IBM reveals its hunt for a 500,000 square foot NYC office as tech tenants continue to double down on deeply-discounted workspaces at a moribund moment for leasing activity
- IBM released a request for proposals on Tuesday to the New York City real estate market in search of an office up to 500,000 square feet in size.
- The requirement is being initiated at a moment when leasing activity has plunged and tenants hold an upper hand in lease negotiations that could allow IBM to extract discounts.
- The new space will allow the company to do more with less, catering flexibly to different functions and allowing workers to rotate in and out in a model that could become commonplace post-pandemic.
- Visit Business Insider's homepage for more stories.
IBM said it is initiating a search for 500,000 square feet of office space in New York City, making it the latest technology company to double down on the workplace even as the pandemic has raised questions about its future.
The company, which is based in the Westchester suburb of Armonk, issued a request to Manhattan landlords on Tuesday to offer it proposals to accommodate its space needs. IBM is seeking to consolidate nine locations it presently has in the city into the new space, including offices at 51 Astor Place and 590 Madison Avenue.
Joanne Wright, a vice president of enterprise operations and services at IBM, said the company would seek to create an office that embraced trends that both preceded the pandemic and have resulted from it.
Like other large space users in recent years, Wright said IBM, for instance, wanted space that can be used flexibly to accommodate different functions, such as events, client presentations, and company meetings, then pivot to serve as project-focused workspaces.
Read More: Amazon just leased a new space in Brooklyn to house recording studios for its music-streaming service, as Big Tech keeps gobbling up space while the office market flounders.
And as the virus crisis has prompted large swaths of the workforce to do their jobs from home, she said the space would anticipate that remote work will become a permanent outgrowth of the pandemic.
"More than 70% of employees said they would return to the office on a flexible mode, two to three days per week perhaps after the pandemic," Wright said. "But really for a purpose, for collaboration or being innovative, running an agile sprint with colleagues or clients. It will open the doors to being more a hybrid model, where it's not static workspace, where one day it's client engagement and events and another it's a small design team creating and collaborating."
Wright suggested that the company's flexible vision for its space, including the prospect of having employees share workspaces in shifts, had allowed it to slim its footprint. The company presently occupies about 500,000 square feet in the city and the new space would accommodate those offices and also allow for growth, Wright said.
IBM's operations in the city are focused on its Watson artificial intelligence and cloud computing products and also marketing.
Although many of Manhattan's towering office buildings remain sparsely populated as workers have found they can accomplish tasks just as well at home, the technology sector, in particular, appears to be betting on a return to the workplace and its importance as a tool for recruitment and productivity.
Amazon purchased an office building for its occupancy on Fifth Avenue for around $1 billion in late March as the pandemic thrust the economy and daily life into lockdowns.
Facebook, meanwhile, in August signed the largest New York City office lease of the year, taking a 730,000 square foot office space at the Farley Building on Manhattan's West Side in a lease that stretches 15 years and will see the social media giant pay about $1 billion in rent over the life of the deal.
Read More: Facebook scored a $100 million break on its blockbuster NYC office deal, and it could mark the start of a wave of discounts as vacancies soar.
"For us, our clients are New York City and there's a great talent pool there," Wright said.
IBM has hired the real estate services company Cushman & Wakefield to help it with its search for space. Wright estimated that it could take two or more years before IBM chooses an office, inks a deal, and moves in. She said the company was considering both newly built offices and existing buildings.
"We are going to start understanding what's available and that will determine when we will move," Wright said.
Leasing activity has plunged in the city as many tenants remain reticent to take space at an uncertain moment. About 10.3 million square feet of space has been leased in Manhattan through the first eight months of 2020, nearly half of what was leased during the same period a year ago, according to the real estate services firm CBRE.
Wright acknowledged that part of the company's strategy in announcing its space search – publicity that few tenants seek – was in part to seize on a depressed moment in the market where space users have been able to extract discounts and other financial perks. Facebook, for instance, received a nearly 10% discount on the space it took at the Farley Building over the original economics of the deal, which where were arranged before the pandemic.
"We have an intention to invest in our future in the city when others are still deciding what the future holds and I want to make sure that's recognized," Wright said.
Have a tip? Contact Daniel Geiger at [email protected] or via encrypted messaging app Signal at +1 (646) 352-2884, or Twitter DM at @dangeiger79. You can also contact Business Insider securely via SecureDrop.
Get the latest IBM stock price here.
Source: Read Full Article