GOOGLE AND J.P. MORGAN COMMIT TO NEW YORK
Although we generally focus on apartment and townhouse sales, in this edition of the Novack Team Update we will cover two significant office developments since the strength of the New York City residential market is inherently tied to the quality and breadth of local job opportunities and the associated caliber of buyers and sellers
- Google is set to purchase Chelsea Market, the 1.2 million square foot office and retail property located at 75 Ninth Avenue for ~$2.4 billion from its current owner, Jamestown. This acquisition will add to Google’s existing fee-owned 2.9 million square foot New York headquarters located across the street at 111 Eighth Avenue, effectively creating a mega-campus for its employees in the Chelsea/Meatpacking neighborhood.
- The company’s impending $2.4 billion purchase price underscores its growing commitment to NYC, particularly when compared to Jamestown’s 2011 buyout of Chelsea market for an implied valuation of $800 million.
- Google’s expanding presence is emblematic of an overall increase in the number of technology firms choosing New York as a base of operations, and consequently, as a home for their employees. In fact, employment at tech firms in New York City has grown 3 times faster than other areas of the private sector, adding more than 50,000 jobs since 2010.
- While the modern technology sector began on the West Coast and was founded upon the development of technology and software, the industry is now moving towards the application of that technology across other sectors such as finance, healthcare, media, and retail. New York’s status as an international business capital has made it a natural and growing hub for this expansion.
- Google is not the only tech company expanding its presence. Facebook, Amazon, Salesforce, and Spotify are also enlarging their New York space by hundreds of thousands of square feet.
- J.P. Morgan is slated to build a new 2.5 million square foot 70-story headquarters for its 15,000 employees on the site of its current flagship at 270 Park Avenue. Demolition of the existing property is expected to begin in early 2019 with the new tower completed in the following 5 years.
- The new tower will be approximately 500 feet higher than the existing 52-story headquarters and add ~1 million additional square feet of office space. It will allow J.P. Morgan to both modernize its office space and accommodate all future growth plans.
- J.P. Morgan’s new headquarters was the first building to be approved under the new Midtown East Rezoning Plan. The Midtown East Rezoning Plan covers 39th Street to 57th Street from Third Avenue to Madison Avenue and is the result of developers’ and corporations’ desire to build taller, more efficient state-of-the-art office towers coupled with elected officials’ and community groups’ focus on improving the area’s transit system and streetscape.
- Under the final terms of the rezoning developers can purchase unused air rights from neighborhood landmark buildings (for example, Saint Patrick’s Cathedral) in order to build taller skyscrapers. In return, the city will collect a tax of $61.49 per square foot of air rights sold which will fund pedestrian plazas, sidewalks, transportation, and infrastructure improvements. J.P. Morgan’s purchase of neighboring air rights alone is expected to generate ~$40 million in associated City revenue.
- J.P. Morgan’s new tower represents not only a recommitment by one of the banking Industry’s largest employers, but also an effort to ensure that Midtown is able to exist as a preeminent office destination that can compete with newer developments such as Hudson Yards.
In conclusion, it is worth pointing out that corporations’ ultimate goal is to attract the best talent, which in part means anchoring their firms in locations where that talent wants to live. With that in mind, we feel that New York continues to be viewed as one of the most attractive residential markets for a global set of buyers and investors.
Please don’t hesitate to reach out to us with any questions, or on any of your real estate needs.
Alex and Sybille