by
CNN Business
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When Microsoft President Brad Smith announced in February 2021 that the tech giant had purchased a 90-acre piece of land on Atlanta’s west side, he laid out a bold vision: The company, he said, would invest in the community and put it “in the market”. on its way to becoming one of the biggest Microsoft hubs” in the United States.
O The announcement, which received 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, changing its hardware portfolio and consolidating rents. As part of those changes, Microsoft put development on its Atlanta campus on hold this month, a spokesperson confirmed to CNN.
The decision to pause the plans looks like a “broken promise” that has caught many residents of the predominantly black neighborhood where Microsoft planned to build the campus off-guard, according to Jasmine Hope, local resident and chair of its neighborhood planning unit.
“All the promises of ‘let’s put a grocery store here, let’s bring jobs to the area, let’s have a conduit between schools and Microsoft to create jobs,’ all of that seems to go out the window,” she told CNN. “But the fallout is still being felt by the neighborhood.”
A Microsoft spokesperson said the land is not for sale, “and we still intend 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 partner to the community,” added the spokesperson.
As the technology industry boomed in the United States over the last decade, cities across the country competed to become tech hubs. State and city officials have vying 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 may struggle to finance on their own. In perhaps the biggest example of this, 238 communities submitted bids in 2017 to house Amazon’s second headquarters, with some offering big tax breaks or even renaming the land “Amazon City.”
But now, several big tech companies are rethinking their costs, after years of seemingly limitless hiring and expansion. The reason: a perfect storm of pandemic demand changes for online services, rising interest rates and fears of an impending recession. Much of the focus of this tech crisis so far has been the long list of layoffs, but companies have also rolled out plans to dramatically reduce real estate expenses across the country.
Meta, Microsoft, Salesforce and Facebook parent Snap have all closed 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 will let leases expire or go fully remote. Meta CEO Mark Zuckerberg said his company is “making the transition to desk-sharing for people who already spend most of their time away from the office.”
The effect of these setbacks can already be felt across the country, from New York City, where Meta has reduced its real estate presence in the Hudson Yards neighborhood, to San Francisco, where some local businesses say they are facing the domino effects of work and various technology office closures.
“Tech pretty much gained market share to become the top office leasing industry in the US, and that started in 2012, 2013,” said Colin Yasukochi, executive director of the Tech Insights Center at CBRE, a commercial real estate company. . In 2022, however, finance and insurance companies overtook the tech industry in the largest share of office leases in the US, according to CBRE data.
“Really, in the last few quarters, you’ve seen the tech industry significantly decrease its leasing activity,” he added. “I think that’s really the biggest impact you’ve seen in regards to these layoffs and austerity measures: the tech industry’s pullback in leasing activity.”
But the impact of this downturn is perhaps strongest in communities with less robust technology centers.
Quarry Yards, on Atlanta’s west side, has been a source of promise and dashed hope. In 2017, Georgia officials included the former industrial area on a list of locations where Amazon could build its second headquarters, as part of its proposal for the e-commerce giant. Amazon finally went with other cities, but four years later, another tech giant from Seattle took the field.
After the purchase, Microsoft described Quarry Yards as a place with “wide, tree-lined streets” but “rough sidewalks”. The area, Microsoft said, is “a food desert without a grocery store, pharmacy or bank.”
The community, according to Hope, consists of “a lot of elderly, black neighbors.” These residents, she said, have been concerned about gentrification and displacement for years as housing prices and property taxes rise in metro Atlanta.
“Just the announcement of Microsoft coming to town” has brought new buyers and developers to the area, she said, exacerbating those longstanding concerns. Data from Zillow indicates that median home values in the borough increased at a significantly faster pace between January 2020 and December 2022 than Atlanta as a whole.
But residents were also cautiously optimistic about the benefits that Microsoft promised the community, according to Hope. Now the community is left with higher prices, but none of the promised improvements or economic opportunities. “We won’t see any benefit and just deal with the fallout,” she said.
“It looks like the community will now be overwhelmed with this,” she said.
Hope’s community is not alone in facing the lash of Silicon Valley’s housing downturn. Late last month, the city of Kirkland, Wash., said in a press release that it had been notified by Google that the company would not be proceeding with its proposed redevelopment project, which initially aimed to bring a massive new campus to the city.
At a Kirkland City Council meeting held last summer, Google representatives teased a range of community benefits from the building – including infrastructure improvements such as the creation of bike lanes and footpaths, as well as an investment of more than US$ 12 million in 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 are working to ensure that 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 center 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 since the one-two punch of the shift to remote work and office closures.
The city’s office vacancy rate hit a record 27.6% in the last three months of last year, according to CBRE, up from 3.7% before the pandemic.
“The previous high was around 20% after the dot-com crash,” CBRE’s Yasukochi told CNN. “We are at the highest point that our records have shown.”
The rise of remote and hybrid working was a key driver of tech giants reducing their real estate investments, Yasukochi said. Then came the recent cost-cutting measures.
Local businesses say they are now feeling the impacts.
Mark Nagle, 21-year-old owner of a downtown San Francisco Irish pub and restaurant called The Chieftain, told CNN that he’s witnessed a “cascade of closures” of tech and corporate offices in his neighborhood recently — including the closure of an office from Snapchat just down the street.
“We’re usually in a great location, downtown,” Nagle said. But now his business is surrounded by several vacant retail spaces and several lots under construction.
The number of workers regularly arriving in the area has not recovered since the start of the pandemic, Nagle said, and neither has his business. Nagle said that in addition to workers stopping in for a drink at the end of their days, nearby businesses often hold events and meetings at The Chieftain, but that too has largely subsided.
At least six bars and restaurants within a two-block radius have closed in recent years, he said.
“You’re making do with less and that makes the business much more unpredictable,” he added. “And we are one of the lucky ones who manage to keep their doors open.”
– Clare Duffy of CNN contributed to this report.
