Business World

Monday 14 October 2019

Multinational tech giants splash spare cash on trophy headquarters

Plans made for Amazon's 'bubble', Apple's 'spaceship', Facebook's 'open office' and Google's 'Googleplex'

An artist’s impression of the proposed Google corporate headquarters in Mountain View, California
An artist’s impression of the proposed Google corporate headquarters in Mountain View, California

Peter Flanagan

WHILE much of corporate America is retrenching on the real estate front, the four most influential technology companies in America are each planning headquarters that could win a Pritzker Architecture Prize for hubris.

Amazon.com this week revealed plans for three verdant bubbles in downtown Seattle, joining Apple's circular "spaceship," Facebook's Frank Gehry-designed open-office complex and a new Googleplex on the list of planned trophy offices.

Even in Ireland, Apple, Facebook and Google in particular have either built or renovated palatial offices.

"It signals a desire, a statement, to say that we're special, we're different. We have changed the world and we are going to continue to change it," said Margaret O'Mara, associate professor of history at the University of Washington, who has written about the building up of Silicon Valley.

"It's also a reflection of robust bank accounts. They have a lot of cash."

Historically, however, when a company becomes preoccupied with the grandeur of its premises, it often signals a high point in its fortunes. These fantastical buildings may end up as little more than costly monuments to vanity and a loss of focus on the core business that made for success in the first place.

"I've been thinking the Apple spaceship is going to get nicknamed the 'Death Star' because the project is so big and the timing is so bad," said hedge fund manager Jeff Matthews of Ram Partners. The building is coming to fruition just as Apple's product cycles may be maturing, he explained. "It is such a classic contrary indicator that you just get the shakes." He no longer holds Apple stock.

Amazon's design includes three steel and glass spheres almost 100 feet high, which will serve as the centrepiece for three new skyscrapers that will house a rapidly growing workforce in downtown Seattle.

The plans call for "a series of intersecting spheres with ample space for a wide range of planting material, as well as individuals working alone or in groups." Amazon declined further comment.

Google has outgrown its original headquarters in Silicon Valley's Mountain View and is planning to build a 1.1 million square foot Googleplex nearby.

Called Bay View, it will have nine rectangular buildings, horizontally bent, with living roofs surrounded by courtyards and connected by bridges. No employee will be more than a two-and-a-half-minute walk away from any colleague, a design aimed at encouraging collaboration.

Facebook is taking the collaborative idea a step further, with plans for Facebook West, an addition to its main campus in Menlo Park, California, that will be the size of seven-and-a-half football fields.

At the new site, a worker will be able to wander from one end to the other without ever going through a door. The rooftop serves as a park.

Facebook spokesman Tucker Bounds said the expansion will be "extremely cost-effective" and is needed to help the company develop new products for its users. He declined to comment further.

Apple has the most ambitious idea. The company, which has been heavily criticised for using Ireland to legally avoid billions of dollars in taxes, wants to build a 2.8 million square foot glass ring on 176 acres. It would be in part a monument to former chief executive Steve Jobs, who described it as like a spaceship and was closely involved in the plans before he died in 2011.

The project, which could cost up to $5bn according to reports, would house about 12,000 Apple employees.

The technology sector has amassed large cash piles in recent years, leaving many companies over-capitalised, said Bill Smead, head of Smead Capital Management. "Over-capitalised companies often don't perform well, and leaders of over-capitalised companies sometimes squander the money," he said.

While these plans radiate optimism, they risk bringing down a curse that has befallen big companies just as they construct pyramid-scale palaces.

AOL-Time Warner started building the Time Warner Centre on the edge of New York's Central Park featuring two towering glass skyscrapers, right as the tech stock bubble popped in 2000, destroying more than three-quarters of the Internet and media company's value.

The 'New York Times', Wall Street bank Bear Stearns and chemical company Union Carbide also built ambitious headquarters just before their businesses hit tough times.

The "campus curse" has claimed several tech victims as well.

In the early 1990s, Borland Software – once the world's second-largest independent software company – spent more than $100m on offices just south of Silicon Valley that featured ponds, tennis courts and a swimming pool. By 2008 the company had been hammered in the market by Microsoft and was worth less than the cost of the complex.

Since then, Yahoo, MySpace and Sun Microsystems have either hatched plans for, or moved into swaggering headquarters, only to hit the skids. Google moved into Silicon Graphics' campus and Facebook took over Sun's headquarters.

Despite these cautionary tales, some say the new breed of tech companies are smart to construct their own buildings, which match the collaborative way they work and can yield long-term productivity and energy-efficiency benefits.

"As they see energy prices going up they recognise that these buildings have to last longer, and they need to be more in control of the operation costs of these buildings," said John Barton, director of the architectural design programme at Stanford University.

"Employees are more productive in the right kinds of environments. That may be more expensive, but if it pays back in a 5pc productivity increase, that may be really smart," he added.

O'Mara at University of Washington suggests the new tech giants are emulating the workplace innovations of the famous Bell Labs, the historic research arm of AT&T that gave birth to the transistor, the laser and technology behind mobile phones over many decades.

Bell's legendary facility, designed by modernist architect Eero Saarinen in the late 1950s, might not be the right role monument.

Now owned by global telecom giant Alcatel Lucent, the quarter-mile-long mirrored box lies empty, and is likely to end up being turned into a medical centre – or razed. (Reuters)

Irish Independent

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