Google Parent to Buy Manhattan's Chelsea Market Building -- 2nd Update

02/06/18 06:08 PM EST
By Keiko Morris 

The parent company of Google is expanding its real estate holdings in Manhattan, with plans to plow more than $2 billion into one of the city's prime tech neighborhoods.

As Amazon.com Inc. narrows its search for a second headquarters, the latest deal underscores New York City's ascendance as one of the country's leading technology hubs, real-estate analysts said.

Amazon has named New York City among the 20 finalists to host a second headquarters.

Under the deal, Alphabet Inc. is in contract to buy the Chelsea Market building at 75 Ninth Ave. from Jamestown LP, according to a person familiar with the transaction.

The deal shows how beneficial tech spending can be to a city. Technology companies have been increasing their share of office space in the Manhattan market over the last several years, with household names such as Amazon, Facebook Inc., Spotify USA and others signing large lease deals.

In the San Francisco Bay Area, tech companies have been gobbling up more space than they need in the short term to ensure they have enough capacity for workers and equipment down the line.

That might be playing out in New York too. The Chelsea Market deal "is a potential land grab, where these firms are competing against one another, and you might see these firms take space defensively to ensure that they will have the space even though they don't need it now," said Sacha Zarba, vice chairman of real estate services firm CBRE Inc.

Google already has offices in the 1.2 million-square-foot building, which houses offices on the upper floors and shops and restaurants on the ground and lower-level floors. The building is home to other companies, including Major League Baseball Advanced Media and the Food Network.

The web-search giant also owns the 2.9 million square foot building at 111 Eighth Ave., which it bought in 2010. In addition, it has leased more than 200,000 square feet at Pier 57, a former freight terminal. The Chelsea neighborhood and Meatpacking District are part of the Midtown South office submarket, which is a favorite of the technology sector and has had vacancy rates that are among the lowest in the U.S.

New York City's technology landscape has changed dramatically over the last decade, when skeptics doubted whether its labor force could support a large technology hub.

"Any further long-term real estate commitments by Google is proof positive that New York is the present and future home for technology innovation and the most fertile ground for talent retention," said Doug Harmon, of Cushman & Wakefield, a longtime adviser to Jamestown and the broker who worked on the sale of 111 Eighth Ave. to Google.

The potential acquisition of the Chelsea Market building also highlights some of the options that global companies, especially tech companies, are now considering as the new tax law takes effect. The law reduced the corporate tax rate to 21% from 35% and included incentives for companies to bring offshore profits back to the U.S.

"If you're bringing that much cash back, you are now probably looking for ways to deploy it," Mr. Heller said.

Write to Keiko Morris at Keiko.Morris@wsj.com

 

(END) Dow Jones Newswires

February 06, 2018 18:08 ET (23:08 GMT)

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