What Should Google Do?
Google’s on the prowl for another 600k SF to add to its space at 111 Eighth Ave, Chelsea Market, and 85 Tenth Ave, but the tech giant is going to have to get creative to find space that size. We asked the experts what Google could do (and we'd love to hear your ideas on strategies and buildings, too—e-mail email@example.com):
1) Sell its NY HQ
Google bought 111 Eighth for a splashy $1.8B in 2010. That’s a big raw number, Avison Young’s Greg Kraut (above) told us yesterday, but it breaks down to just $600/SF, and office like that is going for much more now. Many thought Google overpaid back then, but sources say the 2.9M SF building could trade for as much as $1,000/SF. Considering Google will be playing a years-long waiting game for the other tenants' leases to expire, it could opt to sell and do a 1031 exchange for another building, Greg says.
2) Build around Hudson Yards or the WTC
If it’s a campus setting Google is after (consider its famous 7.5M SF Googplex in Silicon Valley, above), it could build on the Far West Side of Midtown. That’s just the kind of tenant all those developers are awaiting to start their planned buildings, Greg says. Google also could structure a deal to help Larry Silverstein with his 3 WTC financing frustrations (he's still seeking construction financing for the 2.3M SF, $2.8B tower).
3) Build near 111 Eighth Ave
Parking lots and old warehouses in Manhattan pretty much mean development sites, and there are a few near Google’s HQ (above), Greg points out. Google could JV with a real estate company and thus still have an ownership interest, which it seems to prefer, considering its acquisition of 111 Eighth and the Silicon Valley campus.
4) Fix the City’s Moynihan Station problem
Related’s latest proposal, to put the Borough of Manhattan Community College in the back of the James A. Farley Post Office Building (while the front is redone as Moynihan Station for Amtrak and an entrance to Penn Station) has fizzled. Real Capital Analytics’ Dan Fasulo (snapped in his office this morning) tells us a Google commitment to the property sounds like just what the City needs, he says. (Plus, the symbolic irony of Gmail replacing snail mail would inspire our poetry.)
5) Lease existing WTC or Midtown blocks
If Google can’t wait for construction, both Durst’s 1 WTC and Silverstein’s 4 WTC could accommodate the 600k SF requirement, says Dan. There’s also about 300k SF in Boston Properties’ 250 W 55th St (above), which would get Google halfway to its goal. Law firm Morrison & Foerster moved into 208k SF there yesterday as the 1M SF, LEED Gold building’s first tenant. On a full-acre lot, it’s got the trading floor-worthy plates tech tenants love to customize. And Boston Properties knows tech, having just last week signed salesforce.com to 714k SF in San Francisco's 415 Mission St, to be renamed Salesforce Tower.
6) Go to Brooklyn
Google first set up shop in Manhattan to be near the employees it wanted to attract, but since then, Brooklyn has grown up, Greg says. A lot of Google types live across the East River now, and the company could consider a two-campus strategy: Google Manhattan and Google Brooklyn (a solution we support simply for the epic, bridge-spanning tug-of-war during the company picnic). Though not ideal, Greg says, it'd put Google back on the cutting edge.
Dan’s got a particular Brooklyn idea in mind for Google. Kushner and RFR are redoing the Jehovah’s Witnesses' Watchtower complex in Dumbo into 1.2M SF, half of it creative office. That 600k SF is exactly what Google reportedly is seeking, and it’s a straight shot on the A or C to 111 Eighth Ave. Whatever office tenants end up there, Dan says, the rent is going to surprise people, likely topping rates for Downtown Manhattan’s existing stock.
7) None of the above
Ultimately, Dan also thinks Google will surprise us all and come up with yet another solution. Greg points out that available large blocks have decreased 40% year over year, and that trend won't stop in the near future. (If your building doesn't get Google, we hear Alta Vista is also in the market for 8 SF—or even just a desk in your garage.) Despite the lack of ready-to-go spots for Google, it does have creative options and can provide value to a landlord or partner beyond the dollars of its lease consideration. According to Greg, NYC just might end up with a million-SF campus in Queens, on the Jersey waterfront, or on one of the piers.