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2 Months : From Nov 2019 to Jan 2020
By Keiko Morris
Facebook Inc. is in talks to lease a landmark Manhattan building in a deal that would make it one of New York's largest corporate tenants and would help offset the lack of Amazon.com Inc.'s second headquarters earlier planned for the city.
The social-media giant has its eye on about 700,000 square feet of space at the Farley Building, a vast post office undergoing mixed-use redevelopment in Midtown Manhattan, people familiar with the discussions said. That new space would be in addition to Facebook's recent deal to lease 1.5 million square feet at the new Hudson Yards neighborhood, which the firm announced last month.
A lease at Farley and Facebook's recent lease at Hudson Yards, combined with its existing offices in the city, would bring the company's total footprint to more than 3 million square feet of New York office space. That would catapult the company into the top ranks of the city's largest corporate tenants, putting it in the same category as companies like JPMorgan Chase & Co. and Bank of America Corp., which have had a major presence in New York for many years.
If the Farley deal is completed, the new leases would create space for more than 14,000 Facebook employees, according to rough estimates by real-estate consultants. Before Amazon stunned New York's business community less than a year ago by canceling plans for a second-headquarters project in Long Island City, Queens, it had said it aimed to create some 25,000 new jobs in the area over time.
Many of the largest U.S. tech companies have been scrambling for the most prized office buildings downtown and along the Hudson River, and their expansion is remaking swaths of Manhattan. Tech, advertising and media companies have been the biggest occupiers of Manhattan office space this year, according to real-estate services firm Newmark Group Inc.
A number of executives warned that Amazon's about-face would discourage other major tech companies from considering the city. Instead, tech interest has only grown. Alphabet Inc.'s Google, Apple Inc. and Spotify Technology SA have scooped up office space over the last two years. Others with a strong presence in the city are looking to expand -- including Amazon. The retail giant also looked at the Farley Building, which owner Vornado Realty Trust is converting into offices and will be part of a complex with retail space and a train hall near Penn Station.
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. "Amazon wanted to do that with a new headquarters, but that didn't work out...It looks like Facebook wants to do something similar."
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.
Many of the new tech deals have been reached without significant incentives or extra tax breaks from the city. At Hudson Yards, Facebook isn't getting the same financial inducements, like additional tax credits, that were included in the package offered to Amazon.
"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."
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 providing 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.
Facebook's most recent deal was for 1.5 million square feet of space, which could accommodate as many as 10,000 employees, according to broker estimates. That news followed Google's deal to lease 1.3 million square feet at a converted former freight terminal in lower Manhattan, part of the company's plan to add some 7,000 in staff in the city over 10 years.
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 after, New York developer Tishman Speyer announced 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 06, 2019 05:44 ET (10:44 GMT)
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