5 ms·

$1600/ft seems shockingly high for commercial real estate, even in New York. Just because you have lots of money (that theoretically belongs to your shareholde

$1600/ft seems shockingly high for commercial real estate, even in New York. Just because you have lots of money (that theoretically belongs to your shareholders) doesn’t mean you should overpay.

djtriptych 9y ago
It's not shockingly high by a long shot. Paying 1.6M for a 1000 sq ft condo in that area is totally feasible.
- karambahh 9y ago
  Unless I'm mistaken, isn't commercial real estate usually cheaper than residential?
  - downandout 9y ago
    Yes, it is. That was my point.
- adsfasdfsad111 9y ago
  in fact, that'd be quite cheap.
ceejayoz 9y ago
https://www.propertyshark.com/Real-Estate-Reports/2017/03/02/nyc-cre-2016-office-report/ https://www.propertyshark.com/Real-Estate-Reports/2017/03/02... > Data analyzed by COMMERCIALCafé shows a steady rise in the average yearly sale price per square foot, starting at 2012’s $959. The price increased by 40% over 5 years, resting at $1,347 in 2016. The Y-o-Y increase was 7%. Midtown remains the highest priced NYC submarket. Last year, 50 office properties were sold at an average price of $1,531 per square foot.
- downandout 9y ago
  So they’re paying above average, which was my point.
  - ceejayoz 9y ago
    That's a really silly response. They're paying 4% above average (and that's the 2016 average - prices may be higher in 2018). The average likely includes a range far greater than 4% depending on the properties involved. Google is clearly not paying anything remotely describable as "shockingly high".
    - eric_h 9y ago
      It's roughly the same price they paid for 111 8th Ave.
    - downandout 9y ago
      I’ll get more downvotes for this, but 4% when billions are involved is a shocking amount of money. In this case, that’s roughly $80 million - enough for Eric Schmidt to buy another G650.
      - ceejayoz 9y ago
        The same link I posted said the average increased 7% YOY. If that kept up in 2017, Google just paid below average. But hey, maybe you're a better negotiator than Google's team of real estate experts and lawyers. $80M probably isn't even a shocking number to a company who made $12,660M profit last year. Keep digging that hole, though.
      - dang 9y ago
        > I’ll get more downvotes for this Please edit bits like that out of your comments here, since they break the site guidelines. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
  - ryanwaggoner 9y ago
    If the average is $1500, then a number of transactions have been above average, so this isn't that unusual. There are a lot of reasons you might pay 5-10% above average: location, building quality and condition, how much deferred maintenance there is, historical or architectural significance, etc, etc.
adjkant 9y ago
I'd point out that this is prime real estate. They could have bought a cheaper building but I don't think they overpaid by much if at all.
yeukhon 9y ago
They want the entire building badly for years now so it makes sense to overpay and grab the deal right now before another developer comes in with a more competitive offer, knowing Google would not move away! $2B for this is not expensive, considered how much they had paid to other short-term leases. Moving to and decorating new office space will cost them many millions. If they can own the building, $2B is a big saving in the next decade (and I presume the purchase would come with a property tax credit). Google has enough money to buy ten of these in NYC. Finally consider the property value should Google ever want to sell the property or lending out. Though if this was up to me, I would buy a land and build another giant Google Campus. But that's just me.
- hux_ 9y ago
  For $2B you could probably buy a nice village by the sea with great weather all year round. Having worked in downtown NYC, I'd pick a beach any day of the week. But I can see the value of a large marketing, finance and sales presence for a Google type firm in the city. Engineering not so much.
  - deleted 9y ago
    [deleted]
  - yeukhon 9y ago
    I agree. I think the convenience of locating in Manhattan makes sense. For CA, since everyone travels, it doesn't matter (though they do have an office in SF!) I wouldn't mind traveling to NJ if Google picks me up like Google does in CA :-) Bell Lab would have been the perfect campus location for Google :/ (see [1]) [1]: https://www.investors.com/news/once-empty-bell-labs-building-revived-as-new-jersey-tech-hub/ https://www.investors.com/news/once-empty-bell-labs-building...
  - wbl 9y ago
    Manhattan is where the train goes. Montauk not so much.
Q6T46nT668w6i3m 9y ago
Location, location, location (as others have mentioned they occupy parts of Chelsea Market and it’s across the steeet from the New York office).

$1600/ft seems shockingly high for commercial real estate, even in New York. Just because you have lots of money (that theoretically belongs to your shareholders) doesn’t mean you should overpay.

djtriptych 9y ago

It's not shockingly high by a long shot. Paying 1.6M for a 1000 sq ft condo in that area is totally feasible.

karambahh 9y ago
Unless I'm mistaken, isn't commercial real estate usually cheaper than residential?
- downandout 9y ago
  Yes, it is. That was my point.
adsfasdfsad111 9y ago
in fact, that'd be quite cheap.

ceejayoz 9y ago

https://www.propertyshark.com/Real-Estate-Reports/2017/03/02/nyc-cre-2016-office-report/ https://www.propertyshark.com/Real-Estate-Reports/2017/03/02... > Data analyzed by COMMERCIALCafé shows a steady rise in the average yearly sale price per square foot, starting at 2012’s $959. The price increased by 40% over 5 years, resting at $1,347 in 2016. The Y-o-Y increase was 7%. Midtown remains the highest priced NYC submarket. Last year, 50 office properties were sold at an average price of $1,531 per square foot.

downandout 9y ago
So they’re paying above average, which was my point.
- ceejayoz 9y ago
  That's a really silly response. They're paying 4% above average (and that's the 2016 average - prices may be higher in 2018). The average likely includes a range far greater than 4% depending on the properties involved. Google is clearly not paying anything remotely describable as "shockingly high".
  - eric_h 9y ago
    It's roughly the same price they paid for 111 8th Ave.
  - downandout 9y ago
    I’ll get more downvotes for this, but 4% when billions are involved is a shocking amount of money. In this case, that’s roughly $80 million - enough for Eric Schmidt to buy another G650.
    - ceejayoz 9y ago
      The same link I posted said the average increased 7% YOY. If that kept up in 2017, Google just paid below average. But hey, maybe you're a better negotiator than Google's team of real estate experts and lawyers. $80M probably isn't even a shocking number to a company who made $12,660M profit last year. Keep digging that hole, though.
    - dang 9y ago
      > I’ll get more downvotes for this Please edit bits like that out of your comments here, since they break the site guidelines. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- ryanwaggoner 9y ago
  If the average is $1500, then a number of transactions have been above average, so this isn't that unusual. There are a lot of reasons you might pay 5-10% above average: location, building quality and condition, how much deferred maintenance there is, historical or architectural significance, etc, etc.

adjkant 9y ago

I'd point out that this is prime real estate. They could have bought a cheaper building but I don't think they overpaid by much if at all.

yeukhon 9y ago

They want the entire building badly for years now so it makes sense to overpay and grab the deal right now before another developer comes in with a more competitive offer, knowing Google would not move away! $2B for this is not expensive, considered how much they had paid to other short-term leases. Moving to and decorating new office space will cost them many millions. If they can own the building, $2B is a big saving in the next decade (and I presume the purchase would come with a property tax credit). Google has enough money to buy ten of these in NYC. Finally consider the property value should Google ever want to sell the property or lending out. Though if this was up to me, I would buy a land and build another giant Google Campus. But that's just me.

hux_ 9y ago
For $2B you could probably buy a nice village by the sea with great weather all year round. Having worked in downtown NYC, I'd pick a beach any day of the week. But I can see the value of a large marketing, finance and sales presence for a Google type firm in the city. Engineering not so much.
- deleted 9y ago
  [deleted]
- yeukhon 9y ago
  I agree. I think the convenience of locating in Manhattan makes sense. For CA, since everyone travels, it doesn't matter (though they do have an office in SF!) I wouldn't mind traveling to NJ if Google picks me up like Google does in CA :-) Bell Lab would have been the perfect campus location for Google :/ (see [1]) [1]: https://www.investors.com/news/once-empty-bell-labs-building-revived-as-new-jersey-tech-hub/ https://www.investors.com/news/once-empty-bell-labs-building...
- wbl 9y ago
  Manhattan is where the train goes. Montauk not so much.

Q6T46nT668w6i3m 9y ago

Location, location, location (as others have mentioned they occupy parts of Chelsea Market and it’s across the steeet from the New York office).