Big Tech helps save Manhattan’s real estate market

Google’s $ 2.1 billion deal to buy an office building in Manhattan adds to Silicon Alley’s rapid growth, despite the growth of remote working and the declining office market in New York City.

Google buys the old St. John’s terminal on the West Side of Manhattan, expanding its footprint downtown. The company had leased the 1.3 million square foot building, but exercised an option to purchase the space. The price is the highest paid for an office building in the United States since 2018, according to commercial realtors.

It also signals the continued march of the Big Three tech companies to Manhattan, as companies gobble up massive new buildings and entire neighborhoods to house a growing workforce. Google, Amazon and Facebook now have more than 8 million square feet of space in Manhattan, according to real estate experts. And that number is expected to continue to rise as businesses seek more space.

“It’s definitely a positive sign,” said Danny Mangru, research director for the New York and Tri-State of Savills area.

Google’s latest deal brings its total area in Manhattan to more than 3.1 million square feet, the brokers said. In addition to the new building, it also purchased 111 8th Avenue – where it occupies more than 800,000 square feet of space – as well as the neighboring Chelsea Market building.

Facebook has gained space in Hudson Yards and is leasing the 730,000 square feet of office space in the soon to be renovated James A. Farley building in the downtown area. Facebook now has more than 3.2 million square feet of space in Manhattan and is currently looking for more, brokers said.

Amazon is also growing rapidly in Manhattan, although it has canceled plans for a massive “HQ2” in Long Island City after a political backlash. With its $ 978 million purchase of the former Lord & Taylor department store building, Amazon now has nearly 2 million square feet of space.

Big Tech’s rental business helped trigger the first signs of a recovery in the Manhattan office market, which has been hit hard by the Covid-19 pandemic and urban theft. Leasing volume in August more than doubled from July, with 1.46 million square feet of office space rented in the downtown area, according to Colliers International.

Yet while technology is driving the city’s new rental business, the broader market still has a long recovery ahead. Only about 23% of Manhattan workers returned to the office in late August, according to a survey by the New York City Partnership. The partnership’s survey found that 76% of workers plan to return to the office in early 2022. According to Savills, Manhattan has about 86 million square feet of available office space. The uptime rate is now above 18% and at or near a 30-year record, according to Savills.

The Partnership survey found that 70% of employers adopt a rotating or “hybrid” office schedule, where employees can work remotely for part of the week.