Google to Buy New York City Office Building for $2.1 Billion - The Wall Street Journal

Google said it is buying a Manhattan office building for $2.1 billion, one of the clearest signals yet of big technology companies’ growing appetite for office space, even as these firms embrace remote work.

The deal for the new building on Manhattan’s West Side is the most expensive sale of a single U.S. office building since the start of the pandemic—and one of the priciest in U.S. history, according to data company Real Capital Analytics.

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Google is already leasing the 1.3 million-square-foot waterfront building, a former freight terminal dubbed St. John’s Terminal, which is under construction 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.

Google, Facebook Inc., Apple Inc., Amazon.com Inc. and other tech giants have emerged in recent years as some of the biggest renters and buyers of office space throughout the U.S. Tech companies are taking advantage of lower office building prices and putting billions of dollars in cash reserves to use.

Tech’s soaring real-estate demand has helped offset office space being dumped by large financial firms, from JPMorgan Chase & Co. to HSBC Holdings. Cities usually welcome the arrival of big tech companies for bringing an influx of well-paid employees and a boost to property-tax revenue, though these companies’ presence has also fueled concerns over rising commercial and apartment rents.

Google has embraced remote work more aggressively than many large-company peers, letting employees work at home since the spring of 2020. Sundar Pichai, chief executive of Google parent Alphabet Inc., said last month that the company would delay its return to the office until January. But the Manhattan office purchase underscores how the company views office space as an important part of its long-term strategy.

“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.”

Mr. Floyd said Google wants to offer employees the flexibility to work from home or in an office. The Manhattan building is expected to open in mid-2023.

Google often prefers to buy buildings because owning spaces makes changing them in the future easier, like reconfiguring floor plans. “We like to control our own space,” Mr. Floyd said.

The sellers are two Canadian companies: real-estate firm Oxford Properties Group, which joined with Related Cos. on Manhattan’s Hudson Yards commercial and residential development, and CPP Investments, a pension fund manager.

Google has been expanding its New York offices in recent years and now employs around 12,000 people in the city—its biggest workforce outside California. That number is up from around 7,000 in 2018, Mr. Floyd said. The company’s offices, some owned and some leased, are clustered in Manhattan’s Chelsea and Hudson Square neighborhoods.

The acquisition of St. John’s Terminal cements Google’s status as one of Manhattan’s biggest commercial property owners. The company paid $2.4 billion for the nearby Chelsea Market building in 2018 and owns 111 Eighth Ave. and the Milk Building at 450 W. 15th St. Globally, Alphabet held $55.9 billion worth of land and buildings as of June 30, according to its latest quarterly filing with the Securities and Exchange Commission.

Tech companies have said they favor New York over cheaper cities because of its large skilled labor pool and appeal to many young professionals. Amazon.com once planned to open a second headquarters in the city but backed out of the plans in 2019 after the subsidies it would receive drew opposition from local lawmakers. Google’s latest deal shows that the Amazon episode has done little to dent New York’s appeal to tech companies.

“New York City is the place for world-class talent and Google’s acquisition of 550 Washington Street in Manhattan for its workforce demonstrates that,” Manhattan Borough President Gale Brewer said.