compared with the same period in 2019.
Another advantage of working primarily from home is that employees will have more freedom in choosing where to live, potentially opting to move farther away if they do not need to commute as often. Companies will also have more flexibility in their hiring if they are not limited by distance; they will be able to draw from a larger talent pool, potentially creating jobs in new areas and diversifying their workforces. Facebook, for example, intends to begin hiring engineers who live within four hours of an office. The company is building offices in locations such as Denver, Dallas and Atlanta with the reasoning that not everything needs to be quite as centralized as it was previously. Although they were already moving in this direction, the pandemic has accelerated the process. The flexibility of working from home may be an important factor as people entering the technology sector look for jobs.
“Talented people in the technology sector have a lot of options as to where they go … Saying you can telework if you want or work remotely is attractive to some of these, particularly younger, folks,” said Santa Clara County Assessor Larry Stone in an interview with the Daily.
The shift to remote work is likely to have some negative consequences as well. The Santa Clara County assessment roll hit $516 billion in 2019, a 6.79% increase from the prior year, as reported by San Jose Inside. In 2018, the roll had reached $483.2 billion, which was a 7.34% increase from 2017. Tech companies make up a significant portion of this roll, which is the total net assessed value of all real and business property in the county. Apple and Google alone made up almost 10% of the increase from 2017 to 2018 – the assessed value of Google properties increased by $759 million that year. According to the 2018-2019 Annual Report from the Office of the Santa Clara County Assessor, Apple was the largest taxpayer in the 2017-2018 year and paid $56,182,029, while Google was the third largest and paid $49,501,623.
During the “dot-com boom” from 1995 to 2001, real estate developers often leased space to unsuccessful tech startups, which led to instability and a peak in office vacancy in 2009 at 25%. Since then, however, companies such as Google, Apple, Samsung, LinkedIn and Nvidia have bought land and buildings rather than leasing, making the office market more stable in the event of a future recession.
The growth of tech companies has aided in decreasing the unemployment rate from 11.2% in 2010 to 2.3% when the 2018-2019 Report was released. In fact, around four million jobs in the Bay Area depend on the technology industry. Before the pandemic, these employees required a lot of office space; many tech companies were constantly expanding, leading to increases in the assessment roll.
“Apple’s $1.5 billion increase [in 2018] was attributed to the costs associated with new equipment and fixtures, along with the partially completed construction of the Apple Park (Spaceship) campus,” states the 2018-2019 Report. “Apple also purchased several existing office buildings. Google’s $1.5 billion increase was primarily due to real property acquisitions in San Jose and Sunnyvale.”
If more employees begin to work from home, however, this expansion might slow down.
“If I’m a company that’s leasing space and I’ve got an option to expand … and now I’m inserting a teleworking component here where some or all of my people are now going to telework, I’m not going to exercise that option for additional space,” Stone said. “Now you can grow and not lease a lot of space,” he added. “Over time, that is going to impact the value, I would think, of office buildings.” A decrease in value means a decrease in property taxes, which, in turn, means less tax revenue coming from these large companies to fund public services, including “K-12 school and community college districts as well as local government agencies, including cities, the County, and special districts,” as stated in the report.
Even so, increased office availability does not necessarily mean permanently empty office space; bigger companies leaving the market could create “opportunities … for smaller businesses that want to be able to stay here and not start in Colorado,” Chavez said. Also, social distancing needs may mean that buildings will begin to occupy more space, rather than less.
“Buildings will be reconfigured back to cubicle-type arrangements, which means certainly a reduction in the number of employees the space will accommodate,” Stone said. “One of the advantages of the open office environment is they can get more people in than they could in a cubicle environment. Now that’s been flipped.”
Although the reduced presence of these companies may create some opportunities, the absence of their employees will likely be felt by businesses in the county. A recent New York Times article about the effects on Manhattan of employees at companies such as Barclays, JP Morgan Chase and Morgan Stanley working remotely stated that bodegas, restaurants, bars and grocery stores, especially those in areas that are surrounded by office buildings, often depend on these employees to remain afloat. Chavez said, however, that understanding the consequences of the shift for businesses in Silicon Valley “has been a little challenging, because for some of them, it may be the location they’re in”; there are “so many other variables” to consider.
Although housing in Silicon Valley is incredibly expensive, tech workers leaving will not necessarily make the region more affordable for those who stay. The 2018-2019 Annual Report stated that “[the] peak of the apartment market appears to have passed.” After rents in the San Jose metropolitan area increased 52% between 2010 and 2018, they have finally reached “a level that is unsustainable for a healthy local economy,” and the market is beginning to show signs of “price fatigue.” The problem of affordable real estate may therefore be solved, or at the very least, improved, independently of tech employee migration.
Although it is still too early to see the full extent and consequences of the transition to remote work, it is unlikely that the shift will be absolute; not all companies have been as quick to embrace working from home as Facebook and Twitter. As peer companies explored remote options in May, Apple was making plans to bring more employees back to its offices. The company sent workers home relatively early on with its March 13 announcement that it was “moving to flexible work arrangements worldwide … That means team members should work remotely if their job allows, and those whose work requires them to be on site should follow guidance to maximize interpersonal space.
In May and early June, Apple began bringing back workers such as hardware and software engineers who have more difficulty working from home, as well as some members of their executive team, reported Bloomberg. Although Apple is a hardware-focused company and requires more hands-on work than Facebook or Google, which are more software-based, it serves as a reminder that many companies continue to value face-to-face meetings and in-person product development.
Stone told The Daily that when people are working from home, “productivity goes down. That’s why IBM, the godfather of teleworking, eliminated almost all of it about three years ago.” International Business Machines Corporation (IBM), which released a report entitled “Challenging the modern myths of remote working, the evidence for the upside of teleworking” in 2014, touted their modern business model with over 40% of their employees working remotely. In May 2017, however, the company brought them all back, giving employees the choice between working in a regional office or leaving the company.
IBM was not alone in realizing that the work-from-home model is not necessarily as productive as people once thought; Yahoo, among other companies, made a similar move in 2013 and brought its teleworkers back to the office. There are certain dynamics that exist in an office that simply cannot be achieved through a screen. Random encounters and hallway conversations are key to effective collaboration and creative innovation. Even if remote work becomes more prevalent, most employees probably will not work from home all of the time, as many of the benefits of remote work can be achieved with employees going into the office less, but not never.
Facebook and Twitter are hardly pioneers of the remote work movement; if it did not work for companies like IBM and Yahoo five to 10 years ago, why should it work now? Of course, necessity is the mother of invention, and COVID-19 is certainly an instance of necessity. There are clearly many advantages to the remote model, both for the employees and the regions in which they live, but it is unclear whether these companies will be able to solve the issues that arise and remain connected as physical distance increases. Although a move to remote work would present some issues, Chavez said that “I think it’s way too early to sound the alarm, because I think where there have been challenges, we’ve seen lots of silver linings.”
Contact Anna Goldman at anna.r.goldman ‘at’ gmail.com.