The technology giants bet two years before the pandemic to turn Manhattan into the new Silicon Valley. Apple, Amazon, Facebook, and Google closed numerous leases, began construction of new buildings, and many of their employees bought apartments in the city.
The consolidation of teleworking that came later and the winds of recession that are blowing now have begun to make a dent in their intentions. Both Meta and Amazon have been the first to back down on expansion plans for their offices in the Big Apple.
The two technological titans they have paralyzed the negotiation of leases They planned to close this year. According to a Meta report published by Bloomberg, the company planned to acquire 30,000 square meters of additional space at 770 Broadway, in the East Village, where it already has several floors.
In a last-minute decision, Mark Zuckerberg’s company has decided not to sign the expansion of the space it was negotiating with the real estate agency Vornado Realty Trust, which would have led to a total of 75,000 square meters in the property.
Meta arrived at the building four years ago with a rental contract for 7,250 square meters and with the commitment to occupy around 50,000. The space that interested him was the old Verizon offices, but finally, and after announcing the rental agreement last April, he has decided not to sign. Thus, it remains with the 35,000 square meters that it has added since 2018.
This decision follows the recent halting its plans to build more offices in Hudson Yards, west of Midtown. The company did not want to comment on the details of this change of course. She just pointed out that she remains committed to her presence in New York City. This means concentrating its activity in the building of the historic James Farley post office, next to Penn Station, which it rented in 2020 and whose remodeling has not yet been completed.
The ups and downs of Amazon
The e-commerce giant has also withdrawn its offer to lease an unspecified amount of space in the 5 Manhattan West building at Hudson Yards, which is tenanted by JPMorgan Chase. The banking giant put 9,300 square meters on the market there last year to sublet that have not yet been occupied.
It’s unclear how much space Amazon, which still has several leased offices in the area, planned to acquire. In 2019, the company leased 33,000 square meters at number 410 Tenth Avenue, owned at the time by the real estate company SL Green, which later bought 601W Companies for 952.5 million dollars (930.2 million euros).
Just before confinement paralyzed the world, Jeff Bezos’s company spent more than $1 billion for the Lord & Taylor office building at 424 Fifth Avenue, former WeWork headquarters, to make it its flagship. At the moment, the move is still pending.
This real estate operation took place a year after Amazon gave up on building its second headquarters in Long Island City due to the refusal of local politicians to grant it the tax advantages it demanded for the investment. The company then decided to distribute its offices in different parts of Manhattan.
The refusal to expand its space in New York is added to the recent stoppage of the construction of six new office buildings planned in Bellevue (Washington) and Nashville (Tennessee). The company made this decision to reevaluate the design to adapt it to hybrid work, according to John Schoettler, vice president of Global Real Estate and Facilities at Amazon.
The construction delay will not affect the commitment to create 25,000 jobs in Bellevue and another 5,000 in Nashville, Schoettler said. “The pandemic has significantly changed the way people work. Our offices are long-term investments and we want to design them in a way that will meet the needs of our employees in the future,” she said.
The two companies have thus decided to take a more cautious approach to their real estate expansion when the return to the 100% office in the US looks increasingly distant. New York still faces an office oversupply, with more than 18% of available space, despite a slight uptick in leases earlier in the year, according to second-quarter data from Savills Research.
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Amazon and Meta halt plans to expand Manhattan offices