Google lease bucks trend; positive sign in S. F. crisis

Despite closed offices and a hiring slowdown during the coronavirus pandemic, Google is still growing in San Francisco.

It’s a small addition, picking up what would have been enough space for 300 employees in the days before social distancing protocols. But the Mountain View search giant’s move to expand its real estate holdings, already among the biggest in the Bay Area, comes as other tech companies retrench, shedding excess space or canceling leases. Some start

ups have abandoned offices altogether, going virtual to save money.

Google confirmed exclusively to The Chronicle that it has leased around 42,000 square feet at Two Rincon Center, where it already has offices.

It’s one of the biggest San Francisco deals in a year chilled by the pandemic. It’s also one of the few signs of business expansion in downtown San Francisco, which has been economically devastated by the absence of hundreds of thousands of office workers since March. Google’s core advertising business was hit by the coronavirus, but it hasn’t had layoffs or listed any Bay Area office space for sublease.

Michael Appel, a Google spokesman, said offices will remain a core part of the company, and major expansions in San Jose and Mountain View are moving forward. The company is seeking a flexible work model that combines inperson collaboration and remote work, he said.

Last month, Sundar Pichai, CEO of Google parent Alphabet, said a hybrid model would best serve employees. Working from home sometimes will mitigate some downsides of always being in an office, such as the twohour commute between San Francisco and Mountain View common during prepandemic rush hours, he said.

“We firmly believe that in person, being together, having a sense of community is super important when you have to solve hard problems and create something new, so we don’t see that changing. But we do think we need to create more flexibility and more hybrid models,” Pichai said at a Time magazine event.

Google is striking a middle ground compared to tech companies like Twitter, which is allowing workers to stay home forever, and Netflix, whose coCEO Reed Hastings called remote work “a pure negative” and is eager to bring back employees.

The tech giant’s continued investment in San Francisco, where office vacancies spiked to 14.1% last month, is a positive sign for the battered economy, experts say.

“After a significant downshift in new leasing activity caused by the pandemic related economic downturn, it’s certainly a positive sign that a major tenant in San Francisco has moved forward with its expansion plans,” said Robert Sammons, senior director of

Bay Area research at real estate brokerage Cushman & Wakefield. “It is a sign that companies will indeed require office space moving ahead in a postpandemic world and in the resiliency of San Francisco.”

Google offices, along with all other nonessential businesses, remain closed in San Francisco. City officials have not yet released a timeline for when they will be allowed to reopen.

The company is allowing employees to work from home until at least July. Other tech giants like Facebook, Salesforce and Uber have similar plans.

Google previously leased 166,460 square feet at Two Rincon Center in 2017. Hudson Pacific Properties owns Rincon Center, which was previously a hub for Salesforce and near the Transbay neighborhood. Google has numerous offices near the Embarcadero, including at the Ferry Building, Hills Plaza, One Market Plaza, One Maritime Plaza and 215 Fremont St.

Google has also committed more than $ 100 million to support affordable housing in the Bay Area, as part of a $ 1 billion pledge made last year.

Ruth Porat, chief financial officer of Google and its parent Alphabet, said in June the company expected a “modest decrease” in capital expenditures this year as the company slows its real estate expansion compared to last year.

“We continue to be very much focused on the fact that place and space are important. We believe in collaboration. Serendipity is key to innovation,” she said on a quarterly earnings call with Wall Street analysts.