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Google ponders "should it stay or should it go" after Mountain View city council largely denies its expansion requests

LinkedIn Corp. (LNKD) has a market cap of $25.17B USD on an annual revenue of $2.21B USD and a 2014 annual loss of $15M USD.  Google Inc. (GOOG) earned a cool $14.4B USD in 2014 on a revenue of $66.0B USD.  And it has a market cap of $366.9B USD.  Pop quiz -- if these companies were competing to place their headquarters in your town which company would you pick as a city hall official?

I. Contested Ground

Well if you're officials in Google's home town of Mountain View, the answer is apparently the seemingly more unlikely candidate.  Google is in the market for a new headquarters.  So too is LinkedIn.  And both were vying for a 2.2 million square foot (50.5 acre) patch in Mountain View's North Bayshore district [MAP].

Together, LinkedIn and Google had requested 5.24 million square feet (~124 acres) of space, mostly in northern Mountain View.  It was apparent there would be winners and losers as the city only planned to develop half as much total acreage as was requested by the pair.

Both companies tried to offer up incentives to sell the city on their respective visions.  LinkedIn promised to foot development costs of a basketball court, movie theater, and a gym with a pool.  It didn't put a price tag on that effort.  Google, meanwhile, offered up a more concrete number -- a $200M USD package that would have paid for a lengthy bike path along the highway and a public safety building.

Google vs. LinkedIn
[Image Source: Jason Mick/DailyTech]

Silicon Valley Business Journal (SVBJ) reports that in a Tuesday night vote the city council decided to give LinkedIn the lion's share of the territory -- 1.5 million square feet (34.4 acres).  That's more than two-thirds of the development space.  Google, meanwhile was offered up the leftovers -- 500,000 square feet (11.5 acres).  The rest of the land will go to smaller projects or be reserved for future development.

Put slightly differently, Google asked for 3.4 million square feet (78 acres) to expand four of its sites with current buildings.  The new land and old would be pooled to make room for four builds comprising the crown jewels of its new mega headquarters.  But ultimately Google received only roughly a seventh of the land it asked for.

By contrast LinkedIn -- who was vying with Google for some of the land in North Bayshore, will get nearly all the 1.6 million of office space (to house a new headquarters) and the 240,000 worth of accompanying mixed retail spacethat it asked for.  This is a boon as LinkedIn is currently based out of a "mere" 400,000 square feet (9.2 acres) of total office space in North Bayshore under a lease that expires in 2023.  The development will roughly quadruple its footprint.

Google HQ
The proposed HQ would be comprised primarily of hulking glass dome-like structures north of Highway 101.  These structures can be seen above in the artist's render.

Google Mountain View -- former plan
The proposed development land is seen in green versus the location of the current sprawling Googleplex in orange. (click to enlarge) [Image Source: Jason Mick/DailyTech]

The outcome all but erases the potential of Google building its futuristic headquarters on the site, as it only provides enough space to potentially build one of the hyper-futurist buildings Google and its partners envisioned.  And while snubbing Google for LinkedIn may seem foolish, there is perhaps more than meets the eye.

The choice was founded in part on some valid criticism of Google's plan.

II. Google and Silicon Valley's Mega-Headquarters Arms Race

But first -- what set the stage for this bizarre showdown in this first place?  In a word, the answer is "competition."

In Silicon Valley, the mega-headquarters arms race is officially on.  Apple, Inc.'s (AAPL) "spaceship" infinite loop/ring mega-headquarters set to open next year housing 13,000 employees.  The cutting edge structure -- engineered by the Arup Group Ltd. and designed by Foster + Partners -- will cover 2.8 million square feet when complete (64.3 acres).

Apple vs. Facebook

Facebook Inc. (FB) just opened a sprawling warehouse superheadquarters in Menlo Park, designed by legendary architect Frank Gehry.  The new HQ dubbed MPK20 (Menlo Park, Building 20) and covers 430K square feet.  It has a 9 acre garden/park on its rooftop.  And did we mention it's the world's largest open floor plan with room for over 2,800 workers?  Oh and Zuckerberg and company even found time to possibly poke a bit of fun at Google with rooms full of colorful balls.

 

First day shenanigans #theaquarium

A photo posted by Wei Jien (@wei.jien) on


What nerve!

With such a headquarters arms race afoot, it's easy to get carried away.  So did Google take things too far?  That's a hot topic for debate, as feasibility and timeframe appear to be too issues the Mountain View city council faulted Google on.

Google certain pitched hard the visionary headquarters, as did its partners in design.  



The vision was hatched by a pair of design rebels.  First up was London's Heatherwick Studio, the design house headed by Thomas Heatherwick.  Heatherwick is perhaps best known for its eye-catching cauldron at the 2012 Olympic Games in London.  The London firm was joined by the Bjarke Ingels Group (BIG.dk), the self-title studio of Denmark's Bjarke Ingels (winner of The Wall Street Journal's 2011 "innovator of the year" award in architecture).

Google HQ

Google HQ
Artist renders of the next-gen Googleplex and surrounding green spaces.

Together this union of bold European designers would create for Google a remarkable vision which holds the allure of truly setting it apart.  It would be a tree filled glade disrupted by shimmering structures of gleaming glass.  

Google HQ renders

Google HQ renders
Artist renders of the next-gen Googleplex and surrounding green spaces. (cont'd)

Beneath these airy translucent geometries would be a series of modular internals which would be rearrangable "like LEGO blocks" to give Google a highly flexible workspace.

Google HQ

Google HQ
Artist renders of the next-gen Googleplex and surrounding green spaces. (cont'd)
 
The headquarters did ruffle some feathers by requesting an exemption from the city's height limits (pg. 85 of the city's 2030 General Plan [PDF] calls for a height limit of eight stories on the North Bayshore zone).  And its designers admitted that they would have to invent new techniques in order to construct the outside the box vision.

Google HQ

Google HQ
Artist renders of the next-gen Googleplex and surrounding green spaces. (cont'd)

Jim Morgensen, LinkedIn's VP of Global Workplace Services took aim at those concerns in his 10 minute pitch for his company's headquarters plan.  Dubbed Shoreline Commons, the headquarters was the anti-Google, in its more down to Earth, if attractive design sensibilities.  Morgenson is quoted by The New York Times as pitching:

[North Bayshore] is the singular place in Mountain View where we could eventually develop and have enough space for our company without being encumbered by expensive leases, with rates being driven by companies larger and growing faster than ours.

We are doing this [project] without asking for any variances in heights or density, with a project that can be built now with existing technology and union labor.

LinkedIn
LinkedIn's proposed campus (pictured) is expected to be constructed with traditional building methods.

But there's more to it than the risky technical aspects of Google's plan.  After all, Apple's headquarters required new techniques to be invented to created the massive ever-so-slightly-curved panels of building glass that were a critical component of its design.

Yes, it saw cost overruns and delays.  But here we are today and it's almost finished.  

Google surely dreamed big when it came to replacing its current headquarters, the "Googleplex".  But at the end of the day it's hard to buy the argument that technical limitations would have forever checked Google's will to make the vision a reality, particularly in view of its massive cash pile it could throw at it.

III. Should I Stay or Should I Go?

Perhaps the true meat of LinkedIn's successful pitch to beat out Google for the space lie in its "preserve business diversity" selling point.  The argument basically boils down to the notion that Mountain View is too dependent on Google.  Google is Mountain View's top taxpayer, top employer, and top land owner.  It already owns most of the land in North Bayshore and has plans to further control the area by developing real estate in the district, targeted at its employees.

Mountain View
[Image Source: Wayfaring]

But now LinkedIn will become a second, but crucially important piece of the city's tax revenue.  And with its gains, LinkedIn has also partnered up with a low-cost real estate developer, who's looking to develop housing targeted at LinkedIn employees.

The question is whether Google cares about the loss.  While it is certainly a setback, to Google's intended placement of the next-gen headquarters' quartet of towering tent/dome-like structures, there is still some land yet to be gobbled up in the area.

Moreover, according to The NYT Google owns the equivalent of three Empire State buildings worth of local office floor space (roughly 6.5 million square feet, or 149 acres) in North Bayshore.  Mind you that figure likely includes floor space in multi-story structures, so the true footprint will likely be substantially smaller.

Google Mountain View
Google said it would continue to evaluate its "future in Mountain View" -- possibly a threat to City Hall that it might relocated. [Image Source: Panoramio]

It's clear that if Google wants its headquarters to be built badly enough it could clear room for it, even with its existing holdings.  The big question is whether the snub will be enough to alienate Google to the point of encouraging it to relocate.  While Google's VP of real estate David Radcliffe reacted cooly to the rejection, there's also what sounds like a threatening hint at that possibility in his comment to The NYT:

We know the City Council had a tough decision to make last night and thank them and our community for more than six hours of debate.  [We plan to] continue to work with the City on Google’s future in Mountain View.

Perhaps Google is reminded of the classic lyrics of The Clash's "Should I Stay or Should I Go":

It's always tease, tease, tease / You're happy when I'm on my knees
One day it's fine and next it's black / So if you want me off your back
Well, come on and let me know / Should I stay or should I go?

But for all the talk of Google leaving, there's one reason why it may not, even if it is truly bitter.  Namely there's a major elephant in the room I haven't yet mentioned (and one which Google is surely keenly aware of) -- LinkedIn's financials.  While LinkedIn may have won the day and wooed the city council into giving it favored status, it is still earning basically a grand goose egg (nothing) on a yearly basis.  Without a doubt the company could borrow the money it needs for its plans, but that could tip the scales on its already precarious financial state.

Attempts to improve monetization could fix that, but it's worth a degree of cynicism to see a company with such fundamental monetization issues proposing such an expensive project.  It could work out well -- but then again it could not.  Just ask Radioshack who built a beautiful gleaming new headquarters in Fort Worth, Texas at the turn of the millenia, only to wind up going bankrupt.

LinkedIn office
Finances are one unanswered question for linked in. [Image Source: Flickr]

Google may ultimately adopt a wait and see approach.  LinkedIn's plans could collapse under the company's own weight.  And if they don't Google could pack up shop and move on to greener pastures, or opt to work with what it has.

Sources: Silicon Valley Business Journal, via The Verge, The New York Times, SiteproNews





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