For much of the past two decades, including during the pandemic, tech companies have been a bright spot in New York’s economy, creating thousands of high-paying jobs and expanding into millions of square feet of office space.
Their growth boosted tax revenues, made New York a credible competitor to the San Francisco Bay Area—and created jobs That helped the city absorb Layoffs in other sectors during the pandemic and 2008 financial crisis.
Now the tech industry is in sharp decline, clouding the city’s economic future.
Amid numerous business challenges, major tech companies have reportedly laid off more than 386,000 workers nationwide since early 2022 Layoffs.fyi, which tracks the technology industry. And they’ve lost millions of square feet of office space due to downsizing and the shift to working from home.
These cuts have hurt many tech hubs, and San Francisco has been hit hardest, with an office vacancy rate of 25.6 percent, according to Newmark Research.
New York is doing better than San Francisco — Manhattan has a 13.5 percent vacancy rate — but growth can no longer count on the tech industry. According to Newmark, more than a third of Manhattan’s approximately 22 million square feet of office space available for subleases is owned by technology, advertising and media companies.
Consider Meta, which owns Facebook and Instagram. It is now unloading a large portion of the more than 2.2 million square foot area office space The company has disbanded 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 elected not to renew leases for 250,000 square feet at Hudson Yards and 200,000 square feet at Park Avenue South.
Spotify is trying to sublet five of the 16 floors it leased at 4 World Trade Center six years ago, and Roku is offering a quarter of the 240,000 square feet it moved in Times Square just last year. Twitter, Microsoft and other technology companies are also trying to sublet unwanted space.
“Tech companies have been such a big part of the real estate landscape over the last five years,” said Ruth Colp-Haber, managing director of Wharton Property Advisors, a real estate brokerage firm. “And now that they appear to be making cuts, the question becomes: who will replace them?”
Ms Colp-Haber said it could take months for larger rooms or entire floors of buildings to be sublet. The large supply of sub-leased space is also depressing the rents that landlords can achieve with new contracts.
“They’ll undercut every landlord out there and they have really nice rooms that are all built out already,” she said, referring to the tech companies.
The technology sector has been a driver of New York’s economy since the dot-com boom helped establish it in the late 1990s.silicon alley” south of Midtown. Then, after the financial crisis, the expansion of companies like Google propped up the economy as banks, insurance companies, and other financial firms retreated.
Small and large technology companies added According to the State Comptroller, 43,430 jobs were created in New York in the five years to the end of 2021, a 33 percent increase. And those jobs paid very well: The median tech salary in 2021 was $228,620, nearly double the median private-sector salary in the city, according to the Comptroller.
Job growth fueled demand for commercial space, and technology, advertising and media firms accounted for nearly a quarter of new office leases signed in Manhattan in recent years, according to Newmark.
Microsoft and Spotify declined to comment on their decision to sublet space. Twitter and Roku didn’t respond to requests for comment. Meta said in a statement that it is “committed to distributed work” and “continuously refining” its approach.
Some big tech companies are still expanding in New York.
Google plans to open St. John’s Terminal, a large office near the Hudson River in Lower Manhattan, early next year. According to a company official, Google will own or lease about seven million square feet of office space in New York, including the terminal, up from about six million currently. (Google leases more than a million square feet of that space to other tenants.) The company has more than 12,000 employees in the New York area, up from more than 10,000 in 2019.
Amazon that in 2019 canceled plans The company planned to build a large campus in Queens after local politicians objected to the incentives offered to the company, but has nevertheless added 200,000 square feet of office space in New York, Jersey City and Newark since 2019. The company will have added about 550,000 square feet of office space later this summer when it opens 424 Fifth Avenue, the former Lord & Taylor department store it bought for $1.15 billion in 2020.
“New York offers an amazing, diverse talent pool and we are proud of the thousands of jobs we have created across the city and state over the past 10 years in both our corporate and operational roles,” said Holly Sullivan, Amazon’s vice president of global economic development, in a statement.
And while many tech companies continue to let their employees work from home for most of the week, they’re also looking to lure workers back into the office, which could help reduce the need for space subletting.
Salesforce, a software company with offices in a high-rise building next to Bryant Park, said it is not considering subleasing its New York space.
“Right now, I’m facing the opposite problem in the Tower of New York,” said Relina Bulchandani, Salesforce’s director of real estate. “A concerted effort has been made to continue building the right positions in New York as we have a very large client base in New York.”
New York is and will remain a vibrant home for technology companies, said industry representatives.
“I haven’t heard of a single tech company leaving, and that’s important,” said Julie Samuels, president of TECH:NYC, an industry association. “If anything, we’re seeing less of a decline in technology leases in New York than other major cities.”
Fred Wilson, a partner at Union Square Ventures, said tech executives have felt less of a need to be in Silicon Valley, a change he says has benefited New York. “We have more CEOs and founders in New York today than we did before the pandemic,” Mr. Wilson said, referring to the companies his company has invested in.
David Falk, New York Tristate Region President for Newmark, said, “We are currently working on several transactions with smaller, early stage technology companies looking for subleasable space.”
However, many companies are still withdrawing.
In 2017 and 2019, Stockholm-based Spotify signed leases for a total of more than 564,000 square meters at 4 World Trade Center, becoming one of the largest tenants there. Soon there was a space with all the amenities one would expect from a tech company – colourful, flexible workspaces, stunning views and ping pong tables.
But in January, Spotify announced it was laying off 600 peopleThat is around 6 percent of the global workforce. The company, which gives its employees the choice of working fully remotely or on a hybrid schedule, is also reducing its office space and making five floors available for subletting.
“On days when I’m alone, I sit in a meeting room all day to focus,” said Dayna Tran, a Spotify employee who regularly works in the downtown office, adding that the employees who come in motivate themselves and create community by working on an office playlist together.
