Google to spend $ 2.1 billion on Manhattan office building

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NEW YORK – Google said on Tuesday it would spend $ 2.1 billion to buy a sprawling Manhattan office building on the Hudson River waterfront, paying one of the highest purchase prices in recent years for an office building in the United States and bringing a wave of optimism to a New York City real estate industry hit by the pandemic and the shift to remote working.

The transaction comes during a precarious period for the city’s office market, the country’s largest, as the rapid adoption of hybrid work and the loss of office space presented the most serious threat to the city. industry for decades.

As Manhattan has a glut of office space available for rent, reaching record levels during the pandemic, the four companies that make up what’s called Big Tech – Amazon, Apple, Google and Facebook – have taken a stand. bullish on the future of New York.

Companies have rapidly grown their operations and workforce, one of the few bright spots for New York, which has been hit harder by the economic toll of the pandemic than any other major American city.

Google was already leasing but not yet occupying the 1.3 million square foot property known as St. John’s Terminal, a former freight terminal undergoing renovation and expansion near the Holland Tunnel. The company has 12,000 employees in New York City – its largest satellite office outside of its California headquarters – and said Tuesday it plans to hire 2,000 more workers in the city in the coming years.

“New York’s energy, creativity and world-class talent are what keeps us rooted here and why we are strengthening our engagement with St. John’s Terminal purchasing projects,” said Ruth Porat, CFO of Google and its parent company, Alphabet. “We look forward to continuing to grow with this remarkable and diverse city. “

Collectively, the four tech giants employ more than 20,000 people in their Manhattan offices. But their employees are unlikely to be working five days a week in the office again anytime soon. Many tech companies have said they will allow employees to work remotely in a hybrid arrangement even after the pandemic has ended. Google recently postponed plans to return to the office in early 2022 due to the highly contagious Delta variant.

How fast the economy is recovering in New York City, especially Manhattan, could depend on its strip of office buildings, which before the pandemic attracted 1 million workers every day whose spending on everything from morning coffee from business lunches to Broadway shows after the hard work of thousands of businesses. The absence of these workers during the pandemic has led many stores and restaurants to close in Manhattan.

Companies embraced remote working during the pandemic in a way they had never had before, deciding that employees could continue to work away from the office for part or all of the week after the end of the crisis. pandemic and even hire new employees who plan to work remotely indefinitely.

As a result, large employers like Condé Nast and JPMorgan Chase have given up on chunks of office space, contributing nearly 19% of Manhattan office space available for rent, according to Newmark, a real estate services company, nearly double the average rate. over the past decade.

About 28% of office workers in the New York City area, which includes parts of New Jersey, Connecticut and Pennsylvania, returned to the office last week, more than double the rate from a few months ago , according to Kastle Systems, a security company that tracks employee cards in office buildings. The national average was 33.6%, Kastle said.

Kate Lister, president of Global Workplace Analytics, a consulting firm advising companies on their return-to-office policies, said hybrid work will remain a permanent feature of the work culture after the pandemic.

Office space isn’t going to go away, but, Lister added, “total space is going to shrink.”

Yet New York City officials have sought to present Google’s announcement as a sign of the city’s rebound.

“This Google announcement is further proof that New York’s economy is recovering and rebuilding,” Democrat Governor Kathy Hochul said in a statement. “We are creating jobs, investing in emerging industries, raising New Yorkers, and together we are making our comeback story.”

Mayor Bill de Blasio called the deal a “historic investment in New York”.

The transaction was first reported by the Wall Street Journal.

When the building opens after construction is completed in mid-2023, Google will have more than 3.1 million square feet of office space in New York City, making it one of the largest tenants in the world. city.

Google’s presence in New York City began in 2000 with a single sales employee who worked at a Starbucks. The company sealed its commitment to the city in 2010 with the $ 1.8 billion purchase of a 15-story building in Chelsea.

Over the past decade, Google has rapidly increased its workforce in Manhattan, hiring young engineers from area universities, attracting technicians who do not wish to reside in Silicon Valley, and expanding its marketing and sales departments. The company has added 5,000 employees in New York City since late 2018.

The terminal that will house Google’s new office is located in Hudson Square, a neighborhood on the West Side of Manhattan that is sandwiched between Tribeca, Greenwich Village and SoHo. Many creative, media, and tech companies have offices there, including website builder Squarespace and eyewear company Warby Parker. Disney has chosen the neighborhood as the new headquarters for its New York office.

In addition to its office district, the district has a growing residential population, after a rezoning in 2013 resulted in a boom in the development of new high-rise buildings and condos.

In recent years, Google’s main rivals, notably Amazon and Facebook, have also invested heavily in New York City, turning part of the West Side, from Midtown to Lower Manhattan, into a thriving tech corridor.

Facebook has acquired more than 2.2 million square feet of office space in Manhattan, most of which was signed just before or during the pandemic, and has 4,000 employees in the city. Amazon, whose headquarters are largely clustered near its rivals on the West Side of Manhattan, purchased the former Lord & Taylor building on Fifth Avenue for $ 1.5 billion in March 2020.

And while the tech industry has been among the most conducive to remote working, businesses are still gobbling up real estate, a potential sign of their pace of hiring and a reimagining of office space.

Tom Wright, president of the Regional Plan Association, a research and advocacy group, said that although technical workers only come to the office a few times a week, they may want more space between desks or rooms. larger conference. In particular, he said, offices need to figure out how to organize hybrid meetings in which some participants are in person while others are videoconferencing from their homes.

“During the pandemic, people assumed a widespread reduction in activity and demand for office space when in reality it is a much more complex equation,” Wright said.

The growing footprint of Google and other tech giants in New York City reflects their growing importance to the city’s economy. Economists expect the tech sector to be the main driver of job growth after the pandemic.

In the first eight months of the pandemic, there were more job openings in tech roles than any other profession in New York City, according to an analysis of job openings by the Center for an Urban Future, a non-profit research group. During this period, the demand for tech workers was more than double that of finance.

The tech sector has become New York City’s most trusted source of new mid- and high-paying jobs, researchers said, with average salaries in tech jobs 49% higher than the industry’s average salary. private.

But the presence of tech giants in the city has also been a source of tension, especially in 2019, when Amazon scrapped plans to build a company campus with 25,000 employees in Queens after facing the opposition from progressive activists, elected officials and union leaders.

They were mainly angered by the billions of dollars in tax breaks and incentives offered by the government to Amazon as a lure.

Less than a year later, Amazon signed a lease for office space in Midtown Manhattan near the Hudson Yards development, the start of a multi-year expansion in New York City.

Julie Samuels, executive director of Tech: NYC, a tech industry advocacy group, said that despite the collapse of the deal with Amazon in 2019, tech companies are still drawn to New York because of its focus. of diverse technological talents.

“I haven’t heard of any other company giving up on their intention to be here or deciding not to come here because of Amazon,” Samuels said. “We were worried about it. “

This article originally appeared in The New York Times.

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