There’s a new trend lately in commercial real estate. Not only is Big Tech driving the stock market these days — it’s become a pivotal force in the commercial real estate market.
Although many non-tech firms have been struggling with the economic effects of the pandemic, Amazon, Facebook, Apple, Google’s parent company Alphabet Inc., and Microsoft Corp. have been buying and leasing a significant amount of office space in cities throughout the country.
The Big Five Expand their Footprints in Major Cities
In the past, companies chose locations based on access to materials. Today, tech firms are selecting cities like New York, Boston, Seattle, San Francisco, Washington D.C., and Austin to call their home bases, making location decisions strategically based on having access to talent pools of young people who seek the professional and social opportunities offered by a big city.
Since January of 2020, Amazon, Apple, and Facebook have expanded by 1.6 million square feet in New York City alone, apart from the 1.7 million square feet Google recently added. The companies currently have over 22,000 employees in the city, with thousands added to the workforce this year. The recent acquisitions allow these companies room to hire an additional 15,000 employees.
According to CoStar Group, Amazon, Facebook, Apple, Alphabet Inc., and Microsoft currently take up 589 million square feet of commercial real estate nationwide — the equivalent of all the office space in New York City combined.
Despite Pandemic, Office Space is Not Obsolete
Although these Big Tech firms are the same companies that are offering remote work options during the pandemic, the significant investment in office space is indicative that they plan on bringing their workforces back on site.
Employees of some of these firms may also have financial incentives to get back into the office rather than continue telecommuting. For example, Facebook announced that it would begin adjusting salaries in the new year for employees who continue to work from home offices in areas where the cost of living is cheaper.
Despite the working-from-home trend spurred by the pandemic, office space in a thriving city will continue to be a crucial incentive for many employees. Since tech-based companies often implement a younger workforce who seek to develop their social and professional networks, on-site offices, co-working space, and amenities may be essential.
Big Tech Plans to Increase Presence in Boston
Before the COVID-19 outbreak, Boston was named the fifth largest market for office leasing in the tech sector, nationwide — and the pandemic hasn’t stopped Big Tech from making plans to procure additional space.
While Facebook currently leases 130,000 feet of office space in Cambridge’s Kendall Square, the tech giant said it has plans to expand in the Greater Boston area, despite the pandemic-related remote work policy in place.
Similarly, Google made plans last year to expand its Kendall Square presence, taking up 362,000 square feet of space in a 15-year lease in a new office tower construction expected to be completed in 2022.
Amazon has also announced expansion in Boston. The e-commerce company plans to convert a Dorchester-South Boston warehouse into a last-mile delivery hub, adding 96,000 square feet to its ever-increasing footprint in the metro area. In July, Amazon opened an 800,000 square foot delivery station in Revere.
Continental Law Group represents landlords, tenants, commercial stakeholders, developers, asset managers, buyers, and sellers for a variety of commercial real estate matters throughout Massachusetts and New Hampshire. CLG has offices located in Boston, Salem, MA, and Portsmouth, NH. Call (617) 616-8210 to learn more about CLG’s commercial real estate practice and other legal services.