Google recently purchased the former St. John’s Terminal for 2.1 billion dollars. Google had been leasing the office space in Manhattan but has recently decided to purchase it. This signals that the “Big Three” tech firms are setting up true roots in Manhattan. These tech companies planting in Manhattan will bring a huge benefit to the Manhattan area either by providing jobs for citizens of the area or they will be providing jobs for commuters and will pull more people into the city. Google is relatively smart with buying in the retail market when they did because the office space end of the retail market is down right now. Whereas the housing market is up. The office space segment of the market is down approximately 7-8% since 2020. Looking at the overall utility that Google views the purchase of the office space will provide, it is important to look at how big tech is pushing to take roots in Manhattan.
It looks as if big tech is indirectly helping Manhattan recover from the pandemic. It is also smart for Google to buy at this stage because they are viewing their utility in the investment. As of August 2021, unemployment in Manhattan hit a rate of 10.2%. Google is investing in the future because they will be benefitting from the untapped workers in the Manhattan area. Google purchased the office space, due to the utility that the office space will have in the future outweighs the 2.1 billion dollars that they paid for the office space.
References
Grossman, E. (2021, August 04). New York City's small businesses are facing a pandemic-altered commercial real estate landscape. Retrieved from https://www.marketwatch.com/story/new-york-citys-small-businesses-are-facing-a-pandemic-altered-commercial-real-estate-landscape-11628101318
Robtfrank. (2021, September 22). Google's $2.1 billion office building deal is latest sign of Big Tech's muscle in Manhattan market. Retrieved from https://www.cnbc.com/2021/09/22/big-tech-is-helping-to-save-manhattans-real-estate-market-.html
Labor Statistics for the New York City Region. (2021, September 24). Retrieved from https://dol.ny.gov/labor-statistics-new-york-city-region#:~:text=Labor Statistics for the New York City Region,-Bronx, Kings, New&text=The city's seasonally adjusted unemployment,4.6 percent from August 2020.
That's an awful lot for an empty office.
Since COVID-19 companies across the country learned how to operate remotely and use various tools- Zoom, Microsoft teams, etc.- to conduct meetings online. 2.1 Billion dollars is a sizeable investment that might not be necessary or beneficial. Google being at the cutting edge of technology may even have a superior way to conduct business from home, so I don't understand this particular real estate investment. I wonder what the potential financial benefit of conducting business in person verse remotely. Conversely, how much money, besides this purchase, could be saved by not meeting in the same area?