The technology boom in New York City is alive and well. And it may soon get even better.
And more tech jobs will keep coming here because West Coast companies are still quietly negotiating deals for office space in Manhattan.
That’s according to Larry Silverstein, one of the city’s premier real estate developers, whose properties include the World Trade Center.
I met with Silverstein late last week because I was curious about what is going to happen to the city’s real estate market now that a couple of major changes have occurred.
One of the biggest things to happen was the implosion of WeWork — or The We Company as it is now called — which is the city’s largest tenant. In case you don’t already know, WeWork is one of those places where a person or a fledgling company can rent a desk, an office or even a conference room.
No need for that company to spring for the entire office or stay for a long time. Or even hire a receptionist. It can share space and costs with others in a so-called co-worker arrangement.
At one point WeWork was said to hold leases on 8.9 million square feet of office space at more than 100 locations in Manhattan. That surpassed even JPMorgan Chase, which was once the biggest.
But WeWork’s plans for an initial public offering (IPO) failed last year, its founder, Adam Neumann, got booted from the company and lots of the office space it was leasing could soon be back on the market.
On top of that, there’s a lot of new office buildings going up around Manhattan. Just walk around and look up to the sky — especially to the west — and you’ll see gleaming new buildings that are competing for tenants.
That’s the environment I see when walking around Manhattan.
Silverstein, who will turn 89 years old in May, says not to worry. The tech industry, which has already taken a liking to New York, is still flooding in — or trying to.
I met Silverstein in his relatively modest 38th-floor office at 7 World Trade Center. I’ll let him tell this part of the story.
On WeWork’s failure: “I don’t think it had much of an impact on the market in New York City,” said Silverstein. “I think the marketplace took the hit pretty well.”
What caused WeWork’s problems? “I think the problem (Neumann) had was an attempt to expand too quickly to build a larger IPO. And it got so front end loaded it became such an obsession for him to lease space,” Silverstein said.
But Silverstein says the saving grace in the WeWork contracts for space were that they were basically nuts and bolts. No frills that drove up the costs. So WeWork didn’t affect costs of leases in other buildings.
“End of day, I think (WeWork) will survive by eliminating this enormous, constant pressure to expand,” Silverstein said.
Silverstein has something similar to WeWork going on in his own company. It’s called Silver Suites, which “caters to the needs of short-term space users.”
I asked Silverstein if he planned to expand on that idea now that WeWork is wounded. He was non-committal, although he says Silver Suites “has been doing quite well” in the couple of years it has been in operation.
“There will continue to be users for short-term space,” says Silverstein. And that’s why he thinks WeWork — despite its current problems — will survive.
Silverstein says these flexible space options are particularly attractive to technology companies. And sometimes these companies become regular tenants once their business expands.
“If things begin to go well their expansion requirements are enormous,” Silverstein said. One company — a stock exchange called IEX — started by renting temporary space from Silver Suites and now has 45,000 square feet of offices in one of the Trade Center towers.
Silverstein says Silver Suites has taken some business from WeWork, but not since that company’s failed IPO and other problems became apparent.
The World Trade Center has always been owned by the Port Authority of New York and New Jersey. Silverstein and several minority partners won a contract for a 99-year lease of the property in 2016.
He also had a lease on the original World Trade Center that was destroyed by terrorists in 2001. Silverstein had to fight for six years to settle insurance claims after that catastrophe.
Tower 3 of the newly built World Trade Center is about 82 percent filled, said Silverstein.
And he hopes that the remaining couple of hundred thousand feet of space will be leased by the middle of this year.
Then he’ll move his attention to Tower 2, he said, which only has the foundations built.
Silverstein is optimistic that tech companies will keep pouring into the city and help him lease all that space. And he seems to think that Amazon, which abandoned plans to build a second headquarters in Queens in 2019 after local opposition, will be among them.
Amazon has since announced plans to locate some of its workforce in Manhattan. But the number of jobs that will create is nowhere near the 25,000 employees that the Queens site was supposed to produce.
Silverstein has publicly expressed his disappointment about Amazon quitting the Queens project.
“I felt that if everyone who was focusing on it understood that all of the benefits offered to Amazon were the result of existing programs … then perhaps the results would have been very different,” he said.
And he thinks the 25,000 figure was conservative. When all was said and done, Silverstein says he thinks the Amazon project would have produced more than 80,000 or so more jobs for the area.
“The benefits would have been huge,” he said.
But that’s water under the Queensboro Bridge, as they say.
Still, Silverstein thinks Amazon will be among the tech companies looking for more space in New York City although he wouldn’t answer when I asked if he knew that for certain.
I asked: Is the Amazon deal dead? “No, I don’t think Amazon is dead from the standpoint of occupancy of space in New York. Clearly, they are continuing to expand in New York in a very significant way,” he said.
“And now it’s not just Amazon. It’s a whole host of other tech companies that have moved into NY in a significant way,” Silverstein added.
He would say: “We are talking with other tech companies.”
Why such an interest in New York from tech companies? “Their customers are located globally. So being in New York in addition to being in California provides a whole realm of additional opportunities.”
“People, many people, find California stifling,” he added.
I can’t think of a better way of ending this column than with a knock on California. So, The End!