Google said it will purchase a Manhattan office building for $2.1 billion, a sign that big technology companies are still interested in office space, despite the growing remote work trend, according to a Wall Street Journal exclusive report. The deal for the building is the most expensive for one U.S. office building since the COVID-19 pandemic began. It’s also one of the most expensive acquisitions in U.S. history, per data company Real Capital Analytics.
The tech company is currently leasing the 1.3. million square foot waterfront building that’s under construction in the Hudson Square neighborhood. Google has an option to buy it, but plans to exercise in the first quarter of 2022.
Google isn’t alone in the tech industry when it comes to leasing big office space in the U.S. Facebook, Apple and Amazon have all done same as they attempt to leverage low office building prices and use the billions of dollars they have in cash reserves. Meanwhile, the technology industry’s growing appetite for real estate has helped offset all of the office space that big financial companies like JPMorgan Chase and HSBC Holding have dumped, The Wall Street Journal reports.
While cities typically embrace big tech companies’ arrival and the well-paid employees and property tax revenue boost that comes with it, sometimes there are concerns that their presence could lead to increased CRE and apartment rents.
Why Google is embracing in-person work
Google has let its employees telework since last spring and it recently announced it will delay its return to the office until January. Despite the company’s aggressive embrace of remote work, this acquisition shows it believes an in-person work environment is key to its long-term strategy.
“We know that our employees, in order to really be happy and productive, need to collaborate,” said William Floyd, Google’s director of public policy and government affairs told The Wall Street Journal. “Because of that need to collaborate, we’ve been investing more and more in office space.”
Floyd also said that Google wants to offer employees the flexibility to work from home or in an office. The Manhattan building is expected to open in mid-2023. Additionally, the company’s preference to purchase buildings stems from it wanting the ability to change the properties if needed in the future.
“We like to control our own space,” Floyd said.
Google Manhattan building purchase details
Canadian companies Oxford Properties Group and pension fund manager CPP investments are selling the Manhattan property to Google, The Wall Street Journal reports.
Google currently employs approximately 12,000 people in New York City—the company’s largest workforce outside of California. Floyd said that figure is an increase from about 7,000 in 2018. Google’s New York offices are spread around Manhattan’s Chelsea and Hudson Square neighborhoods. This deal
will make Google one of Manhattan’s biggest CRE owners. The company also bought the Chelsea Market building for $2.4 billion and owns 111 Eighth Ave., as well as the Milk Building at 450 W. 15th St. It owns $55.9 billion worth of land and buildings worldwide as of June 30, according to its most recent quarterly filing with the Securities and Exchange Commission.
New York’s been an attractive landing spot for tech companies, even more so than less expensive cities because of the deep skilled labor pool and proximity to young professionals who’d want to work for them. Amazon was set to open a second headquarters in New York but changed its plans after it met opposition from local lawmakers of subsidies.
“New York City is the place for world-class talent and Google’s acquisition of 550 Washington Street in Manhattan for its workforce demonstrates that,” Manhattan Borough President Gale Brewer said.
Joe Dyton can be reached at firstname.lastname@example.org.