Box (BOX) Chief Executive Aaron Levie runs a company that makes work collaboration software. But last week he joined a growing list of tech chieftains in Silicon Valley who are letting employees isolate themselves at home much longer than initially planned — permanently in some cases.
In a shift that could have broad implications on the future of workplaces, Levie’s Box joined a chorus of tech companies, including Twitter (TWTR), Facebook (FB) and Google-owner Alphabet (GOOGL) that are grappling with the seismic shifts occurring in the workplace due to the coronavirus.
The companies now are debating their future real-estate needs and what offices will look like. They’re also wondering how to allow workers to operate remotely and yet keep them corralled.
“We’re announcing that all Box employees can work from anywhere until the end of the year, providing increased flexibility and peace of mind for our nearly 2,000 employees globally,” Levie wrote in a blog post. “While the pandemic has thrust many businesses into operating remotely out of necessity, many organizations, including Box, are seeing the benefits of working digitally even when it’s safe and healthy to go back to the office.”
A day before the announcement by Levie to allow Box employees to work from anywhere, Shopify (SHOP) CEO Tobias Lutke was even more blunt on Twitter. Shopify is a Canadian e-commerce company that employs 5,000.
“As of today, Shopify is a digital-by-default company,” Lutke announced. “We will keep our offices closed until 2021 so that we can rework them for this new reality. And after that, most will permanently work remotely. Office centricity is over.”
“We cannot go back to the way things were. This isn’t a choice; this is the future,” he said.
A Migration To Lower Cost Regions?
The implications of this shift to remote work are significant. Employees may migrate from high-cost areas like San Francisco, New York, Los Angeles and Seattle, to lower cost regions. These shifts, along with the Covid-19 impact overall, could shake up the commercial real estate market.
A recent survey by San Francisco-based Bay Area Council said that a fifth of the region’s companies plan to keep workers remote even after it’s safe to open offices. And 89% are planning at least partial remote work policies.
Offices will be different when workers return, it said. In addition, more than 65% of companies are planning to alternate or rotate employee work schedules. Offices also plan to realign space for social distancing.
In another survey by Kung Group, of 517 founders of venture-capital backed companies, 71% would let some or all of their employees continue to work remotely when the coronavirus restrictions are lifted.
About 60% claimed that there was no impact on their workers’ productivity. In fact, 16% said productivity actually increased.
Work From Home Impact On Real Estate
Jim Berry, U.S. Real Estate leader at Deloitte & Touche, says that unlike past economic challenges, Covid-19 is having an immediate, widespread impact on the commercial real-estate industry across the globe.
Prior to Covid-19, he said, underlying fundamentals in commercial real estate were solid. Transactional activity showed strength, capital commitments remained high and debt service coverage ratios looked good. But Covid-19 has shaken that up.
“One of the many things that was unique about the Covid-19 event was the speed with which it impacted all people and enterprises across the globe,” Berry said in an email to Investor’s Business Daily.
“Right now there is a bit of a pause occurring, as companies more broadly consider their real estate needs.” he said. “We see this in declines in leasing activity currently.”
Numerous factors are playing a role in the shift. Chief among them are health and safety concerns and how to maintain company culture.
Different Models Will Emerge
In a recent report by Deloitte & Touche, authored by Berry, he said, “This abrupt change in the way we work has required mass remote working, a complete lifestyle change.”
He added: “These converging factors, which may prevail over a sustained time period, will likely continue to influence occupiers and end users of real estate in unprecedented and unique ways.”
Berry went on to tell IBD: “It’s too soon to tell what models will most likely emerge as the options around space reconfiguration and design are considered, as well as what the impact of continued, increased remote working will be.”
He said companies are investigating various models, including hub and spoke strategies that lead to increased dispersion of employees geographically. They also are considering who can and should work remotely.
“It is likely there will be no single model that emerges,” he said.
Twitter Takes Lead On Work From Home
Tech companies have mostly led the way on making this transition.
Jack Dorsey, CEO of both Twitter and digital payment services company Square (SQ), recently told Twitter employees they could permanently work from home, even after the coronavirus pandemic ends.
A week later he included Square in that plan. In some cases, employees with jobs that require a physical presence will still need to come in, he said.
Dorsey’s announcement was followed by a blog post from Jennifer Christie, Twitter vice president of people.
“If our employees are in a role and situation that enables them to work from home and they want to continue to do so forever, we will make that happen,” she wrote.
“Opening offices will be our decision; when and if our employees come back, will be theirs,” she said. Twitter does not expect to open offices before September.
Facebook Sets Work From Home Plans
Facebook CEO Mark Zuckerberg gave an update on May 21, speaking to workers during a staff meeting livestreamed on his Facebook page. He said as many as half the company’s 48,000 employees would be working from home within the next 5 to 10 years.
“It’s clear that Covid has changed a lot about our lives,” Zuckerberg said. “Coming out of this period, I expect that remote work is going to be a growing trend as well.”
However, he said employees might have their compensation adjusted based on their new work locations. Zuckerberg also warned, “There’ll be severe ramifications for people who are not honest about this.”
Facebook did not respond to a request for additional comment.
It’s a stark change for Facebook and other large tech companies. They have built giant campuses, with free cafeterias, game rooms, gyms and free shuttle buses. This includes numerous other perks to keep employees comfortable at the workplace.
Alphabet CEO Sundar Pichai, in early May, told employees he expected most of them would work from home until the end of the year. Alphabet plans to reopen some offices July 6, for workers who want to come back. He said the return will be gradual.
Big Bonus For Smaller Regions?
There are upsides to companies letting employees work from home. It could help regions that have not benefited from the technology boom.
“Big Tech and the broader innovation sector have generated significant technology gains and wealth for the country,” wrote Mark Muro, a senior fellow and policy director of the Metropolitan Policy Program at the Brookings Institution, in a recent column.
More than one-third of the nation’s digital services job growth in the last decade came from just five metropolitan areas. They are: New York, Seattle, Boston, San Francisco and San Jose, Calif., he wrote.
“This is why the Facebook and Twitter announcements are such a big deal,” Muro said. “These companies’ moves to permanent remote work is not just a signal that work within cities may soon be reorganized. The announcements could also forecast a degree of tech decentralization across the continent that no amount of real estate appreciation, pleas from heartland leaders, and promises to open branch offices have been able to achieve.”
“Facebook’s plan to allow employees to work outside of expensive, superstar cities seems like a watershed moment,” he said
Walmart Rethinks Remote Work
But it’s not just big tech companies adjusting their work-from-home plans.
Walmart (WMT) said it plans to have thousands of its tech employees work from home after the pandemic subsides.
In an internal memo sent Thursday afternoon, according to a report from CNBC, Walmart’s global chief technology officer, Suresh Kumar, told its technology team of workers that the company is rethinking how it uses its offices and brainstorming ways to make it easier for them to work remotely.
“We believe the way of working in the future, particularly in tech, will be fundamentally different than it was before,” Kumar wrote in the email. “It will be one in which working virtually will be the new normal.”
The retailer has about 10,000 tech employees in the U.S.
Big Offices A Thing Of The Past
Jes Staley, CEO of bank operator Barclays, recently said having thousands of workers in a corporate office may never happen again.
“There will be a long-term adjustment in how we think about our location strategy,” Staley said. He made the comment to reporters after announcing quarterly earnings in late April. “The notion of putting 7,000 people in a building may be a thing of the past,” he said.
American Express (AXP) will also allow most employees to work remotely for the rest of the year. And Visa (V) plans to allow a majority of its 20,000 employees to work from home through 2020, CEO Alfred Kelly said in a LinkedIn post.
“It simply seems wrong for Visa employees to be crowding transit systems and roads when we have the flexibility to both continue full business continuity while working from home,” he wrote.
“While we will look at bringing employees back into our offices on a site-by-site basis in stages, the flexibility to remain working remotely is the right thing to do for our employees and their families.”
Surge In Web Conferencing
Cisco Systems (CSCO), which provides videoconferencing tools and services, is seeing a surge in activity.
Cisco CEO Chuck Robbins said its Cisco Webex videoconferencing platform was running at three times the capacity compared with February. He made the remarks when Cisco released quarterly results on May 13.
“We had well over 500 million meeting participants, generating 25 billion meeting minutes in April,” Robbins said. “Some elements of this work-from-home scenario will not go away.”
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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