Companies requiring in-person work are facing pushback. Those with looser policies find that flexibility makes recruitment easier.
6 min
Some of the economy’s most in-demand employees are about to find out how much power they have over where and how they work.
After months of return-to-work starts and stops, many tech companies, including Alphabet Inc.’s Google, Apple Inc. and Microsoft Corp., are telling remote workers it’s finally time to come back for good, or at least show up part of the week. Employees who fled the Bay Area and other high-cost tech hubs earlier in the Covid-19 pandemic—or who just prefer to work from home—now face hard choices: move back, try the super commute, or hold out for a concession or new job elsewhere.
How the emerging power struggles play out will be a telling indicator of how much leverage remote-work converts in other sectors have as more employers call staff back to offices. A competitive job market, plus the relative ease with which businesses adjusted to work-from-home over the past two years, has emboldened many professionals to try to say goodbye to offices permanently.
Two-thirds of the workforce said they would find a new job if required to return to the office full-time, according to a survey of more than 32,000 workers by ADP Research Institute. Of those who quit their jobs in 2021, 35% cited wanting to move to a different area, according to the Pew Research Center.
If highly skilled tech workers have trouble flexing their market value, though, it’s likely many other remote workers wanting to stay put will, too.
Some tech professionals have already thrown down the gauntlet. Ian Goodfellow, a director of machine learning at Apple, announced to staff this month that he was resigning, in part because of the company’s return-to-office policy. “I believe strongly that more flexibility would have been the best policy for my team,” Mr. Goodfellow wrote in a goodbye note, according to a tweet from a reporter from the Verge. Mr. Goodfellow declined to comment. Apple didn’t comment.
A group called Apple Together says more than 1,400 current and former employees signed an open letter to company executives asking for them to reconsider the office-return policy, which requires employees to work in-person on Mondays, Tuesdays and Thursdays as of last month. Apple employs more than 165,000 people.
“Stop treating us like school kids who need to be told when to be where and what homework to do,” the letter reads.
Office mandates are proving to be recruiting opportunities for some competitors: Airbnb Inc. last month announced employees could work from anywhere without taking a pay cut. In the three days following the announcement, the company’s careers page received around 800,000 visitors, according to a spokeswoman. Twitter Inc. and Zillow Group Inc. have said most employees can work from wherever they want and executives of Facebook parent Meta Platforms Inc. are living all over.
Sean Regan, head of product marketing with software maker Atlassian Corp., moved to Lake Tahoe from the Bay Area this past November and is now using the company’s flexible work policies to lure new hires.
“My access to top talent has gone through the roof,” he says. “It takes me half the time to recruit great people when I tell them they can work anywhere.”
Mr. Regan says he’s currently trying to sign on someone he ran into while skiing who had also moved to Lake Tahoe from the San Francisco area. “She wants to stay in Tahoe. Her employer wants her to go back to the office,” he says. “I’m recruiting her to stay put and work for us.”
Workers in tech have long had the advantage: Their skills are highly sought-after in nearly every industry. As the pandemic has dragged on, flexibility started to become not a perk but something companies needed to offer in order to hang on to talent. Eager to stay competitive, companies have increasingly accommodated their workers and in some cases, walked back in-office requirements.
But there are signs the balance of power may shift. Netflix Inc., Lyft Inc. and other big names in tech have posted disappointing quarterly results—a signal that leaner times may be ahead, and skilled workers won’t be in such demand. Companies including Meta say they are slowing down hiring. Peloton Interactive Inc., Carvana Co. and others have announced layoffs.
Some of those called back have found jobs elsewhere. Christina Patterson, 30, was managing client partnerships for a clothing-rental startup. She says that by the time she got called back to her New York office in March, she had grown allergic to in-person work. Since the fall of 2020, she had been working for months at a time from Tulum, Mexico, and wasn’t ready to give it up.
Desperate to find a new role ahead of the March deadline to return to work, Ms. Patterson texted an executive she’s friendly with at a Chicago-based startup, offering to be her remote assistant. “She was like, ‘I’ll do you one better: We need someone in business development,’ ” Ms. Patterson says.
She took the role at the startup, Swaypay, which makes an app for consumers to earn cash for posting TikTok videos featuring recent purchases. The new job didn’t require a move or any commitment to come into the office. Her last day at the old job was the Friday before she was supposed to go back to her old office.
“I was like, ‘Phew, I missed that very narrowly,’ ” she says.
Adam Ozimek, an economist with the think tank Economic Innovation Group, estimates that, across the U.S. workforce, there have already been 4.9 million relocations as a result of remote work, according to data extrapolated from a survey of 23,000 workers. Mr. Omizek conducted the survey this past November, while working at another company. More than a quarter said they planned to move more than 4 hours from their current job in 2022—because of remote-work options, while 13% said they were looking at moving 2 to 4 hours away. Mr. Ozimek himself says he recently started commuting 2½ hours once a month from central Pennsylvania to Washington, D.C., where his job with EIG, which he joined in March, is located.
Some tech workers who have relocated and don’t have permission to stay remote say they’re in a standoff with HR: They’ve been called back to the office but haven’t moved yet. They’re looking for remote-friendly roles both internally or elsewhere.
“If the time comes where they say: ‘Here’s an ultimatum, you show up in an office or you find somewhere else to work,’ I will find somewhere else to work because there are a lot of remote opportunities,” says one engineer who works for a North Carolina bank and bought a house earlier this year in New York’s Catskill Mountains, where he plans to stay.
Despite some signs of a downturn for the industry, tech workers who want to stay remote will have options if their employers won’t accommodate them, says Tim Herbert, chief research officer for CompTIA, a tech trade association. The number of U.S. employers posting tech jobs hit a record level last month, despite initial rumblings of a downturn.
“Especially in tech, you have companies that are simultaneously either slowing or transitioning workers or sometimes laying off workers in one area of the company and then they’re hiring in another area,” he says.
Companies with disappointing earnings can always scale back signing bonuses but continue to offer remote work as a perk for new hires, he added.
Google recently called its workers back on a hybrid schedule that requires most to be in the office three days a week. Some employees have complained that because the policy is implemented based largely on local managers’ discretion, it can feel arbitrary. “If you have a friendly manager and a friendly VP who support you, then your odds are pretty good,” says Andrew Gainer-Dewar, a senior engineer and member of the Alphabet Workers Union. “If you don’t, then things get tough.”
More than 14,000 of Google’s approximately 166,000 employees have requested to go fully remote or to transfer to a new location, and the company has approved 85% of those requests, according to a spokeswoman. “We know our employees have many choices about where they work,” she said. “So we continue to provide top of market compensation.”
Until August, Laura de Vesine was a senior engineer for Google living in San Jose, Calif., near the company’s offices. She jumped ship before officially being called back after growing tired of uncertainty surrounding when she’d have to return to work. She knew she wanted to move to a lower-cost city where she wouldn’t depend so much on a car, such as Philadelphia.
Such a move would have involved a 15% pay cut from Google, she says. “Is my work actually worth less?” she says she asked herself. If she wanted to keep her Bay Area salary, she worried she’d be required to report at least a few times a week to Google’s New York City office.
Instead, she made the move to Philadelphia and took a remote role with a New York-based cloud-computing company. She says she is now making around 20% more than her former salary and has the assurance she won’t have to give up her remote status.
“I could have confidence it wasn’t a temporarily remote offer,” she says.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 14, 2022.
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What a quarter-million dollars gets you in the western capital.
Alexandre de Betak and his wife are focusing on their most personal project yet.
Office-to-residential conversions are gaining traction, helping revitalize depressed business districts
4 min
Developer efforts to convert emptying office towers into residential buildings have largely gone nowhere. That may be finally changing.
The prospect of transforming unused office space into much-needed housing seemed a logical way to resolve both issues. But few conversions moved forward because the cost of acquiring even an aging office building remained too high for the economics to pencil out.
Now that office vacancy has reached record levels, sellers are willing to take what they can. That has caused values to plunge for nothing-special buildings in second-rate locations, making the numbers on many of those properties now viable for conversions.
Seventy-three U.S. conversion projects have been completed this year, slightly up from 63 in 2023, according to real-estate services firm CBRE Group. But another 309 projects are planned or under way with about three-quarters of them office to residential. In all, about 38,000 units are in the works, CBRE said.
“The pipeline keeps replenishing itself,” said Julie Whelan , CBRE’s senior vice president of research.
In the first six months of this year, half of the $1.12 billion in Manhattan office-building purchases were by developers planning conversion projects, according to Ariel Property Advisors.
While New York, Chicago and Washington, D.C., are leading the way, conversions also are popping up in Cincinnati, Phoenix, Houston and Dallas. A venture of General Motors and Bedrock announced Monday a sweeping redevelopment of Detroit’s famed Renaissance Center that includes converting one of its office buildings into apartments and a hotel.
In Cleveland, 12% of its total office inventory is either undergoing conversions or is planned for conversion. Many projects there are clustered around the city’s 10-acre Public Square. The former transit hub went through a $50 million upgrade about 10 years ago, adding fountains, an amphitheater and green paths.
“You end up with so much space that you paid so little for, that you can create amenities that you would never build if you were doing new construction,” said Daniel Neidich, chief executive of Dune Real Estate Partners, a private-equity firm that has teamed up with developer TF Cornerstone to invest $1 billion on about 20 conversion projects throughout the U.S. in the next three years.
Conversions won’t solve the office crisis, or make much of a dent in the U.S. housing shortage . And many obsolete office buildings don’t work as conversion projects because their floors are too big or due to other design issues. The 71 million square feet of conversions that are planned or under way only account for 1.7% of U.S. office inventory, CBRE said.
But city planners believe that conversions will play an important part in revitalising depressed business districts, which have been hollowed out by weak return-to-office rates in many places.
And developers are starting to find ways around longstanding obstacles in larger buildings. A venture led by GFP Real Estate is installing two light wells in a Manhattan office-conversion project at 25 Water St. to ensure that all the apartments will get sufficient light and air.
Cities such as Chicago, Washington, D.C., and Calgary, Alberta, have started to roll out new subsidies, tax breaks and other incentives to boost conversions.
The projects are breathing new life into iconic properties that no longer work as office buildings. The Flatiron Building in New York will be redeveloped into condominiums. In Cincinnati, the owner of the Union Central Life Insurance Building is converting it into more than 280 units of housing with a rooftop pool, health club and commercial space.
In the first couple of years of the pandemic, office building owners were able to hold on to their properties because of government assistance and because tenants continued to pay rent under long-term leases.
As leases matured and demand remained anaemic, landlords began to capitulate and dump buildings at enormous discounts to peak values. In Washington, D.C., for example, Post Brothers last year paid about $66 million for 2100 M Street, which had sold for as much as $150 million in 2007.
Washington, D.C., has been particularly hard hit by the office downturn because the federal government has been especially permissive in allowing employees to work from home .
“We’re able to make it work as a conversion because it was no longer priced as though it could be repositioned as office,” said Matt Pestronk , Post’s president and co-founder.
Increasingly, more deals are taking place behind the scenes as converters reach deals with creditors to buy debt on troubled office buildings and then push out the owners. GFP Real Estate reduced costs of its $240 million conversion of 25 Water Street by buying the debt at a discount and cutting deals with tenants to exit the building before their leases matured.
One of the first projects planned by the venture of Dune and TF Cornerstone likely will be the Wanamaker Building in Philadelphia. TF Cornerstone just purchased the debt on the office space in the building and is in the process of taking title.
“The banks are foreclosing and doing short sales,” said Neidich, Dune’s CEO. “There’s a ton of it going on.”
In Washington, D.C., a conversion of the old Peace Corps headquarters building near Dupont Circle is 70% leased just four months after opening, said developer Gary Cohen . Rents are higher than expected.
“If that’s the way to get people downtown, that’s what we have to do,” Cohen said.
Not all developers agree that the economics of conversions work, even at today’s low prices. Miki Naftali , who has converted more than five New York properties over the years, said he has been very actively looking at conversion candidates but hasn’t yet found a deal that works financially.
One of the issues facing converters is that even if an office building is dying, it often has a few existing tenants who would need to be relocated. Some buildings would need atriums to ensure that all the apartments have sufficient light and air.
“When you start to add everything up, if your costs get close to new construction, that’s when you get to the point that it doesn’t make financial sense,” Naftali said.
Some landlords are including clauses in leases that give them the right to evict tenants to make room for a major conversion. Others are keeping a small ownership stake when they sell buildings so that they can learn the conversion process for future buildings.
“The world is looking at these assets in a different way,” said developer William Rudin , whose company decided to learn the conversion process by keeping a stake in 55 Broad Street, a downtown New York office building it sold last year to a converter.
