A view of Google’s logo outside its Beijing office.
(Feature China/Barcroft Media via Getty Images)
Even the virtual world requires a physical footprint.
On Thursday, Sundar Pichai, CEO of Google and its parent company, Alphabet, published a blog post announcing plans to invest $7 billion in offices and data centers this year across 19 states. The plans include over $1 billion earmarked for California and the expansion of offices in Atlanta, Chicago, New York and smaller cities.
The investment will help Alphabet expand its reach across the country and bolster the data centers that enable online search. While massive, it nonetheless marks a drop-off from Google’s prior spending; the company set aside $13 billion and $10 billion for similar expenditures in 2019 and 2020, respectively.
The announcement comes as many technology firms, including Facebook, Twitter and Square, have signaled that they will enable some workers to work remotely forever. In Silicon Valley, the nexus of tech innovation, there have been concerns—and some celebrations—that startup employees may flee the area for good in search of cheaper alternatives.
Google reportedly has nixed a permanent work-from-home model, arguing that some in-person collaboration remains critical to productivity. Thursday’s news further emphasizes that point of view, both in the Valley and far beyond.
“I believe a lasting economic recovery will come from local communities, and the people and small businesses that give them life,” Pichai wrote. “Google wants to be a part of that recovery.”
The company, which has more than $100 billion in cash on hand, is also moving forward on a $1 billion pledge to advance sustainable housing in the San Francisco area, Pichai said. The initiative was first announced in 2019.
According to Adam Segal, the chief executive of Cove, a real estate technology firm, Google’s real estate portfolio is now worth more than $50 billion and includes asset classes ranging from multi-family to offices. “Google leverages real estate to grow their business and brand,” he says.
2020 was a choppy year for the commercial markets. According to VTS, a real estate software company, demand for office space tanked 68% in New York City over the last year; in San Francisco it fell 52%, while Seattle saw a 67% drop.
Analysts say that commercial properties in Manhattan have taken major hits—as much as 40% in some cases—as landlords struggle to lure tenants back, and the world grapples with the changing nature of work spurred by Covid-19.
Google, meanwhile, is plowing ahead, proving that, at least in some places, the future will look much like the past.