Google is gobbling up office space.
Google’s parent company, Alphabet, has been adding office space more rapidly than any other tech company in the Bay Area. It now owns or leases commercial real estate that’s equivalent to 14 Salesforce towers.
With 19.9 million square feet, Alphabet has a Bay Area footprint that’s 38 percent larger than Apple’s. Facebook is a distant third with 3.6 million square feet — though it’s set to expand that by 50 percent with a new Menlo Park campus, and has projects in San Francisco and Fremont as well.
Alphabet’s holdings, calculated by commercial real estate research firm CoStar Group, reflect its vast and expanding operations in the Bay Area. Google, Alphabet’s largest division, employs more than 34,000 people in the region. But its growth has brought inevitable side effects like higher office rents and pressure on housing and traffic.
The presence of huge companies can make it difficult for startups to find space, as landlords may be more willing to work with established, deep-pocketed firms that can sign longer leases and might even buy the property in the future.
In 2014, Box, then a privately held cloud services startup, was rapidly outgrowing its Los Altos office and seeking a new home. Peter McGoff, the company’s general counsel, spent hours working on leases, only to get calls informing him, “Sorry, Google just grabbed the deal.”
“You’re competing with a company that has unlimited resources,” McGoff
said. “When we’re struggling to add another 10 cents a square foot on rent, they can easily do that and throw in an option to buy — for a landlord, that’s a big thing.”
At one of the sites Box lost out on, Google went in with the option to purchase the entire campus, and “we can’t compete on that scale,” McGoff said. He added that Box ended up moving its offices to Redwood City, farther from Palo Alto than CEO Aaron Levie originally wanted.
Since then, Alphabet has continued to accumulate office space at a rapid clip. Besides Google, Alphabet’s divisions include life sciences company Verily and self-driving car division Waymo.
In 2017, the company purchased its largest amount of commercial real estate in a single year — 3.6 million square feet, or 2½ Salesforce towers — in Mountain View, Sunnyvale and San Jose, according to CoStar Group. Google, Alphabet’s most profitable division, declined to comment on CoStar’s data.
“Google has been far and away the most aggressive” in accumulating office space compared to other tech companies, said Jesse Gundersheim, CoStar’s San Francisco market economist.
Google already dominates its hometown of Mountain View, where 20,000 employees work, according to CoStar Group. In Sunnyvale, Alphabet owns or leases 4 percent of the office space. Google plans to open a campus there by 2021 that could fit up to 4,500 workers.
It has more than 1,000 workers in Palo Alto and Alphabet’s real estate reach stretches as far as Alameda. Google’s YouTube division is the largest employer in San Bruno.
Other deals are in the works. Google is negotiating with the city of San Jose to buy acres of land, potentially adding up to 8 million square feet of office, research and development space. The project could bring 15,000 to 20,000 jobs, mostly from Google, to the city. If it moves forward, Google could become one of San Jose’s largest employers.
Maria Noel Fernandez, a campaign director with community group Silicon Valley Rising, is concerned that Google’s huge project in San Jose could contribute to the housing crisis that has forced lower-income workers to leave the Bay Area.
Her group, made up of community activists, residents and labor supporters, has pushed for Google to commit to investing in affordable housing.
“As we think about these companies continuing to expand, continuing to grow, the question we must ask ourselves is what real plans the cities and the tech industries will create to address the problems that are really being led by this growth?” Fernandez said.
Google declined to comment for this story. In January, a Google manager said the company looked forward to working with city officials and the community “to create a shared vision for downtown San Jose that will benefit the city and its residents.”
Google is also increasing its investment in offices outside of California (as are competitors like Apple). CEO Sundar Pichai said in a recent Alphabet earnings call that the company “grew faster outside the Bay Area than in the Bay Area” in 2017. Google plans to make “significant investments” in offices in nine states, including Colorado, California and Michigan, and build five data centers in the U.S., Pichai said.
In the Bay Area, housing for employees has become a foremost concern for companies like Google. Mountain View recently made changes to its city rules to add housing in what had been a primarily commercial neighborhood.
In San Bruno, YouTube plans to rapidly expand its 1,700-employee workforce, hiring an additional 350 people a year.
San Bruno City Councilman Marty Medina says he has seen YouTube buy up numerous properties, not unlike someone playing the game Monopoly.
“It’s a confirmation of why I live in San Bruno,” Medina said. “It’s a great place, and YouTube has spotted the potential . ... But we have to be careful when we load on too much on one employer. It’s a delicate balance.”
The Bay Area has 101 municipalities, according to the census. That means a big company like Google can aggressively negotiate, said Dowell Myers, a professor of policy planning and demography at the University of Southern California.
“They can try to play off one city against the other,” Myers said.
For the startups that Silicon Valley is known for, this can mean fierce competition. Ten years ago, Centrify, a startup that prevents data breaches, had an office for close to 100 employees in downtown Mountain View. As Google rapidly expanded there, rents rose, pushing Centrify to move to Sunnyvale, according to CEO Tom Kemp.
Centrify had to move again. Its landlord declined to let it expand because Apple was increasing its presence in Sunnyvale. So the company moved farther south and today is in Santa Clara.
“You get squeezed,” Kemp said. “You get pushed out.”
“Google has been far and away the most aggressive” tech company in accumulating office space. Jesse Gundersheim, CoStar Group