Tech deals give hope to shaky office market
Amazon, Facebook make long-term commitments, but immediate future brings challenges
Amazon and Facebook both made major commitments in the past two weeks to a New York City office market with an uncertain future. But that shot in the arm belies the fact that many companies are still in wait-and-see mode.
“A lot of tenants are punting on the whole topic and saying they’re going to continue working remotely,” said Grant Greenspan, a principal and head of office leasing for the Kaufman Organization.
Greenspan added that the jobs associated with the recent deals will take a few years to be filled.
“There’s going to be a three-to-five-year recovery where tech tenants are going to be the driver of the city’s economy,” he said.
But there’s an ominous opposing force: a flood of sublet space that will hit the market and drag down the office recovery.
“In the near term,” he said, “there’s a lot of negativity about where the market’s going to go.”
Seattle-based Amazon this week said it plans to add 3,500 corporate jobs at hubs in six U.S. cities. That includes 2,000 positions at its New York City office in the former Lord & Taylor building. The rest will be in Phoenix, San Diego, Denver, Detroit and Dallas.
The news came just two weeks after Facebook signed its long-anticipated lease for 700,000 square feet at Vornado Realty Trust’s Farley Post Office redevelopment and follows TikTok’s lease of more than 230,000 square feet at the Durst Organization’s One Five One office tower in Times Square.
The string of high-profile deals arrives as future demand for office space in cities like New York is very much in question as companies move further toward work-from-home models.
But the Amazon and Facebook deals had been set in motion before the pandemic. Amazon made plans to expand when it hammered out a deal to buy the Lord & Taylor building sometime around February for $1 billion. Facebook’s lease had been in the works since at least November.
“Amazon always said they were planning to increase jobs, particularly Amazon Web Service jobs in New York,” said Kathryn Wylde, president and CEO of the Partnership for New York City. “So I don’t think it’s a surprise, but it’s consistent. And the good news is there’s a continuity of this desire to be in New York.”
Wylde pointed out that Amazon is part of a group of companies including JPMorgan and Google pledging to help 100,000 disadvantaged New Yorkers find jobs by offering training, apprenticeships and entry-level positions.
Her view on Amazon’s jobs expansion, though, was somewhat bittersweet, given the opposition that led the e-commerce giant to scuttle plans for a second headquarters in Long Island City early last year. Wylde said she hopes the announcement of new jobs will get a warmer welcome this time around.
“We’re seeing the private sector step up and kind of bridge the gap for New Yorkers left on the other side of the digital divide,” she said. “It’s extremely important to not allow the naysayers to say that doesn’t matter.”
Julie Samuels, executive director of Tech:NYC, a nonprofit that has come to speak for the city’s tech industry, said Big Tech office decisions are still driven by intense competition to recruit the best engineers. When the likes of Amazon, Facebook and TikTok make monster deals, she said, lots of companies take notice.
“These companies signing big leases is in many ways a bellwether for tech,” she said. “I think that’s true even beyond tech.”
Greenspan added that the ecosystem around all those Amazon and Facebook jobs will help new businesses form. And he said even in a space as challenged as restaurants, he is seeing new businesses starting up.
“There are plenty of entrepreneurs out there who know they’re going to be back in business,” he said. “It gives me encouragement to know there’s a light at the end of the tunnel.”
Contact Rich Bockmann at firstname.lastname@example.org or 908-415-5229.
COMPANIES AND PEOPLE