Tech Firms Once Powered New York’s Economy. Now They’re Scaling Back.

For much of the past two decades, including during the pandemic, tech companies have been a shining force in New York’s economy, adding thousands of high-paying jobs and expanding into millions of square feet of office space.

Their growth increased tax revenue, established New York as a credible rival to the San Francisco Bay Area, and brought in jobs. it helped the city absorb Other divisions also cut jobs during the pandemic and the 2008 financial crisis.

The technology industry is now largely out of business, looming over the city’s economic future.

Faced with a host of management challenges, tech giants have laid off more than 386,000 workers nationwide since early 2022, according to tech industry tracker And it has pulled out of millions of square feet of office space, cutting staff and moving to work from home.

The job cuts have hit many tech hubs hard, with San Francisco 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 we can no longer expect the tech industry to grow. More than a third of the approximately 22 million square feet of office space available for subleasing in Manhattan is provided by technology, advertising and media companies, according to Newmark.

Consider Meta, who owns Facebook and Instagram. The company is now dumping most of the more than 2.2 million square feet of office space it has eaten up in Manhattan in recent years, after laying off about 1,700 employees, or a quarter of its New York state workforce, this year. The company has opted not to renew its leases covering 250,000 square feet of Hudson Yards and 200,000 square feet of Park Avenue South.

Spotify is subleasing five of the 16 floors of World Trade Center Four that it rented 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 tech companies are also trying to sublet unwanted space.

“For the past five years, tech companies have been a big part of the real estate industry,” said Ruth Colphherber, chief executive of real estate brokerage Wharton Property Advisors. “And now they seem to be making cuts, but the question is, who will replace them?”

Ms Colphaber said it could take months to sublet a larger space or an entire floor of a building. And with more space available for subleasing, landlords are getting less rent on new leases.

“They are going to beat any landlord out there in terms of pricing, and they have really great spaces already built,” she said of the tech company.

The tech sector has been the engine of New York’s economy since the dot-com boom of the late ’90s established “Silicon Alley” south of Midtown. And after the financial crisis, as banks, insurers and other financial firms pulled out, the expansion of companies like Google helped prop up the economy.

Small and large technology companies Added In the five years to the end of 2021, New York state jobs rose 33% to 43,430, according to the state comptroller. And these jobs were very well paid. The average salary for technicians in 2021 was $228,620, nearly double the average salary in the city’s private sector, according to the Comptroller’s Office.

Tech, advertising and media companies account for nearly a quarter of all new office leases signed in Manhattan in recent years, according to Newmark.

Microsoft and Spotify declined to comment on the decision to sublet the space. Twitter and Roku did not respond to requests for comment. In a statement, Meta said it was “working on distributed work” and was “continuously improving” its approach.

Several big technology companies are still expanding their operations in New York.

Google plans to open a large office, the St. John’s Terminal, near the Hudson River in lower Manhattan early next year. Including the devices, Google will own or lease about 7 million square feet of New York office space, up from about 6 million today, according to company representatives. (Google leases more than a million square feet of that space to other tenants.) The company employs more than 12,000 people in the New York area, up from more than 10,000 in 2019.

Amazon canceled plans to build a massive campus in Queens in 2019 after local politicians opposed incentives offered to the company, but it has nonetheless added 200,000 square feet of office space in New York, Jersey City and Newark since 2019. The company plans to add about 550,000 square feet of office space later this summer when it opens at 424 Fifth Avenue in the former Lord & Taylor department store it acquired in 2002. $1.15 billion at 0.

“New York offers a wonderfully diverse talent pool and we are proud to have created thousands of jobs in New York City and the state in both our corporate and operational divisions over the past decade,” said Holly Sullivan, Amazon’s vice president of worldwide economic development, in a statement.

And while many tech companies continue to have their employees work from home most of the week, they are also looking to move them back into the office, potentially reducing the need to sublet space.

Software company Salesforce, which has offices in a tower next to Bryant Park, said it was not considering subleasing its space in New York.

“Right now, in New York Tower, I’m facing the opposite problem,” said Relina Buchandanani, head of real estate at Salesforce. “We have a very high customer base in New York, so a concerted effort has been made to continue to expand our appropriate role in New York.”

Industry representatives said New York was and will continue to be a vibrant home for tech companies.

“I haven’t heard a single tech company exit, and that’s important,” said Julie Samuels, chairman of trade group TECH:NYC. “If anything, New York has not seen a reduction in technology leases compared to other large cities.”

Fred Wilson, a partner at Union Square Ventures, said tech executives feel less need to be in Silicon Valley, and the shift has benefited New York. “There are more CEOs and founders in New York today than there were before the pandemic,” Wilson said, referring to companies his own firm has invested in.

“We are currently working on several deals with smaller, young technology companies looking to use the subleasing space,” said David Falk, president of Neumark’s New York Three States area.

However, many companies continue to withdraw.

Stockholm-based Spotify signed leases for a total of over 564,000 square feet of space at World Trade Center 4 in 2017 and 2019, making it one of the largest tenants there. In no time, we had a space with brightly colored flexible work areas, stunning views, a ping pong table, and all the amenities you’d expect from a tech company.

But Spotify announced in January that it would lay off 600 people, about 6% of its global workforce. The company, which allows employees to choose to work entirely remotely or on a hybrid schedule, has also cut office space and subleased five floors.

“On days when I am alone, I sit in a conference room all day to focus,” said Dana Tran, a Spotify employee who regularly works in the downtown office, adding that employees who come to the office are motivated and form a community by collaborating on playlists in the office.

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