Google’s $2 Billion Wager on Urban Recovery and Hybrid Work

Published on September 28, 2021 - By Daniel Lehewych

• Google’s massive investment comes as a surprise to some. 
• The decision is great news for New York City as it experiences record vacancy rates. 
• Google’s purchase of the Manhattan property shows confidence in the eventual return to in-office work and New York real estate value. 

Last Tuesday, Google announced that they purchased St. John’s Terminal building in Manhattan’s Hudson Square for $2.1 billion. This announcement comes when New York City has its highest level of vacant office spaces on record — and Google’s robust support for remote work. So, why this investment … now? 

Google bets on a hybrid work future and a NYC recovery

On the surface, it looks as if they’re taking a jab at their principles.  

However, the reality seems to be quite the opposite. Expert projections suggest that many workers who’ve shifted to remote work during the pandemic will not return to in-office work. For the workers that do return to the office, it doesn’t appear to be anytime soon. Google’s purchase of office space in New York City, ultimately, appears to signify the company’s belief in New York’s post-COVID recovery.  

Google’s current policy on work is not a wholesale endorsement of remote work or the traditional office. Instead, Google has maintained a dedicated appraisal of hybrid work, where workers are given the option to either come into the office three days a week or choose to work entirely remotely.  

As a result, Google expects that 20 percent of their workers will remain to do their work remotely, while 20 percent will return to in-office work; the remaining 60 percent fall into the hybrid option category. This will mean 80 percent of their employees will be coming to the office – at least occasionally. Google’s flexible approach indicates employees will have options rather than workers being forced to work remotely or in-office. 

A Commitment to expand to diverse communities  

Google’s high-profile purchase in Manhattan may be connected to its initiatives to expand to more diverse areas, a belief in urban renewal — and grow its real estate portfolio.  

Google CFO Ruth Porat stated that “Our decision to exercise our option to purchase St. John’s Terminal further builds upon our existing plans to invest more than $250 million this year in our New York campus presence. It is also an important part of meeting our previously announced racial equity commitments, which include continuing to grow our workforce in diverse communities like New York.”  

Hybrid work and the DEI challenge 

Hybrid work faces challenges in ensuring that diversity, equity, and inclusion (DEI) programs make a smooth transition from traditional work.  

Google is far from failing to rest on its laurels: if anything, it’s bolstered them.  

A key to overcoming potential issues arising in DEI for hybrid workers as its remote counterpart tends to benefit already high-earning individuals; by contrast, remote work poses a risk disproportionately for Black and Hispanic Americans, who compose a large percentage of low to middle-income American families.  

New York has one of the highest population densities of Black and Hispanic Americans in the United States, thus making Google’s recent purchase a step in the right direction for DEI-related efforts for hybrid workspaces.  

Will the future of work be a return to business as usual? 

Does the tech behemoth’s latest move dismiss the notion that most knowledge workers will continue to work remotely indefinitely? Will workers soon be forced to return to the office? 

While many workers fled city life early in the pandemic, companies did not follow suit. Reports from last year predicted that there would not be a mass exodus of companies from urban cores; Google’s recent purchase proves those predictions were right. 

Still, this doesn’t mean that workers will be forced back into a centralized office. Rather, Google’s recent NYC purchase, combined with its remote work policy, hints at the fact that it will give workers additional choice over where they work.  

More diversity and work flexibility 

Consider, for instance, that most major tech companies are making investments comparable to the one recently made by Google in New York City, with the matching intention of hiring more workers for in-person work. Amazon and Facebook, for example, have collectively spent billions over the past two years towards opening up new offices.  

These investments are projected to produce tens of thousands of jobs over the next few years, and most of these jobs will not be fully remote. And even though employees are overwhelmingly in favor of remote work, there are good reasons to be grateful for this return. 

For instance, many remote workers experience feelings of social isolation and a sense that they never have a chance to escape their work. One benefit of having an in-office option would be that these grievances would now have a tangible solution. After all, most people are extroverted, making them more susceptible to the ills of social isolation we’ve all experienced over the last two years.  

Remote work is here to stay and so are urban centers 

However, these changes will not serve to disappoint those who do indeed prefer remote work. Only 28 percent of companies are forcing workers to return to the office, and most workers, when polled, say that if they are going to be forced to make such a decision, that they will quit their jobs to find new work. This has given employees a great deal of leverage that they did not have before the pandemic.  

It seems, therefore, that investments like Google’s in New York are not intended to tip the scale in one direction or the other between remote and traditional work, but rather to balance the scales. It is a change that makes everyone happy, not just those who prefer remote work or traditional work.  

This brings us back to the so-called “mass exodus” out of cities in light of the advent of remote work. Are people leaving cities because of changes in work modalities? Do people even plan to leave cities in light of these changes? 

Many did leave big cities in 2020, but this largely consisted of wealthy people attempting to avoid the worst of the pandemic. And when these people left big cities like New York and San Francisco, this reduced rent prices, creating a greater incentive for more people to live in big cities. Not to mention that most of the people who moved last year intend to return at some point.  

Great cities will evolve but survive  

Big cities are nowhere near dead. In fact, they will always be hubs of young entrepreneurship, as most universities are located in big cities. However, cities will change, and these changes are likely to stick around for the long run. The economic situation in most large cities has yet to recover from the pandemic’s impact and are not expected to for quite some time. Retail sales are at record lows, and many small businesses do not expect to ever re-open.  

While cities are not going to disappear, what they will do is fight an uphill battle to recover a semblance of what urban life was like before the pandemic. In New York, for instance, restaurants, green markets, museums, and retail are all part of what makes New York a great place to be. Each of these contexts requires having in-person workers. If these jobs went away –along with their cultural counterparts in other cities — we would be more worried about the state of cities. But, there is no indication that such jobs will disappear anytime soon. 

Given that situation, Google is fighting in favor of cities with its latest investment, and the hope for city-lovers should be that more companies follow suit.