Amazon and Facebook to Lease More Space in Manhattan

Less than a year after Amazon pulled out of a deal to build its second headquarters (HQ2) in Manhattan, it inked a lease for 335,000 square feet in the neighborhood to house more than 1,500 employees. Facebook is also reportedly in talks to lease 700,000 square feet in a nearby neighborhood. If that plan goes through, the social media platform, which has other real estate holdings in the city, would become one of its largest corporate tenants, which include JPMorgan Chase and Bank of America.

The Wall Street Journal reports that, unlike the HQ2 deal, Amazon “is taking the space — in a property being redeveloped at 410 Tenth Avenue — without any special tax credits or other inducements like those it had been offered previously.”

New York City mayor Bill de Blasio and Governor Andrew Cuomo courted Amazon for HQ2 with the hope of realizing “the company’s pledge to create 25,000 new jobs — by offering up to $3 billion in financial incentives.”

But backlash led Amazon to cancel its plans, a move which had “many in the New York business community worried that [its] withdrawal would signal to other tech giants and large companies that New York had become inhospitable to business.”

The Amazon and Facebook deals would be “the latest sign that tech companies are scrambling for prime Manhattan real estate to attract the city’s large and well-educated talent pool.”

Facebook’s deal-in-the-works “would bring its total footprint in the city to more than 3 million square feet … [and]  create space for more than 14,000 Facebook employees.” Google signed a lease earlier this year for 1.3 million square feet in the Hudson Square neighborhood and space in nearby buildings, with “plans to add 7,000 employees over the next decade in the city.”

Vox reports that, according to a Brookings Institution report, “since 2005, five metro areas — Boston, the San Francisco Bay Area, San Jose, Seattle, and San Diego — accounted for 90 percent of all U.S. growth in ‘innovation sector’ jobs … [defined] as employment in the top science, technology, engineering, and math industries that include extensive research and development spending.” In the same period, “343 metro areas lost a share of these jobs.”

With one-third of these jobs in 16 counties and one-half in 41 counties, “wealth and productivity are becoming even more concentrated in fewer, primarily coastal cities.” These typically well-paying jobs “contribute to overall faster wage growth in the areas they’re located, … [and] also result in a lot of secondary work … to help serve those workers.”

Brooking’s Metropolitan Policy Program senior fellow/policy director Mark Muro noted that “that economy initially revolved around the price and location of resources — rivers, bays, forests, or highways — and that dictated geography.” Now, however, “it has become so efficient to have clusters of sophisticated activity workers in one place that the rich tend to get richer in these economies.”

The solution, said the report, is “intensive government investment — direct funding, tax preferences, workforce development — to stem future regional economic divergence” in places like Madison, Wisconsin; Albany, New York; and Provo, Utah that have enough existing assets to become “future innovation hubs.”