- IBM is pushing forward with its search for a huge new Manhattan office where it would consolidate several locations, sources told Business Insider.
- The firm has narrowed its search to about a half dozen buildings.
- The progress shows that not all tenants have soured on the workplace, even as the coronavirus has prompted some occupiers to question whether they will need as much space going forward.
- The tech sector has been a robust taker of office space through the pandemic.
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IBM is forging ahead with its search for a huge Manhattan office where it will consolidate several locations it occupies in the city, five sources with direct knowledge of the computing giant’s plans said.
The $110 billion public company has narrowed its options to roughly half a dozen buildings, these sources said. Among the spaces IBM is said to be considering is a deal to anchor a potential redevelopment of the office property One Madison Avenue.
IBM is seeking between 450,000 and 500,000 square feet and has hired the real estate services firm Cushman & Wakefield to help it evaluate and procure the space.
“IBM continually looks at our real estate to ensure it services the needs of IBMers and how we serve our clients,” a spokesman for IBM said in a statement, declining to provide further information about the status of the firm’s plans.
The company’s search highlights how some tenants, especially in relatively robust sectors of the economy such as technology, have persevered in making real-estate decisions despite the coronavirus crisis, which has caused commercial real-estate sales and leasing to otherwise plummet.
Options trading Some tech firms are still seen pushing ahead with leases
Facebook is said to be nearing an agreement to lease over 700,000 square feet at the Farley Building on Manhattan’s West Side.
Those negotiations have captivated the city’s real estate industry, which views the transaction as a measure of health for the office market and a signal whether large companies remain committed to maintaining a physical footprint as the pandemic has thrust the future utility of the workplace into question.
The video sharing site TikTok meanwhile, recently signed on to lease over 200,000 square feet at 151 West 42nd Street in Times Square.
“Years go into the decision-making process of where to locate a company, lease space, and grow,” said Nelson Mils, the president and CEO of Columbia Property Trust, which owns and operates nearly 3 million square feet of space in the city and also owns buildings in other major markets such as San Francisco, Boston, and Washington DC. “Successful companies spend a lot of time and energy making these decisions and Covid is just one more aspect of the process.”
Mills pointed out that Columbia recently signed a roughly 35,000 square foot lease with Twitch Prime, a streaming video gaming service owned by Amazon, which is taking two floors at 315 Park Avenue South.
“These tech and media businesses are doing quite well,” Mills said. “I don’t think anyone we’re talking to right now is devaluing the importance of the office to their future and the success of their culture and business.”
The coronavirus has dealt a considerable blow to the office market both in the city and nationally.
Just 1.3 million square feet of space was leased in Manhattan in May and June, almost half of the 2.5 million square feet that was leased in June 2019 alone, according to data from CBRE. So far, about 8.3 million square feet has been leased in Manhattan this year, down from almost 15 million square feet at the same point a year ago, CBRE reported.
The large office provider WeWork is awash in so much space, it revealed to Business Insider that it is tapping large real-estate brokerage companies such as CBRE and JLL for the first time to help it fill large holes in its portfolio.
IBM, itself, seemed to pull back on its office presence, dropping a 70,000 square foot space it occupied in Manhattan with WeWork.
Columbia releases its earnings on Thursday, but peers in the business have been bruised by the crisis. Last week, SL Green released second-quarter financial information that showed its earnings per share dropped to 74 cents, down 60% from the same period a year ago.
Options trading Long-term remote work plans have loomed over office markets
Large tenants have uncoupled their operations from the workplace, raising anxieties among landlords when tenants will return and if the pandemic could lead to a long term downsizing and deprioritization of physical office space.
Google, for instance, announced Monday that it would allow employees to work from home until next summer. Twitter, which has its NYC headquarters in a building owned by Columbia on West 17th Street, told its workers earlier in the virus crisis that they are free to work from home indefinitely.
Mills said he believes that despite that edict from Twitter CEO Jack Dorsey, the company has conveyed it will maintain an office presence.
“We had conversations with them and there is no suggestion that they will reduce their footprint,” Mills said. “Will working from home be a lasting thing? It could happen. But we have talked about it many times that the drivers that made office space a necessary for creativity and culture for firms like Google, Facebook, Apple and Twitter all still exist.”
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