Google To Buy Manhattan Office Building for $2.1 Billion in Biggest New York Deal in Two Years
September 21, 2021
Deal Gives Shot of Confidence to City’s Office Market Pummeled by Pandemic
Google agreed to buy a Manhattan office building for $2.1 billion in a bet that offices, especially in New York, are a key part of the future of work even as the pandemic delays the return to the office for companies.
Google, which first set foot in New York more than 20 years ago and has expanded its employee count to 12,000, intends to purchase the St. John’s Terminal building at 550 Washington St. in the Hudson Square neighborhood on the west side of Manhattan, said Ruth Porat, chief financial officer of Google and parent Alphabet, in a company blog post Tuesday.
The deal would be the largest New York office sale in at least two years, CoStar data shows. Google, which currently leases the building, is exercising its options to buy the property as it’s constructing a 1.7 million-square-foot office campus in the area with the building serving as an anchor. It comes as the company has delayed the return to the office for its employees to January.
In 2018, Google spent $2.4 billion for the Chelsea Market building bounded by Ninth and 10th avenues between 15th and 16th streets in Manhattan, a popular tourist attraction with its food hall. That transaction ranked as the largest U.S. office sale of 2018, according to CoStar data. Then-owner Jamestown has said it only considered Google, which already occupied a majority of that building, as a buyer without actively marketing the property.
In 2010, Google acquired the 2.9 million-square-foot building at 111 Eighth Ave. near Chelsea Market, paying Jamestown and Taconic Investment Partners $1.77 billion.
New York has Google’s largest office presence outside of the company's home base of California. The Hudson Square neighborhood will house Google’s global business organization, which includes its sales and partnership staff. The purchase of St. John’s Terminal, a former freight facility that is being turned into what Google describes as “a highly sustainable, adaptable and connected building,” will close in the first quarter of next year, Google said.
“New York’s vitality, creativity and world-class talent are what keep us rooted here,” Porat said. “As Google moves toward a more flexible hybrid approach to work, coming together in person to collaborate and build community will remain an important part of our future.”
Google plans to invest more than $250 million this year on its New York campus in addition to the deal, Porat said.
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Companywide, Alphabet owned about $60 billion of buildings and land as of June 30, up from $50 billion at the end of last year, according to its latest quarterly filing. Alphabet has spent $7.6 billion on 95 office properties in the past 10 years in the United States, with New York’s Chelsea Market the largest transaction, according to CoStar data.
Google’s latest move further validates the appeal of Hudson Square, a former printing and warehouse manufacturing district surrounded by Tribeca, Greenwich Village and SoHo, with the Hudson River and its waterfront walkway and park to the west.
The neighborhood began changing after it was rezoned about 10 years ago for mixed-use residential development. Disney is also building an office campus in the market, while Hudson Square Properties, a joint venture made up of Trinity Church Wall Street, Norges Bank Investment Management and Hines as the operating partner, recently broke ground on 555 Greenwich St., a 270,000-square-foot, 16-story office tower without tenants lined up.
“A major reason we chose to go forward on this project in August 2020 in the middle of COVID is the confidence that we have that post-COVID users would pursue what we call a flight to quality,” Tommy Craig, senior managing director of Hines, said recently in an interview. Hines’ new office tower will combine with the existing 345 Hudson St. to become one full-block office building spanning more than 1 million square feet.
With Disney and Google, we are “between the two largest user commitments in New York,” Craig told CoStar News in August. “It’s a big statement about how they perceive the neighborhood as the place to recruit young new tenants. … Who’s young and comes to New York and doesn’t want to live in Greenwich, Tribeca or SoHo or in Brooklyn and take the L train and get right here?”
The market’s office vacancy rate of 8.1% is below the city’s record high of nearly 12%, CoStar data shows.
“It’s knitting all of Hudson Square together into an extremely vibrant community,” Rick Cook, founding partner of CookFox Architects and designer behind 555 Greenwich St. and the St. John’s Terminal building, told CoStar News previously. “It’s kind of the workplace of the future. It’s a whole thought of connecting people to the nature and connecting people to the Hudson River. Every one of these buildings is kind of a building block towards that.”
Google said the construction of Pier 57 is also proceeding and will be completed next year. The company said it will include office space occupied by Google, a public food hall, community space, galleries, and the city’s largest public rooftop space and educational and environmental programs run by the Hudson River Park Trust.
RXR is currently undertaking the redevelopment of the historic Pier 57 in Hudson River Park. Google is listed as the only tenant in the redevelopment, occupying 434,256 square feet, according to CoStar data. The Port Authority of New York and New Jersey is also listed as one of the owners of Pier 57.
Google isn’t the only tech giant hot on New York. Facebook, for instance, in the middle of the pandemic last year signed the city’s largest lease deal of the year for 730,000 square feet at the Farley Building as part of Vornado Realty Trust’s mega Penn District development.