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Now Even Google Caves under Demand for Permanent Work from Home, Another Blow to Bay Area Office Market
By: Wolf Richter | May 5, 2021

• “The future of work is flexibility,” Alphabet CEO Pichai told employees today.

Google now expects that 20% of its employees work from home permanently, 20% work in new office locations of their choice, and the remaining 60% would work at their current office but in a hybrid workweek, going to the office three days a week and working the other two days “wherever they work best,” Alphabet CEO Sundar Pichai told employees today in an email cited by the Wall Street Journal.

What was new today was that 20% of the employees could work from home permanently, and that another 20% could move to different locations.

Last December, Pichai had already put forward the idea of a hybrid workweek when he told employees that, once it was safe to return to the office, employees could work from home up to two days a week and spend three “collaboration days” a week at the office, though some employees, such as those working in data centers and labs, might not be able to work from home.

The company would be “testing a hypothesis that a flexible work model will lead to greater productivity, collaboration, and well-being,” he said at the time.

Employees would have to apply and get permission from management to change locations and to work from home permanently, Pichai said today in the email.

In June, Google will launch the application process for people who want to change their location and will provide additional information about the required approval process.

This new system would start after September, but until then most employees could keep working remotely, an Alphabet spokesperson told CNBC today.

Google’s numerous contractors, temporary workers, and vendors will likely be in the office on the same days as their teams, the spokesperson said.

Google will also double from two weeks per year to four weeks per year the period that employees can work from anywhere, to provide more flexibility with vacation and travel plans. This also requires approval of management

This type of flexibility is designed to help employees do their best work, Pichai said in the email.

And that’s a lot of people: If 20% of Google’s 140,000 or so employees work at home, that would amount to 28,000 people who wouldn’t need space in a corporate office. And if another 20% moved to cheaper locations where Google has offices, that might take another 28,000 employees – and their families – out of the areas where they live now.

Cost cutters at Google are salivating.

Compensation of employees who change locations will be adjusted, Pichai said. The majority of Google’s 140,000 people work in the Bay Area, one of the most expensive housing markets in the US. So if they choose to move to one of the cheaper housing markets, they will also have to digest a pay cut. It would be a win-win for Google, so to speak.

Google has vast real estate holdings in the Bay Area and leases a lot of office space. It has for years been planning to build a new campus in San Jose, “Downtown West,” with 7.3 million square feet of office space and 4,000 housing units, plus retail space and plazas. The City Council is scheduled to vote on it later this month.

Google, which also has large office footprints in New York City, Austin, and Atlanta, has been spending the past years adding feverishly to its office space, on the assumption that it would continue to balloon its workforce and therefore its need for office space.

But the strategy of letting people work from home, letting people move to cheaper locations, and reducing the amount of time that the remaining people have to spend at the office is taking a lot of pressure off the need to constantly add to the office footprint.

Surveys of employees have found that somewhere around 80% and 90% of employees want at least some kind of flexibility, with many employees preferring no more than three days at the office, and a good portion of employees preferring no days at the office.

Ultimately, the bosses decide what they offer. But people decide where they want to work. And offering flexibility, a hybrid workweek, and the option of full-time remote work can be powerful incentives to attract and retain good workers. The Pandemic has proven to executives that their companies and employees can be very productive with this setup.

And for corporate cost cutters, there is a huge incentive: remote work and a hybrid workweek shift many corporate expenses, such as office space and free lunches, from the company to the household.

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