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)
Copyright (c) 2019 Dow Jones & Company, Inc.
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