(New York) For two decades, even during the pandemic, tech companies have been one of the strengths of New York’s economy, creating thousands of well-paying jobs and filling countless downtown offices. .
Their growth boosted tax revenues, made New York a true rival to the San Francisco Bay Area, and created jobs that helped the city absorb layoffs in other industries during the 2008 financial crisis and the pandemic.
But today, the tech sector is retreating and clouding the economic future of the city.
Faced with numerous business challenges, big tech companies have made 386,000 layoffs globally since January 2022, according to layoffs.fyi, which tracks the industry. They have also abandoned millions of square feet of office space due to these cuts and telecommuting.
The downturn is affecting other tech hubs: San Francisco is the most challenged, with a vacancy rate of 25.6%, according to Newmark Research.
New York is doing better than San Francisco—Manhattan has a vacancy rate of 13.5%—but the tech industry is no longer a growth engine. More than a third of the roughly 22 million square feet offered for sublease in Manhattan come from technology, advertising and media companies, according to brokerage Newmark.
So Meta, owner of Facebook and Instagram, is now getting rid of much of the 2.2 million square feet it has leased in Manhattan offices in recent years. Meta laid off 1,700 employees this year, a quarter of its New York state workforce, and will not renew leases covering 250,000 square feet at the Hudson Yards complex and 200,000 square feet on Park Avenue South .
Spotify is trying to sublet five of the 16 floors it leased six years ago at 4 World Trade Center. Roku is offering a quarter of the 240,000 square feet leased in 2022 in Times Square. Twitter, Microsoft and other tech firms are also trying to sublet excess space.
“Tech firms have played a really big role in real estate over the past five years,” said Ruth Colp-Haber, CEO of Wharton Property Advisors, a real estate brokerage firm.
Tech companies created 43,430 jobs in New York from 2016 to 2021, a gain of 33%, according to the state auditor general. High paying jobs, he points out: the average salary in this sector in 2021 was $228,620, nearly double the average private sector salary in the city.
Job growth has boosted demand for office space: tech, advertising and media have accounted for nearly a quarter of new leases signed in Manhattan in recent years, according to Newmark.
Microsoft and Spotify declined to comment on their real estate decisions. Twitter and Roku did not respond to interview requests. In a statement, Meta affirmed its commitment “to remote working,” adding “continually refining” its approach.
There are still a few big tech companies growing in New York.
Google bought in 2021 John’s Terminal, a large building near the Hudson River in lower Manhattan; move-in is expected in early 2024. Including this space, Google will own or lease approximately seven million square feet of office space in New York — one million more than today — according to a spokesperson. (Google leases more than a million square feet of this space to other firms.) The company has more than 12,000 employees in the New York area, about 2,000 more than in 2019.
Amazon in 2019 canceled construction of a sprawling campus in Queens after city politicians denounced the incentives offered to the company. However, it has since added 200,000 square feet in the New York area. Amazon will add another 550,000 square feet by the end of the summer on 5th Avenue, in the former Lord department store
New York therefore retains its strong appeal for tech companies, say industry officials.
“In reality, tech shrinkage in commercial real estate is less in New York than in other major cities,” says Julie Samuels, president of TECH: NYC, an industry association.
According to Fred Wilson, a partner at Union Square Ventures, tech bosses feel less of a need to be in Silicon Valley than before. This change has benefited New York, he says. “Today we have more CEOs and company founders in New York than before the pandemic,” Wilson added, speaking of the companies his company has invested in.
Same story with David Falk, president of the New York Tri-State Region for the city of Newmark, New Jersey: “We are working on several transactions with young technology companies looking to sublet offices”.
However, many companies continue to make cuts.
In 2017 and 2019, the Swedish Spotify signed leases totaling 564,000 square feet at 4 World Trade Center, becoming one of the main tenants of the place. She quickly created a space with all the attributes associated with tech firms: flexible workspaces; bright colors ; breathtaking views; table tennis tables.
But in January, Spotify laid off 600 people, around 6% of its global workforce. The company, which allows partial or total teleworking, wants to reduce the surface area of its offices and offers five floors for subletting.
“On the days I’m alone, I end up sitting in a meeting room all day to concentrate,” testified Dayna Tran, a Spotify employee who often works in the office. Other face-to-face followers get motivated and bond by collaborating on an office playlist, she adds.
