NYC office market revives with tech firms hunting for space
NEW YORK’S battered office market is drawing more interest from tech companies that are hungry for space even as the pandemic upends traditional work.
Roku, Inc. and Microsoft Corp. are among firms in talks for new leases in Manhattan. Amazon.com, Inc. and Facebook, Inc. have explored options to expand their offices. Digital-payments firm Stripe, Inc. is taking a chunk of space in the financial district.
In the year’s biggest office deal, Google agreed earlier this week to buy St. John’s Terminal, a redevelopment project it was already leasing but hasn’t yet occupied, for $2.1 billion. The transaction was a bet on New York’s future as a tech hub that also affirmed the search-engine giant’s commitment to in-person work.
“It’s all great news,” said Bill Rudin, chief executive officer of New York landlord Rudin Management Co. “It’s all part of the tech ecosystem. The big players are coming in but the small-, medium-sized companies are also making deals and expanding and looking for space.”
A year and a half after COVID-19 shut down the city and emptied its skyscrapers, the real estate world is eagerly anticipating a burst of leasing by newcomers to the market as well as established companies looking for a bigger footprint. But the optimism comes at a precarious time as the Delta variant rages, disrupting return-to-office plans for many of Manhattan’s key tenants — particularly in the tech industry.
While Wall Street firms such as Goldman Sachs Group, Inc. and JPMorgan Chase & Co. have called most workers back to their buildings, Facebook and Google have said employees don’t need to be back until next year. Microsoft said it can no longer give a date for a full reopening because the virus is too unpredictable.
Tech companies also have been at the forefront of more-permanent flexible work models. Facebook, which has more than 2 million square feet in New York, said in June that all its employees can request to work remotely full time. Google, the owner of several buildings in the Chelsea neighborhood, has said workers only need to be at its locations for part of the week.
But their interest in new office space shows just how swiftly tech companies are growing and their need to accommodate an ever-expanding workforce. The industry’s deep-seated culture of collaboration also lends itself to in-person work. A study of more than 61,000 Microsoft employees, published this month, showed remote work caused staff networks to “become more static and siloed.”
In the second quarter, tech companies new to the market toured roughly 2.1 million square feet of New York office space, 91% more than in the previous three months, according to commercial-property data firm VTS.
Video-streaming company Roku is in talks to lease more than 100,000 square feet at 5 Times Square in Midtown, and Microsoft is close to a deal for roughly 100,000 square feet in the Flatiron district, according to people familiar with the companies’ plans. Stripe recently took more than 100,000 square feet at a WeWork location in lower Manhattan, people familiar with the transaction said.
Representatives for Roku, Microsoft and Stripe declined to comment.
While hybrid work may be the norm for now, the tech companies’ interest in offices is a long-term wager on New York’s rebound and the strength of its hiring pool, according to Jim Wenk, a vice-chairman at the brokerage Savills.
“There hasn’t been a tremendous return to office as we’d all like due to Delta, but people are seeing that’ll eventually subside,” Wenk said. “These companies have significant confidence in this marketplace to acquire and retain talent, and part of that is having marquee real estate.” — Bloomberg
