It's a different world from just a few years ago. Not long ago, Big Tech was on a roll and making plans for building shiny glass towers and filling them with well-paid software engineers who would patronize local businesses and boost tax revenue.
Amazon’s second headquarters was supposed to supercharge its new neighborhood just outside Washington, D.C.
Architectural renderings showed a lively urban landscape brimming with pedestrians and cyclists, the kind of environment that would attract other companies and even more investment.
But Amazon said last month that it would be delaying some construction at this massive new Northern Virginia campus. And observers wonder, I wonder, why build more offices if people aren’t going to come?
A similar story is playing out nearly 3,000 miles to the west in San Jose, California. Google has halted construction of its proposed 80-acre campus there, and it doesn't have plans to resume work in the near future.
This is what happens after a decade-long bull market in technology runs its course. Note: 2022 was the worst year for tech stocks since the 2008 financial crisis.
In June 2021, Google won approval to build an 80-acre campus, spanning 7.3 million square feet of office space, in San Jose, California.
The estimated economic impact: $19 billion. The timing couldn’t have been worse.
Rising interest rates and recessionary concerns led advertisers to reel in spending, and, for the first time in Google's history, management implemented dramatic cost cuts.
What was poised to be a mega-campus called “Downtown West,” with thousands of new housing units and 15 acres of public parks, is largely a demolition zone at risk of becoming a long-term eyesore and economic zero.
The Reckoning Continues
The tech industry's layoffs began last year and have kept up a relentless stream of bleak announcements coming in multiple waves.
The industry, which had overhired during the pandemic, started trimming its workforce last year, just as the Federal Reserve started raising interest rates to cool the inflation-rattled U.S. economy.
Layoffs are often understood as an indicator of incipient recession, and stock prices typically fall in step with both of those trends. Last year was the worst year for tech stocks since the great dotcom bust more than 20 years ago.
In 2023, layoffs continue to cost tens of thousands of tech workers their jobs, driven by the biggest names in tech like Google, Amazon, Meta, Microsoft, Yahoo, Salesforce, and Zoom.
They all cite the macroeconomic environment and a need to find discipline on a tumultuous path to profitability. Translation: Cut costs. Still, tracking the layoffs helps us to understand the impact on innovation,
The running total of layoffs for 2023 based on full months to date is 168,243, according to Layoffs.fyi. Tech layoffs conducted to date this year currently exceed the total number of tech layoffs in 2022, according to the data in the tracker.
January: 84,714 employees laid off
February: 36,491 employees laid off
March: 37,109 employees laid off
Meta, the parent company to Facebook, announced on April 18 that it is expected to lay off 10,000 jobs in the coming months. This is on top of the 11,000 jobs that were cut in November. Lyft, Refin, and Apple have also announced layoffs this month.
A Mismatch of Intent and Strategy
Amazon first announced its plans for its HQ2 in the fall of 2018, but the pandemic changed everything. White-collar workers traded their commutes for their living rooms. The tech giant shifted from rapid expansion to laying off tens of thousands of employees.
As Amazon seeks its first round of incentives from Virginia, critics contend the company stands to be rewarded with taxpayer dollars for building something that has already become obsolete.
“We have a mismatch of intent and strategy,” Jim Russell, a geographer who chairs the Virginia Statewide Community Land Trust told The Washington Post. “HQ2 is infrastructure for an economic era that no longer exists.”
Company executives and local elected officials have insisted the economic benefits of Amazon setting up shop in Arlington would come gradually.
Its employees will be required to commute in three days a week beginning next month, including thousands who will work at two 22-story towers that are set to open in June.
A fenced-off patch of dirt is still supposed to turn into another three office buildings and a futuristic glass building called the Helix. Construction is moving ahead on a host of transit projects and a new graduate school campus.
Some cities offered to pay the company as much as $6 billion, but Northern Virginia managed to win the prize with a comparatively modest bid: It offered up to $773 million in economic incentives that hinged on concrete metrics of the company’s local impact.
Arlington County had been expecting to pay Amazon a few million dollars by now on the condition that the tech giant would occupy a growing amount of office space and increase tax revenue from hotel stays. Since that boost never materialized, county officials have not paid a penny to Amazon.
No Plans to Restart Construction
As part of Google’s downsizing that went into effect early this year, the company has gutted its development team for the San Jose campus, according to CNBC.
The construction project, which was supposed to break ground before the end of 2023, has been put on pause, and no plan to restart construction has been communicated to contractors, according to people familiar with the matter who asked not to be named.
While sources are optimistic that a campus will be built at some point, they’re concerned the project may not reach the scale promised in the original master plan.
The Mercury News, one of Silicon Valley’s main newspapers, previously reported that Google was reassessing its timeline.
In February, LendLease, the lead developer for the project, laid off 67 employees, including several community engagement managers, according to filings viewed by CNBC. Senior development managers, a head of business operations, and other executives were among those let go.
Last month, Google also removed construction updates from its website for the project, according to internal correspondence viewed by CNBC.
A LendLease spokesperson said in an emailed statement that the company remains “committed in the creation of thriving mixed-use communities in the Bay Area, including the Google developments,” and still has a “significant team to aid in delivering these communities.”
Alphabet-owned Google is embarking on its most severe cost cuts in its almost two decades on the public market.
The company said in January that it was eliminating 12,000 jobs, representing about 6 percent of its workforce, to reckon with slowing sales growth after headcount swelled before and during the Covid pandemic.
About a year ago, Google announced that it would invest nearly $10 billion in at least 20 key real estate projects in 2022. By then, the company had already completed much of its multiyear land grab of downtown San Jose for the future campus.
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