High-profile purchases, leasing deals and hiring have seen technology companies threaten to upend Wall Street’s historic role as New York’s dominant industry.
Google made waves in Manhattan real estate when it bought the iconic Chelsea Market and its 2.9 million-square-foot New York headquarters building within a few years of each other in the past decade. The technology giant followed up last month with the largest U.S. real estate transaction since the pandemic, a $2.1-billion purchase of the under-construction St. John’s Terminal.
Google’s takeover of Manhattan’s West Side has been mirrored to varying degrees by Amazon, Microsoft, Apple, Facebook and Salesforce, each of which has established a campus in the city. The surge in real estate occupancy shows how technology companies are rapidly displacing counterparts in banking and finance as the city’s biggest industry in the aftermath of the pandemic: Big tech also leads in employment growth and by volume of companies.
Two decades ago, Tim Armstrong, 50, became Google’s first New York-based employee. “If you were having a cocktail party for all the people who worked in the internet in New York, you could fit them all in a bar,” Armstrong says. “Now I’m guessing you’d have to take over Madison Square Garden, plus the Javits Center to fit everybody in.”
Data provided to Forbes by the New York State Comptroller’s Office provide an expansive view of this phenomenon. The number of tech companies in the city surpassed more than 10,000 in 2020, more than double the number 20 years ago — and almost twice as many as securities companies. Tech employment has also surged: Between 2000 and 2020, the number of tech employees in the city grew from 108,000 to 167,000, while the number of securities employees shrank from 190,000 to 176,000.
The tech takeover of Manhattan has occurred in visible ways — the Salesforce logo replacing MetLife above 1095 Sixth Avenue near Bryant Park, for example — and in more subtle ones, such as the receding of bank offices. Since the wake of the Great Recession in 2008, the five largest banks in the U.S. by total assets — JPMorgan, Bank of America, Citigroup, Wells Fargo and Goldman Sachs — collectively shedded nearly 5.5 million square feet of office space in Manhattan, according to data provided by Real Capital Analytics.
Over the same time period, just two tech firms — Google and Amazon — acquired about 6.5 million square feet of office space. Apple, Microsoft and Facebook, meanwhile, leased millions of square feet of space across the city. Facebook brought its total Manhattan footprint to 2.2 million square feet when it last year leased 730,000 square feet at the Farley Post Office building in Midtown. Apple also signed a 220,000-square-feet lease nearby at 11 Penn Plaza last year. Microsoft has an additional 200,000 square feet of leased space at 11 Times Square and last month was in talks to take 100,000 square feet more at an undisclosed building in the Flatiron District.
“The city was always talked about as a financial services city, and now it’s talked about as a financial services and tech city,” says Darcy Stacom, a commercial broker for CBRE who represented Google in its building acquisitions. “It was never said before in my career.” Stacom, who has worked in New York City real estate for more than 40 years, says that the recent activity could put the tech industry on track to surpass finance as New York’s biggest occupier of commercial real estate by the end of the decade.
Google says it is doubling down on New York because of the city’s vast talent pool, a rationale echoed by Amazon, Facebook and Microsoft. Last month, Google said it planned to hire an additional 2,000 people in the city, growing its local workforce to 14,000 people, with sales and marketing employees at its newest property. “With people fretting about whether New York would come back, we thought this would be the perfect illustration of our corporate commitment to New York,” says William Floyd, Google’s head of public policy and government affairs. “In New York, tech is not only an industry, but tech also cuts across and is a vital part of the other industries of New York.”
The most recent real estate mega-deal could also be chalked up to Google having too much cash and nowhere to spend it, says Rahul Jain, deputy comptroller with New York State. “They have the money, and they are playing the long game,” he says. “It’s a belief in the fact that New York will remain desirable.” Google’s parent company, Alphabet, has cash reserves valued at $135 billion in April, and according to a public filing, holds almost $56 billion in real estate assets as of June 30 — ranging from a new $1 billion building in London’s Kings Cross to a vast portfolio of data centers across the world — making its Manhattan holdings a relative drop in the bucket.
Google has said it will require its employees to return to offices in January, although it has twice postponed the mandate because of concerns about spread of Covid-19. The approach doesn’t align with those of Microsoft, Amazon and Salesforce, which have suspended return to their offices indefinitely.
While the tech industry was born in Silicon Valley, New York’s focus on the sector kicked into gear in the 2000s under Mayor Michael Bloomberg, whose eponymous data and financial intelligence company was the city’s largest tech tenant at the time. Bloomberg vowed to wrestle away New York’s reliance on the finance sector, launched initiatives and in 2011 spearheaded the $2 billion development of Cornell University’s tech campus on Roosevelt Island.
The bet has had a strong effect on both the tech and finance industries. This month, the Comptroller’s office issued a report on the use of office space in New York City that showed between 1990 and 2020, the finance sector’s office occupancy dropped from 48% of all office space in New York to 35%, citing data from commercial brokerage Cushman and Wakefield. By comparison, the TAMI sector (technology, advertising, marketing and information companies), now holds 25% of New York’s leased office inventory, up from 16%. The Comptroller’s office also found that 30 years ago, finance companies allocated on average 420 square-feet per employee. Now TAMI companies give their employees that same amount of space, while finance companies have shrunk their floorplates to 372 square feet per employee.
“The tech sector will surpass the financial services in New York very soon”
Despite all indicators reflecting the tech industry’s growth, one key metric remains out of reach: better pay. Securities workers still earn more — therefore generating more personal income tax for the city — with an average $438,000 salary, compared to $195,000 for tech workers, according to the Comptroller’s office.
However, the information sector is closing in on financial services as New York’s biggest producer of economic output, according to figures provided to Forbes by the Partnership for New York. Citing data from labor market data company Emsi, the organization found that from 2015 to 2020, the information sector’s share of New York’s Gross City Product grew from 10% to 13%, while the financial services industry (excluding insurance companies) only rose from 18% to 19%.
Those figures may not reveal the true breadth of the tech-driven impact, says Nicholas Economides, an economics professor at New York University’s Stern School of Business, because many of its largest tech companies are based outside of New York. “The tech sector will surpass the financial services in New York very soon,” Economides says. “Before the end of the decade for sure.”
One other major factor is the role of tech-trained employees within the financial sector. In 2000, Goldman Sachs employed 600 traders on its cash equities desk, only to replace them with automated systems overseen by 200 computer engineers. In 2018, the bank announced that computer engineers made up a quarter of its workforce, or 9,000 employees. “Tech has become a significant part of those companies,” says Armstrong. “You’re going to end up with super-tech corporations living in an ecosystem, in the same environment.”
Armstrong, who left Google as head of its Americas’ operations in 2009 to lead AOL as CEO, has since started his own tech startup in New York, Flowcode, which he launched in 2019 with a QR-code generating product, in addition to investing in other startups based in the city. As one of the first players of the city’s tech scene, he points out that the migration of tech isn’t limited to the finance sector; there are now industries growing around health-tech, real estate-tech, media-tech and fashion-tech. “The tech scene in New York used to be called Silicon Alley,” he says. “Now it’s really become the Silicon City of the world.”
Giacomo Tognini contributed reporting