For much of the past two decades, including during the pandemic, technology companies have been the bright lights of New York’s economy, adding thousands of high-paying jobs and expanding into millions of square feet of office space.
Their growth will increase tax revenue, establish New York City as a reliable rival to the San Francisco Bay Area, and create jobs that will help New York City absorb layoffs in other areas during the pandemic and the 2008 financial crisis. provided.
Now, the technology industry has largely retreated, casting a cloud over the city’s economic future.
Facing numerous operational challenges, major technology companies have laid off more than 386,000 employees worldwide since the beginning of 2022, according to technology industry tracker layoffs.fyi. And with layoffs and a shift to working from home, the company has shed millions of square feet of office space.
The layoffs are hitting many tech hubs, with San Francisco being the hardest hit with an office vacancy rate of 25.6 percent, according to Newmark Research.
New York has a better economy than San Francisco, and Manhattan’s vacancy rate is 13.5 percent, but it can no longer count on tech growth. More than a third of Manhattan’s roughly 22 million square feet of office space available for sublease comes from technology, advertising and media companies, Newmark said.
Consider Meta, which owns Facebook and Instagram. The company is now shedding most of the more than 2.2 million square feet of office space it has gobbled up in Manhattan in recent years, after laying off about 1,700 employees this year, a quarter of its New York state workforce. . The company has chosen not to renew leases covering 250,000 square feet at Hudson Yards and 200,000 square feet at Park Avenue South.
Spotify is subletting five of the 16 floors at Fourth World Trade Center it leased six years ago, and Roku is offering a quarter of the 240,000 square feet it occupied in Times Square last year. Twitter, Microsoft, and other technology companies are also looking to sublease unwanted space.
“Tech companies have been a big part of the real estate industry for the past five years,” said Ruth Kolphaber, chief executive officer of real estate brokerage firm Wharton Property Advisors. “And now it looks like they’re making cuts, and the question is, who’s going to replace them?”
Ms. Kolbhaber said subletting larger spaces or entire floors of buildings could take months. Landlords are also receiving lower rents on new leases because more space is available for subletting.
“They’re going to beat every landlord out there in terms of pricing, and they’ve got some really great space already built,” she said, referring to the tech companies.
The tech sector has been a driving force in New York’s economy ever since the dot-com boom of the late ’90s established “Silicon Alley” south of Midtown. And after the financial crisis, the expansion of companies like Google supported the economy as banks, insurance companies and other financial companies exited.
In the five years to the end of 2021, employment at small, medium-sized, high-tech companies and large corporations in New York increased by 33% to 43,430, according to the state comptroller. And these jobs paid very well. The average salary for a technician in 2021 was $228,620, nearly twice the average private sector salary in the city, according to the comptroller.
Newmark says job growth is driving demand for commercial space, with technology, advertising and media companies accounting for nearly a quarter of new office leases signed in Manhattan in recent years.
Microsoft and Spotify declined to comment on the decision to sublease the space. Twitter and Roku did not respond to requests for comment. Meta said in a statement that it is “committed to distributed work” and “continuously refining” its approach.
Several major technology companies are still expanding their operations in New York.
Google plans to open St. John’s Terminal, a large office building near the Hudson River in lower Manhattan early next year. Google will own or lease about 7 million square feet of New York office space, including the terminals, up from about 6 million square feet now, according to a company representative. (Google leases more than 1 million square feet of that space to other tenants.) The company has more than 12,000 employees in the New York area, up from more than 10,000 in 2019. .
Amazon scrapped plans to build a large campus in Queens in 2019 after local politicians objected to incentives offered to the company, but it still has plans to build a large campus in New York, Jersey City, and Newark since 2019. Added 200,000 square feet of office space. will add approximately 550,000 square feet of office space later this summer when it opens 424 Fifth Avenue, the former Lord & Taylor department store it acquired for $1.15 billion in 2020.
“New York offers a wonderfully diverse talent pool, and we are proud to have created thousands of jobs in the city and state in both our corporate and operational sectors over the past decade.” said Holly Sullivan, vice president of the company. He said in his statement that he aims for global economic development in the Amazon.
And while many tech companies continue to have employees work from home for much of the week, they are also looking to bring employees back into the office, which could reduce the need to sublease space. .
Salesforce, a software company with offices in a tower next to Bryant Park, said it is not considering subletting its New York space.
“Currently, I’m facing the opposite problem in a tower in New York,” said Relina Buchandanani, head of real estate at Salesforce. “We have a very strong customer base in New York, so there has been a concerted effort to continue to grow relevant roles in New York.”
Industry representatives said New York is and will continue to be a vibrant home for technology companies.
“I haven’t heard of any tech companies leaving, and that’s important,” said Julie Samuels, president of industry group TECH:NYC. “If anything, New York has seen less contraction in technology leasing than other large cities.”
Fred Wilson, a partner at Union Square Ventures, said technology executives feel less of a need to be in Silicon Valley, a change that has benefited New York. “There are more CEOs and founders in New York now than there were before the pandemic,” Wilson said, referring to the companies his firm has invested in.
“We are currently working on several transactions with small, young technology companies looking to sublease space,” said David Falk, president of Newmark’s New York tri-state region. said.
However, many companies still continue to withdraw.
Stockholm-based Spotify signed leases totaling more than 564,000 square feet of space at the 4th World Trade Center in 2017 and 2019, making it one of the largest tenants there. We soon had a space with all the amenities you’d expect from a high-tech company, including brightly colored flexible work areas, spectacular views, and a ping pong table.
But in January, Spotify announced it would lay off 600 people, about 6% of its global workforce. The company, which allows employees to choose between fully remote or hybrid schedules, has also reduced office space and subleased five floors.
“On days when I’m alone, I end up sitting in a conference room all day trying to focus,” said Dana Tran, a Spotify employee who regularly works out of the downtown office. Collaborate and create community with office playlists.
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