Google’s recent Dublin office decision isn’t a canary in the FDI coal mine, but there are signals of change to come worth heeding, writes Elaine Burke.
Maybe it’s because we’ve started to believe that anything can happen in this most unprecedented year, but when Google made the sensible decision not to rent a Dublin office that won’t be used for the foreseeable future, a small wave of panic came.
Would this mean Google was about to pull out of Ireland? Would other big tech companies follow? Would this signal the end of years of foreign direct investment (FDI) from some of the world’s biggest companies?
Of course not.
‘The Covid-19 impact in Dublin’s office sector is more likely a speed bump than a roadblock’
– TONY WATERS
Indeed, Google has decided not to go ahead with plans to lease the seven-storey Sorting Office in Dublin’s docklands for up to 2,000 employees. But there’s no more to read into that than the fact that Google, like businesses across the world right now, can’t be certain when it will be safe for workers to occupy a space such as this to capacity. To start renting a building that’s bound to lie idle until at least July 2021 (according to Google’s own remote work policy) is just an unnecessary drain on resources.
Meanwhile, the Alphabet subsidiary still has its own sites in development in the Irish capital. Google bought the Boland’s Mill site from NAMA in 2018 and completed a €120m deal for the Treasury Building in Grand Canal earlier this year. Both these developments will be there to accommodate any expansion of its Irish team when we finally enter the post-Covid world.
As for the other big tech neighbours in Dublin’s Silicon Docks, Facebook is still building a new campus in Ballsbridge and Salesforce Tower is expected to have capacity for 3,500 workers when it’s complete.
In fact, the only real panic is among the city’s developers and commercial real estate agencies, though they remain optimistic. Despite expecting the lowest level of office take-up in the capital since 2012, commercial property consultancy HWBC doesn’t foresee a crash akin to 2009, as oversupply and buyers laden with unsustainable debt aren’t part of the problem this time around.
“With over half a million square feet of deals in active negotiation, and continuing strong demand from international technology firms for space, the Covid-19 impact in Dublin’s office sector is more likely a speed bump than a roadblock,” said HWBC managing director Tony Waters.
And big tech isn’t about to make a dramatic about-face on office space either as Microsoft inks a deal for three floors of a new office block in the Dublin docklands to accommodate up to 400 workers.
Indeed, not all tech CEOs see remote work as their ideal model for the future. Netflix co-CEO Reed Hastings told the Wall Street Journal last week that he doesn’t “see any positives” related to working from home, though he does foresee a future of four days in the office and one working remotely.
Anyone who says Google is going to "pull out" of Ireland doesn't know how tech FDI works. They won’t pull out, not because of loyalty to Ireland, but because it's bad for business. But to understand how exposed IE or UK or NL is, look closely at job type.https://t.co/25irD0i3mp
— Stephen McIntyre (@stephenpmc) September 8, 2020
Stephen McIntyre, formerly of Google and Twitter and now a partner at Frontline VC, believes those concerned of a big tech exodus based on office space aren’t looking at the real warning signs. “If you’re a government that relies on big tech FDI, the first lesson is: know what jobs they prize most. Count the number of employees who write code or carry a sales quota. They’ll be the last to go,” he wrote in a Twitter thread.
McIntyre believes Ireland’s real vulnerability is in the shift to remote work for engineering and sales roles. “Sales will happen more over Zoom. [Ireland and the Netherlands] used to compete only for inside sales (v enterprise sales) because big deals were done in person in London or Paris or Hamburg. But in a post-Covid world of mostly remote sales, small ‘field sales’ offices may suffer more than hubs.”
McIntyre warned: “A country that depends on tech FDI shouldn’t get distracted by office space and what that implies for future job numbers. Lower value jobs will eventually disappear anyway – quietly, with no sudden ‘pull out’ – if not due to Covid, then due to automation. That should be old news. Focus instead on how engineering and sales teams are changing in the face of Covid. That’s where the opportunity for tech FDI lies.”
Working world in transition
While Google’s letting decision is not a canary in a coal mine, it is a portent of change that’s not only happening in Dublin. In San Francisco, the mother of all tech hubs, Pinterest recently paid an $89.5m termination fee on a lease for an additional HQ building measuring 490,000sq ft.
While Microsoft, Netflix and others will continue bringing staff back to offices when they can, others are accepting that the tide has turned toward flexible work. Twitter and Slack have both given employees the option to work from home permanently, while even some long-established companies are transforming how they work. Siemens launched a mobile working plan for its 140,000-strong workforce to do two to three days in-office work per week, while Fujitsu will halve its office space in Japan to facilitate a hybrid model of remote work and hotdesking for 80,000 employees.
These plans are to facilitate the future but right now, amid the pandemic, Facebook and Salesforce, like Google, have extended remote work plans to the summer of July 2021 and they may well go further than that. Even Hastings, who is eager to get staff back to office business as usual, concedes that this is an open-ended timeline. He said Netflix’s 8,600 employees will likely come back to offices “six months after a vaccine” – a date that, like the treatment it relies on, is yet to be discovered.
‘In a post-Covid world of mostly remote sales, small field sales offices may suffer more than hubs’
– STEPHEN MCINTYRE
So while the commercial property sector is unbowed and FDI investment seems secure – for now –the biggest short-term impact of this disruption of office life will be on the local economies built around these office workers.
More than 40,000 office workers are based in Silicon Docks and its surrounding area in Dublin, and their recent absence is notable. Claire Byrne, a Green Party councillor in the area, told The Irish Times of her concern that “we are catering here for a transient part of the city”.
The real concerns now for FDI in Ireland are if the indirect benefits to local economies will continue after working models have been transformed, and whether the jobs created are resilient against automation and the borderless recruitment potential of remote working.
An optimistic view would be that this could facilitate a spreading of the wealth of FDI across the country, as a dispersed network of remote workers could bring their spending power to towns and villages beyond the capital city. And so Ireland’s enticing proposition as a great place to live and work should no longer just be marketed to big business but to the engineers, the developers and sales personnel these companies need to attract and retain.
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