By Keiko Morris
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 7, 2019).
Amazon.com Inc. and Facebook Inc. are loading up on new office
space in New York City, helping fuel an expansion of tech companies
that is remaking a swath of Manhattan less than a year after Amazon
dropped plans to build its second headquarters in the city.
The giant online retailer said it has signed a new lease for
335,000 square feet on Manhattan's west side in the new Hudson
Yards neighborhood, where it will have more than 1,500 employees.
The new lease represents Amazon's largest expansion in New York
since the company stunned the city by abandoning plans to locate
its second headquarters in the Queens neighborhood of Long Island
City.
The deal comes the same day The Wall Street Journal reported
that Facebook is in talks to lease 700,000 square feet in a
neighborhood nearby. Combined with Facebook's other recent deals in
the city, such a move would catapult the social-media company into
the top ranks of the city's largest corporate tenants, alongside
JPMorgan Chase & Co. and Bank of America Corp., which have had
a major presence in New York for many years.
For Amazon, the new lease and accompanying jobs come in a manner
that couldn't be more different from its earlier dealings in New
York. Amazon said it is taking the space -- in a property being
redeveloped at 410 Tenth Avenue -- without any special tax credits
or other inducements like those it had been offered previously. And
this time, the company ran no cross-country tournament, in which
some cities felt they were being played against each other in the
contest last year for what Amazon termed its "HQ2" site and the
jobs it would bring.
New York City Mayor Bill de Blasio and Gov. Andrew Cuomo, both
Democrats, had courted Amazon -- and the company's pledge to create
25,000 new jobs -- by offering up to $3 billion in financial
incentives. Amazon canceled its plans for the project after facing
a backlash from some politicians and activists over the package
offered to the company.
After the Journal reported on Amazon's new lease, Rep.
Alexandria Ocasio-Cortez (D., N.Y.), a vocal critic of the HQ2
effort who represents neighborhoods near the proposed site,
tweeted, "Won't you look at that: Amazon is coming to NYC anyway -
*without* requiring the public to finance shady deals, helipad
handouts for Jeff Bezos, & corporate giveaways."
Many in the New York business community worried that Amazon's
withdrawal would signal to other tech giants and large companies
that New York had become inhospitable to business. Instead,
Amazon's continued expansion marks the latest sign that tech
companies are scrambling for prime Manhattan real estate to attract
the city's large and well-educated talent pool.
"It's clear the main reason Amazon wanted to be here was the
availability of a skilled tech workforce plus the synergy with
related industries," said James Parrott, an economist at the New
School. "And New York City still retains that attraction."
A tech corridor stretching several dozen blocks is emerging on
Manhattan's west side, where Facebook's search for new office space
has led it to consider the Farley Building, a landmark post office
under redevelopment across the street from Penn Station, according
to people familiar with the matter. The Menlo Park, Calif.-based
company said last month that it had signed a lease for a 1.5
million square-foot campus at Hudson Yards, several blocks further
west.
Combined with a deal at Farley, that lease and Facebook's
existing offices would bring its total footprint in the city to
more than 3 million square feet. All told, that would create space
for more than 14,000 Facebook employees, according to rough
estimates by real estate consultants.
Alphabet Inc.'s Google, which has plans to add 7,000 employees
over the next decade in the city, signed a lease earlier this year
for 1.3 million square feet at a converted former freight terminal
in the Hudson Square neighborhood as well as space in two other
buildings nearby.
New York is emerging as an East Coast hub for technology because
of the size of its labor force, its extensive transportation system
and the cultural and entertainment activities that come with a big
city, analysts and real-estate executives said.
"It's hard to predict future growth, but we believe New York is
a vibrant market with a tremendous pool of talent," a Facebook
spokeswoman said in an emailed statement.
Tech, advertising and media companies have been the biggest
contributors to Manhattan office leasing this year, according to
real-estate services firm Newmark Group Inc. Those numbers don't
include Amazon's new Tenth Avenue location, which owner SL Green
Realty Corp. is redeveloping. Amazon already employs more than
8,000 people between its tech hub and fulfillment centers in New
York City.
In New York City, "Google is forming its own community and
campus," said Victor Rodriguez, associate director of analytics at
CoStar Group Inc., a real-estate data firm. "It looks like Facebook
wants to do something similar."
Average annual tech-sector job growth between 2009 and 2018 has
increased at a pace almost four times as fast as the city's overall
private job growth, according to Mr. Parrott's analysis.
The increase in tech professionals, who typically earn well over
$100,000 a year, have helped fuel job expansion in rental housing,
restaurants, car services and personal services such as fitness
trainers. The number of for-hire vehicle drivers in 2018 was
120,000 -- four times what it was in 2014, Mr. Parrott said. He
added that part of the city's Uber and Lyft traffic can be
attributed to tech workers using those ride-hailing services.
The tech interest is also giving a welcome boost to the city's
office market, injecting new demand when many other businesses have
hesitated to expand. That is good news for office owners who are
expecting about 22 million square feet of new office space to be
completed between now and 2023, according to Newmark Group.
It is also helping to counter the effects of turmoil at WeWork.
The co-working company decided to put aside initial-public-offering
plans and has been cutting back demand for leases after its rapid
growth made it the largest occupier of Manhattan office space.
The growing tech appetite is already having a spillover effect,
creating new opportunities for other projects. Tokyo-based
advertising and public-relations firm Dentsu Inc. had been close to
a deal at the Farley Building but was bumped when Facebook showed
interest, according to people familiar with the discussions.
Not long afterward, New York developer Tishman Speyer said it
had signed Dentsu to a long-term lease at the Morgan North building
in Manhattan's West Chelsea neighborhood.
Write to Keiko Morris at Keiko.Morris@wsj.com
(END) Dow Jones Newswires
December 07, 2019 02:47 ET (07:47 GMT)
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