Google NYC Real Estate Head On Why It Has Succeeded Where Amazon Flopped
Amazon’s abrupt decision to kill its HQ2 in New York raised questions about how big corporations can successfully expand in major cities. The key to doing it right, as far as tech behemoth Google is concerned, is forming partnerships, and lots of them.
“I think for us, since we started our New York presence, we partnered with the local community, we’ve partnered with elected officials, we’ve contributed in significant ways to the local community — that’s really how we’ve grown and matured,” said Paul Darrah, Google's New York director of real estate.
Darrah drew a contrasting line to a chief criticism of Amazon — its lack of political ground game — at the Real Estate Board of New York’s Members Spring Luncheon Tuesday in response to a question from REBNY President John Banks about what can be learned from the now-infamous Amazon flameout.
“It’s worked for us," Darrah said. It’s a good strategy for any company coming into New York.”
Amazon’s hyped search for a second headquarters, followed by its on-then-off Long Island City plans, has soaked up much of the airtime in the last year. But Google has been on a real estate buying binge, too.
It picked up some of the priciest real estate deals in the country last year, buying Chelsea Market in Manhattan for $2.4B and a 52-acre business park next to its main campus in Mountain View for $1B.
It only plans to accelerate its growth. Last month, the company announced plans to spend $13B to increase and improve its real estate holdings across the United States.
In terms of working with the community, Darrah said that, since 2011, the company has provided $150M in grants to organizations that has enabled “communities to grow and be vibrant,” though he did not provide specifics. He also pointed to the company’s efforts to cultivate the tech community in New York City.
On the matter of politics, he was circumspect.
“I don’t think that [the political climate in New York City] is too unique. Going forward — given any impact any large corporation has — the level of transparency of ongoing dialogue, of communication and partnership, that’s the key that’s had our engagement be successful,” he said.
While Darrah extolled transparency, Google has drawn criticism for its reported use of anonymous LLCs to secure development deals and tax breaks with local officials, whom it then locks into stringent nondisclosure agreements in order to keep the deals under wraps.
For example, Google used a shell company to negotiate a $10M tax incentive deal with Dallas city officials to build a data center, the Washington Post reported last month.
The tech giant’s growth is driven by the war for talent, Darrah said, and Google's need to be in cities that give it access to the workforce it wants.
Last December, Google announced plans to spend $1B on a massive new campus in Hudson Square in Lower Manhattan, taking over the 1.3M SF at Oxford Properties' St. John’s Terminal development, along with space in two other nearby properties.
Google’s goal is to keep as many employees as possible together in one place, in hubs, Darrah said, which enables productivity and collaboration.
“I think the future of work is going to look very different than it does today,” he said. "And I don't know that we have the perfect answer, but what we've been doing is iterating over the last couple of years, as we deliver more and more space, is really working through how to get it right. So we have a lot work ahead of us.”
With Chelsea, expansion plans at Pier 57 and the new St. John’s Terminal location the company will have enough space to double its workforce to around 14,000 people over the next decade, though Darrah said it is not just focusing on the Big Apple.
"Urban areas are growing at a faster rate than ever before. There is the benefit of the energy and excitement of New York — but [also] any urban area,” he said. “We are growing in Austin, Chicago and many of the urban areas, which is where talent wants to be. We are following the talent."