New York rivalling Silicon Valley for tech

New York rivalling Silicon Valley for tech

10 January 2020

When people say tech, the name Silicon Valley comes into mind. Indeed, tech companies have long thrived in the San Francisco Bay area. However, big tech companies such as Google and Facebook have started building a tech empire in a state far from California. 

Facebook’s push to accommodate its booming operations is part of a rush by the west coast Silicon Valley technology giants to expand in New York City, notes The New York Times. The growth is turning parts of Manhattan into one of the world’s most vibrant tech corridors.

Four companies – AmazonAppleFacebook and Google – already have big offices along the Hudson River, from Midtown to Lower Manhattan, or have been hunting for new ones in recent months, often competing with one another for the same space.

In December 2018, Google announced that they will be expanding its presence in New York City by building a 1.7 million sq ft campus. This developed over time into the Google Hudson Square, a billion-dollar investment by Google.

Early in April 2019, Netflix decided that they also want to build a presence in New York, investing over $100 million for a corporate office in Manhattan and a production studio in Brooklyn.

In all, the companies are expected to have roughly 20,000 workers in New York by 2022.

Cities across the United States and around the world have long vied to establish themselves as worthy rivals to Silicon Valley. New York City is certainly not anywhere close to overtaking the Bay Area as the nation’s tech leader, but it is increasingly competing for tech companies and talent.

Tech companies are choosing New York to tap into its deep and skilled talent pool and to attract employees who prefer the city’s diverse economy over technology-dominated hubs on the West Coast. New York is also closer to Europe, an important market.

“For a long time, if you lived in the broader tech sector, there was inertia that brought you to Silicon Valley,” said Julie Samuels, executive director of Tech: NYC, a nonprofit industry group. “So many people wanted to live here and move here, but felt the jobs weren’t here. Now the jobs are here.”

“New York City continues to be a great source of diverse, world-class talent – that’s what brought Google to the city in 2000, and that’s what keeps us here,” says Google CFO Ruth Porat.

Google has grown so quickly and is so squeezed for space that it is temporarily leasing two buildings until St John’s Terminal, a much larger development in Manhattan near the Holland Tunnel, is ready in 2022.

The number of tech jobs in New York City has surged 80 per cent in the past decade, to 142,600, from 79,400 in 2009, according to the New York State Comptroller’s office. (The business services industry, which includes accountants and lawyers and is the largest private sector, employed 762,000 people in 2018, according to the comptroller’s office.)

Since 2016, the number of job openings in the city’s tech sector has jumped 38 per cent, an analysis for The New York Times by the jobs website Glassdoor found. In November, New York had the third-highest number of tech openings among United States cities, 26,843, behind just San Francisco and Seattle.

It is not only the biggest tech firms that are growing in New York. From 2018 through the third quarter of 2019, investors pumped more than $US27 billion into start-ups in the New York City region, the second most in that time for any area outside San Francisco, according to the MoneyTree Report by PwC-CB Insights. (Nearly $US100 billion was invested in start-ups in the Silicon Valley area in that period.)

Industries like finance, retail and health care provide more jobs, but the tech sector, with an average salary of $US153,000 ($220,000), has become one of New York City’s main economic drivers.

That has raised concerns about whether the industry is intensifying income inequality and making New York unaffordable for more people.

The four big tech companies “attract thousands of out-of-state employees with advanced degrees and work experience, and drive unprecedented influxes in luxury rentals, rent hikes, and the flipping of buildings and private homes”, said Kiana Davis, a policy analyst at the Urban Justice Centre.

The major tech firms are expected to grow to the point that they are among the largest private tenants in New York in the coming years, rivaling longtime leaders like JPMorgan Chase.

Among companies in the technology, advertising, media and information industries, Google and Facebook are now the largest tenants, beating out legacy companies like Condé Nast, News Corp and Warner Media, according to an analysis performed for the Times by the real estate company Cushman & Wakefield.

Facebook employs 2900 people in New York, and recently signed the lease at Hudson Yards for 1.5 million square feet (140,000 square metres) in three buildings. In addition to providing space for 6000 workers, the deal gives the company an option to take over another several hundred thousand square feet in the development.

Nearby, Amazon said recently that it had signed a lease for 350,000 square feet – enough space for 1500 employees – in a building on 10th Avenue near Hudson Yards. The social media company LinkedIn, whose New York offices are not far away, in the Empire State Building, recently said it would expand to four additional floors in the landmark property.