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Google to Buy New York City Office Building for $2.1B
- jdorfman 5y agoWhy? I seriously don't understand this investment. Can someone here explain?
- encryptluks2 5y agoI agree. Sounds like a terrible investment. For that price they could literally give over 2000 employees a million dollars or hire 5000 new employees in other remote locations.
- rmah 5y agoA real estate purchase is not a normal expense (on the income statement) the way paying employees is. Assuming it's a cash purchase, it's a balance sheet transfer from cash asset to a real-estate asset. If debt financing is used to pay for it, while the interest expenses would appear on the income statement, the loan itself would also show up on the balance sheet as a debt. In short, a building purchase has minimal to no impact on profits (i.e. the net income on the income statement) and if purchased with debt, minimal impact to the cash flow statement.
- t0mbstone 5y agoThese companies just can't seem to grasp the idea that remote work is viable
- lexapro 5y agoThey are probably measuring output and concluded that office workers are more productive.
- w0m 5y agoIf I was still in my 20s and single; I'd likely strongly consider working in a Manhattan Google office building. That just sounds awesome. X years past that phase - I'd rather not. That it doesn't fit me (anymore) doesn't mean it's not enticing to others though.
- w0m 5y agoSome people can't grasp the idea that remote-work isn't the answer for everyone in all positions.
- lbotos 5y agoThere are many types of remote work: - Remote Only - Remote First - Remote Optional, Office First - No Remote, Office Only Companies (especially large ones) are not gonna just go from No Remote or Remote Optional to Remote Only. Change takes time even in the face of a shock to the system like COVID-19.
- lbotos 5y agoStrong Assumptions include: 1. They think that in-person work still has value. 2. They want a physical presence in a world-class city. 3. They think the property will appreciate in value to sell later 4. They intend to rent it out and generate income that way.
- nerdponx 5y agoIf they are buying real estate now, I suppose it means they are not expecting rents to fall soon. Right now, the city government seems very happy with the fucked up real estate market and the continued gutting of city centers, so maybe they are correct. Reversing this trend is one of the most important things New Yorkers can do to ensure the long-term health of their city. It's already been bled out pretty badly by the real estate investment vampires.
- rmah 5y agoFor a variety of real-estate industry/finance specific reasons, commercial rents in NYC are very "sticky". Many building owners would rather space sit empty for years rather than rent the space at lower rents (for various degrees of lower). In short, both the near-term and long-term future outlook would have to be quite bleak before we see a broad and substantial lowering of commercial rental rates in NYC.
- nerdponx 5y agoI guess that's kind of my point. Google clearly doesn't anticipate either a natural change in the economic situation or regulatory intervention. The latter is what I find disturbing, that they're so sure they're willing to bet $2bn on it.
- ibn-python 5y agoRespectfully, what is there not to understand? They’re expanding their footprint in NYC due to increased demand. I’ve heard here and there that headcount at Google NYC has always been tight, so this should alleviate some of that. Facebook and Amazon have also committed to massive leases in NYC within the past few years as well. Besides that, these companies wield so much cash it seems like a safe bet to park a couple billion in. NYC real estate is arguably one of the safest bets in the modern era
- rrdharan 5y ago> headcount at Google NYC has always been tight, I think you mean desk space at NYC has always been tight? Assuming so, yes can confirm.
- Arainach 5y agoI assume OP meant headcount, not desks. Talking to recruiters, NYC always seemed like one of the toughest offices to get into - presumably due to much greater demand than available space to put devs.
- traceroute66 5y ago> NYC real estate is arguably one of the safest bets in the modern era Uh huh. That's what they all said about commercial property in Western city-centres before the pandemic ... "a sure bet" they said .... "rents only going up" they said.... Now you walk through all these CBDs and they are shadow of what they were before because people discovered working from home either full-time or near enough (3-4 days a week) and the need for large chunks of commercial property is now being brought into question.
- ibn-python 5y agoI generally agree that this is probably the fate for many American cities, but NYC seems to be in a league of its own compared to the other cities in North America. I feel like a better comparison is something like London, Rome, Mumbai, Beijing. These are cultural epicenters that are more resilient (but not immune) to economic downturns. Yes things might get tough for a bit but they're the place you want a multi bullion dollar investment to live when the goings get tough.
- dudus 5y agoGoogle purchased the port authority building in NY for 1.8B on 2010 [1]. They also made a ton of real estate investments in CA and UK. I imagined that with the pandemic and prospects of less employees in the office things would slow down. But someone at Google is betting on a rebound after covid of office space demand, company growth or just real estate appreciation. 1: https://www.nytimes.com/2010/12/03/nyregion/03building.html https://www.nytimes.com/2010/12/03/nyregion/03building.html
- dleslie 5y agoIs it a pure bet, or part of a strategy? With their control of the YouTube algorithm, search result suggestions, Google News curation, and dominance of ads, Google doesn't lack for ability to manipulate public opinion. Edit: if I were Google, and I existed in the present absence of serious regulation, I would wield the ability to manipulate opinion in the favour of my business strategy. I'm not sure if that's an offensive notion, and that's why this comment is controversial?
- coliveira 5y agoCompanies like Google, MS, Apple, etc., make huge amounts of money, and they need to put some of that money in tax advantaged investments. Real estate for offices is one of the easiest ways to do this. They can also use this to say that they're investing billions in the US, when in fact the investment is just on existing buildings.
- manquer 5y agoThat isn't as bad as you make it sound . Even if google is not directly building new , the cash they are paying will directly or indirectly fuel additional real estate investment in new buildings by the seller or reduce their debt load enabling them to invest in new development in the future etc .
- davey48016 5y agoThis is space they already lease, so it's not just a speculative real estate play. If they plan on continuing to use the space long term, then the total cost of renting it might be higher than owning it. To the extent that investors use EBITDA to evaluate stocks, getting rent off the books is probably good, too.
- tw04 5y agoJust look to Kmart? Somehow the entire company sold for less than their real estate was worth and the entire deal was paid for by the acquiring company taking out loans against their real estate. Another example would be Sun, I think Oracle sold off their Boulder campus for nearly what they paid for the entire company.
- rmah 5y agoWhat's not to understand? Presumably, Google's bean counters think the cost of capital necessary to purchase the building plus any real estate value appreciation will be lower than the cost to lease the building. That part seems pretty strait-forward. Or are you not understanding why they don't "just" have everyone work remotely? If that's the case, then try to understand that despite what you may see online, it may be that many people don't want to work remote all the time. Moreover, working remotely will have deleterious effects on managerial promotion as that is heavily influenced by interpersonal relationships. And higher level managers are the ones that make such decisions. Even if remote work is better for the bottom line, remember that people make decisions to benefit themselves (across a variety of dimensions and timeframes), not their organization.
- vmception 5y agoA lot of tech companies are real estate companies.
- cronix 5y agoAnd fast food. McDonald's holds over $30B in real estate. https://www.business.com/articles/mcdonalds-business-model/ https://www.business.com/articles/mcdonalds-business-model/
- edwnj 5y agoGoogle is sitting on bags of cash and those bags are being devalued like we live in Venezuela (40% of all dollars printed in the last 2 years!). So if you're a cashcow like Google, you want your bags in anything and everything except dollars. And buying commercial real estate in New York in the midst of lockdowns and remote work while the city is going through a commercial real estate market crash.. is good.
- burkaman 5y agoThey are already leasing it, so this is not really as interesting as it sounds. Big buildings are expensive.
- throwaway1777 5y agoThis is a huge point. They aren’t increasing space or headcount, mainly changing the cost structure
- gowld 5y agoAnd long-term outlook.
- msoad 5y agoI thought they bought this building in 2012 for $1B. I guess that sale didn't go through.
- wan23 5y agoThat was a different building. Since then they've bought two more!
- paganel 5y agoNow I'm just curious what the total value of their real estate holdings really is. A history of how that value fluctuated recently would also be interesting. I guess this information is hidden somewhere in Alphabet's quarterly earnings reports but I'm afraid I wouldn't know where exactly to look (or what to look for).
- lotsofpulp 5y agoThe article says $60B to $70B between land and buildings.
- deleted 5y ago[deleted]
- ignoramous 5y agoMr. Gorbachev, tear down this wall: https://archive.is/4T3hv https://archive.is/4T3hv
- maxpert 5y agoThey will first do these investments and then insist on coming back. I see modern IBM unable to give up their cult culture.
- traceroute66 5y ago> I see modern IBM unable to give up their cult culture. Indeed. Google of all companies should have embraced the future that was exposed by the pandemic, i.e. remote working. This is even more the case given 100% of their products are based around the internet and so inherently facilitating remote work: - Android - Chrome - Docs - Forms - Google Search - Gmail - Google Meet/Chat - etc. I mean they pretty much don't have to license any third-party software, all they need to do is eat their own dogfood.
- atlasunshrugged 5y agoI don't see that at all. A hybrid culture sure, but all remote work? I think it's way too early to tell if companies like this will end up with a few marquee offices in places like NYC, SF, Berlin that employees who want to can go to while everyone else can work remote. I'm more ambivalent now but in my early 20's I definitely wanted to be in an office in a big city where I was with lots of colleagues in an energizing environment.
- BikiniPrince 5y agoI think for those who are seasoned it a viable option. However, I’ve seen the new hires really struggle to come up to speed.
- cmrdporcupine 5y agoHell, even a pain moving within companies.. I just switched teams/projects at Google in the winter, and it was a months long slog to come up to speed... I've been at the company for almost 10 years, but never had this slow of a ramp up before. Until recently, where a couple days in the office with the TL and a whiteboard and I feel way more connected and competent.
- Someone1234 5y ago- Letting employees work from home: -$0 (savings on building ownership, HVAC, security, extra staffing, power, etc). - Opening a NYC office: $2.1B + upkeep. Even ignoring the environmental impacts directly and for commuting, at what point are we allowed to suggest that senior management at these large companies acts in an irrationally impulsive way? Why aren't the shareholders flagging this? It feels like Google are spending $2.1B here for an ego trip to contrast Apple's open plan "Apple Park." Microsoft almost looks modest by comparison for their boring looking Seattle offices (land value not withstanding). But why any tech company is opening new offices now is mind-boggling.
- paulpauper 5y ago$2 billion for google is a rounding error >Why aren't the shareholders flagging this? Look how well the stock has done since IPO. I think management knows what it is doing
- UncleMeat 5y agoGoogle is letting people work from home (in most orgs). But this isn't the majority of the company and Google is still hiring like crazy.
- throwaways885 5y agoThis is the thing. WFH at Google is an option now, but the uptake hasn't been as huge as people here might expect.
- ugjka 5y agoThey are not opening anything "Google is already leasing the 1.3 million-square-foot waterfront building, a former freight terminal dubbed St. John’s Terminal, in the Hudson Square neighborhood. The company has an option to buy, which it said it plans to exercise in the first quarter of 2022."
- sailfast 5y agoEven if most of your folks work from home you need a lot of square footage for gathering spaces, conference rooms, and phone booths when people do get together. (Which, they should when rates of infection get under control, because it’s key to remote productivity). It’s also an asset on their books at this point and probably cheaper to own than to rent in the long run.
- neonate 5y agohttps://archive.is/4T3hv https://archive.is/4T3hv
- tamade 5y agoNot hard to understand. Real estate in a tier 1 city is the ultimate NFT.
- Salgat 5y agoSeems like a ballsy investment in office space considering we're at the height of a real estate bubble during a massive cultural shift towards remote work.
- noitpmeder 5y agoNY real estate is cheap now
- francisofascii 5y agoHere is a cynical take... Big Tech: "We will continue promoting remote work." Real estate prices plunge. Big Tech buys real estate on the cheap. Big Tech: "In-person work is important." Real estate prices surge. Big Tech profits.
- KptMarchewa 5y ago>Real estate prices plunge. You failed at step 2.
- francisofascii 5y agoCommercial office real estate.
- endisneigh 5y agoMakes sense. If you insist on living in NYC for any reason, then going into the office is probably more comfortable than living (and working) in a cramped NYC apartment. Though it's pretty ironic that virtually all of the software Google uses and creates facilitates virtual work, yet they insist on an in-person setting.
- pyrophane 5y ago> If you insist on living in NYC for any reason Believe it or not, there are people out there who find NYC to be a desirable place to live. Not everyone wants to live in a suburb.
- endisneigh 5y agoSure, never said otherwise
- ysavir 5y agoNot technically, no, but this language: > If you insist on living in NYC for any reason Strongly suggests that living in NYC is only something people do if they have reason to _insist_ on it, and not because it's just a place where people want to live. Someone could just as well say that "If you insist on living in a suburb for any reason, then working from home is probably more comfortable..."
- cmelbye 5y agoNew York is culturally known as a city that never sleeps, an expensive city, a crowded city, a city with muggy summers and bone-chilling winters, etc. There have been countless songs, books, and tweets written about how it takes a certain level of resolve to thrive there. That doesn't mean that people don't enjoy living there.
- ysavir 5y agoNot sure if this was meant towards me or the parent comment, but I'll mention that I am a satisfied NYC resident.
- WarOnPrivacy 5y agoAll my questions are about tech infrastructure. Does the location of this property have anything to do with proximity to NYC's internet exchange points? Will this building need that kind of access? If so, why? Is there infrastructure is already in place to build out high-volume connections? Are there maps and diagrams of that infrastructure; can we see them?
- s17n 5y agoPretty sure it has nothing to do with any of that stuff - this is just a building with a very large footprint that was vacant, pretty much a unique opportunity in Manhattan.
- epc 5y agoNo. The Port Authority building they bought in 2008 or 2009 had (still has?) a huge telco exchange space, which was why Double lick had been there. 60 Hudson St is the other bug exchange point, it’s maybe a half mile from St John’s Terminal.
- kyrra 5y agoGoogler, opinions are my own. Google just bought another building in Boulder Colorado 4 days ago as well: https://www.dailycamera.com/2021/09/16/google-buys-the-reve-office-space-in-major-expansion-of-boulder-footprint https://www.dailycamera.com/2021/09/16/google-buys-the-reve-... The price for it isn't listed yet, but my guess is in the $60m to $100m range. Google bought the building I sit in now for $131m 4 years ago: https://www.denverpost.com/2017/09/21/google-buys-land-buildings-boulder-campus-131m/ https://www.denverpost.com/2017/09/21/google-buys-land-build...
- UncleOxidant 5y agoGoogle not jumping on the WFH bandwagon.
- quartz 5y agoTo the folks who think this is some kind of rejection of remote work: even in a remote work era, having physical offices in cities makes a ton of sense so long as large numbers of people want to live there. In a city like New York, living day to day life across many physical spaces is a core part the experience. In fact it's one of the major draws. The park is your front lawn, the cafe your breakfast nook, the theater your living room, and the office is... your office. Remote work is great and all if that's not the lifestyle you want, and I think the pandemic has perhaps shown that many were living this lifestyle who didn't want it (especially if you were living the quasi-bedroom-city life of SFBay where you slept in SF but commuted out of the city daily for work), but Google embracing the deeply social and physically connected lifestyle of a functional city like New York isn't really a rejection of remote work being viable-- it's just accepting that to many, this type of city life is preferable and having a physical space to do your work provided by your employer is part of what makes that so.
- gordon_freeman 5y ago> In a city like New York, living day to day life across many physical spaces is a core part the experience. In fact it's one of the major draws. The park is your front lawn, the cafe your breakfast nook, the theater your living room, and the office is... your office. why would someone rather not live in a countryside with expansive views and much lower stress and work remotely? (especially when tech like Starlink are going to remove the comms friction)
- RobRivera 5y agowhy would someone assume that is the superior mode of operation for every human neuro-type?
- deleted 5y ago[deleted]
- cj 5y agoI've lived in NYC, SF, Boston, and now the country side. Each have their pros and cons, just like anything in life. For one, in NYC I liked being able to walk everywhere and not owning a car.
- tobyjsullivan 5y agoFor anyone unfamiliar, Google also bought another building in Manhattan for $2.4B five years ago.[0] Seems to have worked out for them so far. I would caution against reading too much into this move. [0] https://blog.google/inside-google/company-announcements/furthering-our-new-york-investment/ https://blog.google/inside-google/company-announcements/furt... Edit: updated to clarify this was some building in Manhattan. My original post was confused with another purchase (probably their purchase of the Port Authority building). Edit 2: Better link
- epc 5y agoThey bought Chelsea Market, which is a one avenue by one block building opposite Ninth Avenue from 111 Eight (former Port Authority Inland Terminal building). Edit: forgot they also have bought the Milk building opposite Chelsea Market across 15th St, it’s the building the air bridge connects to.
- IG_Semmelweiss 5y agoSome history on the site: Only some 7 years ago, this very area was targeted to be the heart of a new stadium development for the Major League Soccer. It was going to be the West Village home....for NYC FC soccer franchise It made sense: Pier40 city park, across the street from 550 washington St, was basically a decreipt property stuck in time as was the rest of the neighborhood. Then hurricane Sandy hit. The damage closed the Pier40 building for almost half a year. Some support did arrive from Sandy hurricane aid, which ironically did more to help the building than any other city park initiative. Post-Sandy, Pier 40 park seemed destined to stumble along. Then came the MSL. They were convinced they could sell the idea to the site: redevelop moribund Pier40 and 550 Washington St next to it. Everyone seemed excited. However, they did not count on a surprise rival: parents of the little league baseball kids that regularly play at Pier40 turf fields (as does DUSC soccer kids). They protested. Loudly. Some of them likely well connected. The project then died and moved elsewhere. Now, some of those parents live in the area. They are now looking to benefit enormously from this Google development. Kudos for them. They earned it
- oblio 5y agoSo it's good because they're going to make money?
- IG_Semmelweiss 5y agoIts good because of the positive externalities it brings The parent's protesting, while self interested (for their kids) benefited many groups, particularly teenagers and immigrants that often play pickup sports at Pier 40 like touch football, ultimate, or soccer, without park permits (because they can't afford field permits). So, this is good because Google will bring more security and investment into a forgotten NYC area. Coincidentally, Pier 40 is also the on-ramp spot where the terrorist truck driver started his post-Halloween drive that killed 8 tourists in the pedestrian walkway. [1] [1] https://abcnews.go.com/US/witness-describes-chaotic-scene-driver-kills-nyc/story?id=50843312 https://abcnews.go.com/US/witness-describes-chaotic-scene-dr...
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- Wonnk13 5y agoI think this is Ruth shifting cost structures moreso than any indication about in office work culture. I believe they were already renting, so someone probably did the math and realized they'd come out ahead in the medium to long term. Google isn't leaving NYC anytime soon.
- microtherion 5y agoI guess in light of recent news, they decided they needed an East Coast Halloween Store to guarantee geographical redundancy if something should happen to the West Coast one.
- iszomer 5y agoBought the dip?
- evanmoran 5y agoIt’s the pandemic likely causing the timing, but not as a statement of remote vs not remote work: it’s just cheaper now with the pandemic to buy rather then rent in the medium-long term. So if they decided they need the space for 20+ years then they certainly have the cash to buy if they want to.
- mrkramer 5y agoYou think Google will survive the next 20+ years? We had "status quo" in the last 20 years I don't want it in the next 20 years. Better internet search engine will emerge sooner or later. Google Search always feels the same; improvements are so minor I don't even notice them in the terms of everyday quality of search. We have one "Big Blue" I'm afraid Google will be the next.
- diebeforei485 5y agoI suspect this means they will be downsizing in SF. NYC has a far, far more reasonable tax regime.
- literallyaduck 5y agoPandemic is great for the rich who are getting prime real estate for cut rate prices, and then will end work from home and make a huge windfall once they gentrify the area.
- brightball 5y agoAlphabet R going to stand for Real Estate?
- deleted 5y ago[deleted]
- ulisesrmzroche 5y ago“We know that our employees, in order to really be happy and productive, need to collaborate,” said William Floyd, Google’s director of public policy and government affairs. “Because of that need to collaborate, we’ve been investing more and more in office space. So the implication is that Google is having trouble with comms. As if they think people will meet in the office to plan and go home and code. My guess is that big companies will run in a hybrid model while startups will be fully remote. But eventually all software development will be WFH only, that's for sure
- spaceywilly 5y agoI feel the same, this will result in a tide change. Companies that embrace wfh will be able to attract the most talented engineers, companies that try to force their employees to come into the office will stagnate