Facebook’s Mixed Signals Leave Office Outlook in Limbo

Facebook is going remote until July 2021; and Facebook closed on a 730,000-square-foot office near Penn Station. 

Times Square is a ghost town; and Zoomer social media app TikTok signed up for a flashy Times Square flagship.

Startups are hiring remote talent; and they’re booking on-demand space for whiteboard sessions. 

Founders are holed up in the Hamptons; and they’re sneaking into empty Soho offices. 

There was a period, up until June, when employers and employees alike believed all of this would be temporary. All we had to do was tighten the hatches for a few months, run Zoom school, do Zoom work, host Zoom birthday parties, and drink Zoom happy hours, and everything would go back to normal. 

That hope was dashed with the rising case numbers and continuous outbreaks through June and July, forcing most people to recognize that longer-term solutions were needed. 

Tech companies like Facebook, Google and Slack began offering some short-term certainty to their employees by assuring them that remote work would last until at least the summer of 2021.

“Employees do want some certainty, so I think it’s important to say we’re definitely not going to reopen for X date so employees can plan their lives,” Slack CEO Stewart Butterfield said in an interview with Bloomberg.

Similarly, Google CEO Sundar Pichai said his company chose to keep its offices closed until July 2021 at the earliest, in part so employees could sign year-long leases, the Wall Street Journal reported. 

That’s long enough that there likely won’t be a normal to go back to.

“I don’t know if we’re going to be able to take that back,” Butterfield said. “If we say you can work remotely and you move somewhere with your family to a different state, we can’t call you up and say, ‘Come back to the Bay Area and buy a house.’”

With tech employees fanning out to all parts of the country and giant tech headquarters closed for another year, the Facebook deal couldn’t have come at a better time for New York City’s morale. 

In early August, the social media giant closed on a lease for the commercial portion of Vornado Realty Trust (VNO)’s redevelopment of the former Farley Post Office. The new space will be the second Facebook office to house its tech and engineering teams, Jamila Reeves, a spokesperson for Facebook confirmed, and will add to Facebook’s considerable footprint in the city. Just last fall, Facebook leased 1.2 million square feet in Hudson Yards, its fourth office in the city.

Both Facebook and Vornado heralded the deal as a win for New York. “This deal reinforces New York City as a great and unique place to do business with an unlimited, highly educated workforce,” Vornado CEO Steve Roth said in the firm’s second quarter earnings call. 

“Facebook’s saying we believe in New York, we believe in the future of this city,” said Reeves, who worked from the company’s office at 770 Broadway before it closed due to the pandemic. 

And they weren’t the only ones celebrating the move. “Facebook’s decision to go to the Farley, was really magnificent not only for New York City but for the commercial real estate industry in the United States,” Peter Riguardi, chairman and president of JLL’s tri-state region, told Commercial Observer. “That’s a decision that’s bigger than just that decision.” 

“I look at that transaction as real support for the need to have an office,” said Sacha Zarba, a CBRE vice chairman who has worked with a variety of large tech tenants. 

But the Farley development is also a particularly unique building for New York, and the deal was in the works prior to the pandemic. So while it points to Facebook’s long-term place, it’s also potentially an outlier. 

“You have to be careful comparing that building around some of these trends because it’s such a unique solution,” Riguardi said. “It’s much more like California headquarters buildings that Facebook would be accustomed to, with the large footprints, massive amount of outdoor rooftop space.”

Reeves confirmed that the specifics of the property were key. “The Farley building was special to us for a couple of reasons,” she said. “The close proximity to our office in Hudson Yards. It’s unique in that it has very large floor plans. That’s unheard of, especially in the city. For tech and engineering, that’s very conducive to the type of work that they do.”

It’s also impossible to discount Facebook’s other moves. CEO Mark Zuckerberg said in May that in a decade up to half the company’s employees could work remotely full-time, and the company is hiring a remote talent recruiter, according to a job listing cited by the Wall Street Journal. “Facebook is taking a thoughtful and measured approach to the future of work at Facebook, including committing to remote work as one of our long-term strategies,” the listing says. 

But Facebook’s Reeves told CO that the Farley lease and the remote-work strategy weren’t at odds. “Facebook, even through the crazy pandemic, we’ve experienced a lot of growth,” she said. “In terms of the long-term trajectory, we have to be able to support our growth.”

And it appears that Facebook is still not done. Vornado’s Roth confirmed that the company  is in talks to take even more space at 770 Broadway, where it occupies 700,000 square feet. “Facebook has talked to us about growing in that building and taking the entire building,” Roth said, “and those conversations are continuing.”

Despite these expansion moves, if half of Facebook’s staff works remotely that would still mean a huge upset to the commercial real estate market. And Facebook’s decision to shutter its offices until 2021 already has the potential to broadly impact the wider office market.

As for the second blockbuster deal of the pandemic, TikTok’s 235,000-square-foot lease at the Durst Organization’s One Five One, the company is facing its own troubles, unrelated to the pandemic. President Trump has given its Chinese parent company, ByteDance, 45 days to sell it to an American company or, he says, it will be banned in the United States. Microsoft is reportedly close to purchasing the video app. 

“With respect to TikTok, they lived through the pandemic in Asia, they’ve come out of it,” said Zarba, who represented TikTok in the Durst lease.  “They understand what the headwinds are. They too understand how important it is to have an office.”

Its potential ban, or sale, has not jeopardized the lease deal, Zarba said. “From where we sit, the game plan is to move forward as if everything that’s happening externally wasn’t happening,” he said. “It has not altered anything to date.”

Still, Zarba said he did not expect either deal to improve the volume of lease activity in the short term. 

It’s important to note that, like Facebook and TikTok, many tech companies have not been adversely affected by the pandemic in terms of revenue. In fact, many tech companies have seen their business improve over this time. That’s true for the FANG companies (Facebook, Amazon, Netflix, Google) as well as mid-sized software companies and startups alike. 

But even successful tech firms are handcuffed at the moment. 

“Those companies still can’t figure out what their long-term game plan is,” Zarba said. “Usually stock price has a good correlation between office space and headcount, but now they can’t make long-term real estate decisions.” 

And, with so much uncertainty, smaller, more nimble companies are responding in very different ways, making it difficult to ascertain a single trend in the tech industry. 

Bowery Valuation, a 65-person startup located in New York, signed a five-year lease at 625 Broadway just before the pandemic struck, so they’re stuck paying rent, said founder and CEO John Meadows.

“It hasn’t affected our thinking toward full remote, or not wanting an office,” he said. “Once the world starts to look normal, we do expect we’ll return to the office and be back to business as usual.”

Bowery, a tech-enabled real estate appraisal platform, has seen steady business throughout the pandemic, Meadow said. And, considering that the work-from-home experiment is going well, it is more open to hiring remote talent, since remote work has been going well. 

OnSiteIQ, another tech-enabled real estate company, has gone even further, and already hired remote talent, said CEO Ardalan Khosrowpour. “We’ve hired multiple people in the past couple months remotely, in remote markets,” he said.

Plus, right now, they have no plans to lease any office space. 

The company, which started out as a three-person team at Cornell Tech, offers a mapping platform for construction sites. The team moved into a flexible workspace in Midtown called Company, at 335 Madison Avenue, in 2018. By the time the pandemic started in March, they had grown to a team of 30, and had an annual lease at Company for a private office. 

In April, when it became clear that the shutdowns would extend at least a few months, OnSiteIQ began working with its landlord to terminate the lease. “We have one case of COVID in our company, right in the beginning,” said Khosrowpour. “It was a wakeup call for us.”

But, while OnSiteIQ has no plans to return to the office, it has begun renting space, again at Company, on a flexible basis either for whiteboard sessions and meetings, or for employees who need to work outside of their homes. 

And that hybrid solution is what many companies are doing right now, said Jamie Hodari, CEO of flexible workspace provider Industrious. The one consistent trend is that employers are putting a lot of choice into the hands of the employees. 

“I don’t really think there’s a paradox,” he said. “I think [companies] are being consistent. They’re going to give employees the choice of where to work and when and how, and they’re trying to set up workspaces that enable that.“

After close to six months out of the office, companies are reaching an inflection point. 

They need to decide on a solution that’s not just about treading water until the crisis ends, and the majority of companies are looking forward to get back to the office, Zarba said. 

“While everyone is okay and taking their time, and making sure their employees are comfortable and have a say in when they’re coming back,” he said. “The leadership of those companies are eager to get back.” 

A spokesperson for Slack confirmed that their offices would be closed until June 2021 at the earliest. They declined to comment on whether or not Slack was in the market for office space in New York, after a previous deal fell through in February. TikTok could not be reached for comment.