How the march of Big Tech is turning New York into a Silicon Valley rival

Office building are seen during sunset in New York City on Nov 12, 2019.
Office building are seen during sunset in New York City on Nov 12, 2019.PHOTO: AFP

NEW YORK - When Facebook was searching for another New York office, one big enough to fit as many as 6,000 workers, more than double the number it currently employs in the city, it had one major demand: It needed the space urgently.

So after the company settled on Hudson Yards, the vast mini-city taking shape on Manhattan's Far West Side, existing tenants were told to move and a small army of construction workers quickly began to revamp the building even before a lease had been signed.

Facebook's push to accommodate its booming operations is part of a rush by the West Coast technology giants to expand in New York City. The rapid growth is turning a broad swathe of Manhattan into one of the world's most vibrant tech corridors.

Four companies - Amazon, Apple, Facebook 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 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.

New York's rise as a tech hub comes as industries that have long dominated the city's economic landscape are transformed by technology, and are themselves increasingly reliant on software engineers and other highly skilled workers.

The growth in New York is occurring largely without major economic incentives from the city and state governments. Officials are mindful of the outcry last year over US$3 billion (S$4.05 billion) in public subsidies that Amazon was offered to build a corporate campus in Queens.

The retail behemoth, stung by the backlash, cancelled its plans abruptly in February. It is continuing to add jobs in the city, although at a slower pace.

 
 

Still, Amazon's announcement last month that it would lease space in Midtown for 1,500 workers renewed a debate over whether incentives should be used to woo huge tech companies to New York.

Opponents of the earlier deal, including Representative Alexandria Ocasio-Cortez, a Democrat from Queens, said Amazon's decision to expand in Manhattan showed that New York was so attractive that tax breaks were unnecessary.

Others responded that the Hudson Yards space the company was leasing paled next to the campus proposed for Long Island City, Queens, and to the 25,000 people Amazon had pledged to employ there.

Tech companies are choosing New York to tap 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 Ms 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."

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

The big tech firms started in New York with small outposts. Google's first New York employee, a sales worker, arrived in 2000, and worked out of a Starbucks in Manhattan. It was the company's first office outside California.

Tech industry offices were once mostly filled with sales and marketing employees who needed to be closer to their customers and to industries like fashion, finance, media and real estate that power the city's economy.

Over the past five years, though, the make up of the companies' combined New York work force has come to resemble the West Coast version: a mix of engineers and others involved in software development.

At Google's New York office, highly skilled workers now outnumber their colleagues in sales and marketing. Of the nearly 800 job openings that Amazon has in the city, more than half are for developers, engineers and data scientists.

"Every line of business and every platform is represented quite healthfully," said Mr William Floyd, Google's head of external affairs in New York, the company's largest office except for its Mountain View, California, headquarters. "Not everyone wants to be in California."

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.

Industries like finance, retail and healthcare provide more jobs, but the tech sector, with an average salary of US$153,000, 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 Ms Kiana Davis, a policy analyst at the Urban Justice Center.

"It should go without saying," she added, "that middle-income, low-wage, poor and unemployed residents in these cities cannot access the luxury housing market nor the rising rents and have been driven out of their communities as a result."

Mr Jonathan Miller, president of Miller Samuel, a real estate appraisal firm, said that the residential market in Manhattan had been strong in areas where the tech firms had grown.

"I speak to brokerage groups twice a week, and the conversation is always peppered with questions about the tech sector," he said. "If you have 20,000 employees coming in who are high-wage earners, that can have a pronounced impact."