Microsoft and Google have promised to invest in these communities. Now they are going back

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CNN Business —

When Microsoft chairman Brad Smith announced in February 2021 that the tech giant had purchased a 90-acre parcel of land on Atlanta’s West Side, he presented a bold vision: The company, he said, would invest in the community and the l ‘would put on the road. towards becoming one of the largest hubs of Microsoft in the United States.

The announcement, which was enthusiastically received by 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 non-profit organizations local profits and affordable broadband for more people in Atlanta.

Our biggest question today isn’t 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 initiatives, including shedding 10,000 jobs, changing its hardware portfolio, and consolidating lease agreements. As part of those moves, Microsoft paused development on its Atlanta campus this month, a spokesperson confirmed to CNN.

The decision to put plans on hold seems like a broken promise that caught many residents off guard in the predominantly black neighborhood where Microsoft planned to build the campus, according to Jasmine Hope, a local resident and chair of its neighborhood planning unit.

All 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 schools and Microsoft to create jobs, anything that seems out the window,” he 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 contribute to the community, the spokesman added.

As the US tech industry has boomed over the past decade, cities across the country have been vying to become technology hubs. State and city officials have been vying for Silicon Valley giants to bring offices, data centers and warehouses to their communities in hopes of creating jobs and other benefits that cash-strapped local governments may struggle to fund on their own . Perhaps in the greatest example of this, 238 communities bid in 2017 to host Amazon’s second headquarters, with some offering major tax breaks or even to rename Amazon’s land city.

But now, a number of big tech companies are rethinking their costs, after years of seemingly limitless hiring and expansion. The reason: a perfect storm of fluctuating 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 been teasing plans to slash real estate spending across the country.

Meta, Microsoft, Salesforce and Snap, Facebook’s parent company, have closed offices or announced plans to reduce real estate, according to recent company announcements, documents and local news. Some tech companies have said they will let leases expire or go remote entirely. Meta CEO Mark Zuckerberg said his company is transitioning to desk sharing for people who already spend most of their time out of the office.

The effect of those pullbacks can already be felt across the country, from New York City, where Meta reportedly reduced its real estate footprint, to San Francisco’s Hudson Yards neighborhood, where some local businesses say they face the knock-on effects. of work and multiple closures of technical offices.

The technology had practically gained market share to become the industry’s leading office space lease in the United States, and that started in 2012, 2013, said Colin Yasukochi, executive director of the Tech Insights Center at CBRE, a commercial real estate firm. . In 2022, however, finance and insurance firms surpassed the technology sector for the highest share of office leases in the United States, according to data from CBRE.

Actually, over the last couple of quarters, you’ve seen the tech industry decrease its leasing business quite significantly, he added. This is really, I think, the biggest impact that you’ve seen regarding these layoffs and austerity measures — the technology industry pulling out of the leasing business.

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

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

After the purchase, Microsoft described Quarry Yards as a place with wide, tree-lined streets but broken sidewalks. The area, Microsoft said, is a food wasteland with no grocery stores, pharmacies or banks.

The community, according to Hope, is made up of many elderly and black neighbors. These residents, she said, have for years been concerned about gentrification and displacement as home prices and property taxes rise in the Atlanta metro region.

Only the announcement of Microsoft’s arrival in the city has brought new buyers and developers to the area, he said, exacerbating those long-standing concerns. Data from Zillow indicates that median home values ​​in the neighborhood increased the most at a significantly faster rate between January 2020 and December 2022 than in Atlanta as a whole.

But residents also have cautious optimism about the benefits Microsoft has promised the community, according to Hope. Now, the community is left with higher prices but none of the promised improvements or economic opportunity. We won’t see any benefits and will only face the consequences, she said.

It appears the community will now be burdened, he said.

The Hopes community isn’t alone in dealing with the whiplash of Silicon Valley’s real estate shrinkage. Late last month, the city of Kirkland, Washington said in a press release that it has been notified by Google that the company will not proceed with its proposed redevelopment project that was initially aimed at bringing a huge new campus to the city.

At a Kirkland City Council meeting just last summer, Google representatives teased a number of community benefits from the construction, including infrastructure improvements, such as creating bike and walking paths, as well as a investment of more than $12 million in affordable housing. The planning process between Google and the city had been ongoing 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 due to the one-two punch of the move 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, up from the pre-pandemic figure of 3.7%.

The previous high was about 20 percent after the Dotcom bust, CBRE’s Yasukochi told CNN. We are at the highest point our records have shown.

The rise of remote and hybrid working has been a driving factor for tech giants slashing their real estate investments, Yasukochi said. Then came the recent cost-cutting measures.

Local business owners say they are now feeling the impacts.

Mark Nagle, the owner of a 21-year-old Irish pub and restaurant in downtown San Francisco called The Chieftain, told CNN that he has recently seen a cascade of corporate and technology office closures in his neighborhood, including the closure of a Snapchat office just up the road.

Normally we were in a great location, we were downtown, Nagle said. But now his business is surrounded by several empty commercial spaces and several lots under construction.

The number of workers entering the area on a regular basis hasn’t recovered 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 businesses often hold events and meetings at The Chieftain, but that even those have largely declined.

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

You’re settling for less and that’s made the business a lot more unpredictable, he added. And I’m one of the lucky ones who can keep the doors open.

Clare Duffy of CNN contributed to this report.

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