Google logo is displayed on the company’s headquarters in Chelsea section of New York City. (Photo … [+]
Corbis via Getty Images
The coronavirus might have convinced the major tech CEOs to order their work force to stay at home until a vaccine is approved, but my bet is that the tech sector is firmly committed to New York City—and will take this opportunity to expand their real estate portfolios at COVID discount prices.
For the last decade, New York City has been turning into a tech town with some of the largest commercial deals signed by Google GOOGL , Amazon AMZN , Facebook, Apple AAPL and Microsoft MSFT . The most recent tech deal occurred in May, when TikTok, the popular video-sharing app from China, signed a lease for a 232,000-square-foot space in Times Square.
One of the primary reasons that tech started to move to New York was to capitalize on a high concentration of talented workers who prefer residing in the financial, cultural and creative capital of the world. Tech also saw advantages in being close to Wall Street and closer to Europe than Silicon Valley in California.
From 2016-2019, tech’s leasing and purchasing binge in the city surpassed 3 million square feet per year, according to CBRE. Based on the latest figures out of the New York State Comptroller’s office, the number of tech sector jobs had increased by 78% between 2009 and 2018.
Real estate owners are suffering economically and hoping to take phased-in steps toward opening their doors. At the same time, some of the major landlords have found themselves saddled with non-paying tenants or tenants looking to renegotiate their lease. Add to that, the costs of upgrading a building to meet the demands of the new pandemic safety rules.
Such a major disruption presents an opportunity for the well-capitalized buyer, and no one has more capital than the combined forces of Google, Amazon, Facebook, Apple and Microsoft. Their total cash reserves: $557 billion! So it’s possible that the buyers in this currently fragile real estate landscape could provide a spectacular opportunity for the very tech companies that have been investing all along. “Rest assured, they are already plotting a real estate strategy as long-term employers of choice,” said David Goldstein, the New York vice chairman of the global real estate firm Savills.
As many legendary investors, past and present, will tell you: Nothing beats New York real estate. Fortunes have been made on the dips. Here are some of the recent tech deals.
Google:
The 6th largest office tenant in New York City with over 5 million square feet.
Purchases:
2010: 111 Eighth Avenue headquarters with 2.9 million square feet for $1.77 billion.
2018: Chelsea Market (75 Ninth Avenue) for $2.4 billion in 2018.
2019: 450 West 15th Street for $595 million.
Current: $1 billion investment in leasing and developing 3 buildings called Hudson Square, totaling 1.7 million square feet.
Amazon:
2019: Abandoned New York as a second headquarters but did not turn its back on the city. It leased 335,000 square feet at Hudson Yards for 1,500 employees.
2020: Leased almost 1 million square feet of warehouse space between three locations in the Bronx, Staten Island and Queens.
Facebook :
Facebook is negotiating a 740,000 square foot lease at the Farley Post Office located at 421 8th … [+]
Universal Images Group via Getty Images
2019: Leased 1.5 million square feet of office space across three buildings at Hudson Yards.
2020: Negotiating with Vornado to take 740,000 square feet at the Farley Post Office building on West 33rd Street.
Apple:
2020: Leased 220,000 square feet at 11 Penn Plaza near Madison Square Garden.
Microsoft:
2019: Leased 63,000 square feet of office space at 300 Lafayette Street in Soho.
Forecast:
Google, Amazon, Facebook, Apple and Microsoft are the dream team of real estate, and the wager is that this group will continue to expand, especially during this pandemic period at discount prices.