Facebook just inked a blockbuster deal to lease the massive Farley Building in NYC as a tech and engineering hub. Here’s why it’s a huge win for a shaken office market.

  • Facebook has completed a lease to take all of the office space in the Farley building on Manhattan’s West Side.
  • The deal signifies a major vote of confidence in New York City’s office market at a moment when its future has been thrust into question by the coronavirus pandemic. 
  • Last year, the company signed on for roughly 1.5 million square feet in three buildings nearby in the Hudson Yards.
  • In a statement, a Facebook spokeswoman said the new location will be used to grow the company’s engineering operations in the city.
  • Visit Business Insider’s homepage for more stories.

Facebook has completed a lease to take all of the office space in the Farley Building on Manhattan’s West Side in a deal that signifies a major vote of confidence in New York City’s office market at a moment when its future has been thrust into question by the coronavirus pandemic.

Facebook signed on for 730,000 square feet of newly-built office, according to a news release from Vornado Realty Trust and a statement from the tech giant. The space is being readied inside the shell of the over-century old Farley Building, which had for decades served as a distribution facility for the U.S. Post Office.

The deal is the latest in a major expansion of Facebook’s footprint in the city over the past year. Last year, the company signed on for roughly 1.5 million square feet in three buildings nearby in the Hudson Yards.

In a statement, a Facebook spokeswoman said the new location will be used to grow the $720 billion company’s engineering operations in the city, which, until now, have been based out of another large office location Facebook has occupied for several years at 770 Broadway.

“The Farley Building will further anchor our New York footprint and create a dedicated hub for our tech and engineering teams,” the spokeswoman stated. “This significant investment in space will support Facebook’s efforts to scale our tech and engineering teams.”

Read more: 20% of WeWork’s New York space is sitting empty. Here’s a look at key vacancies the city’s biggest office tenant is trying to fill.

Manhattan’s office market has been battered by the pandemic

The lease is welcome news for a commercial real-estate industry that has been battered by the Covid crisis.

A total of about 8.3 million square feet of office space was leased in the Manhattan in the first half of 2020, 44% below the amount leased during the same period last year, according to the real-estate services firm CBRE. Over 70% of that space was taken during the first quarter as deal activity plummeted during the second quarter when the pandemic prompted lockdowns that shuttered commerce and daily life.

The lethargic pace of leasing has raised an uneasy question for landlords and real-estate executives whether tenants will ever return to the office workplace in the same way, or if they could choose instead to slim down their footprint by embracing working-from-home as a permanent strategy.

Facebook itself appeared to add credence to this approach earlier in the virus crisis when the company’s chief executive Mark Zuckerberg said in a public presentation that it would allow half of its workforce in the coming decade to work remotely, and would pursue a more diffuse network of smaller spaces in secondary and tertiary cities to cater to that approach.

That disclosure had suggested the social-media giant might shift away from its strategy in recent years of leasing major spaces in huge job centers such as New York City that have been hotspots for talent.

The lease at the Farley Building shows that while Facebook may utilize a work-from-home strategy for a portion of its employee base, it is not likely to abandon its focus on major metropolitan campuses.

“It reaffirms the intellectual capital that New York City possesses,” said Brian Waterman, an executive vice chairman at the commercial leasing and real estate services firm Newmark Knight Frank. “This is just another commitment from the tech segment that shows the city is where they want to be.”

Other major technology firms have committed to office space during the pandemic. The video sharing service TikTok recently signed on for over 200,000 square feet at 151 West 42nd Street in Times Square. IBM, meanwhile, is actively shopping for as much as 500,000 square feet of space.

The Farley Building is a sprawling block-long property across the street from Penn Station, the nation’s busiest transit hub, that is being converted by a development team led by Vornado Realty Trust for dual uses. Its eastern annex will become a new train station for Long Island Railroad and Amtrak, while its western half is being converted into offices. The building’s ground level will also include 120,000 square feet of retail space.

Facebook will take the entirety of the building’s office space, which will be spread across four levels at the property. The building has some of the city’s largest floors, spanning almost 200,000 square feet apiece, big enough to hold over three football fields each. The company said those voluminous floors would allow it to “collaborate and innovate.”

The deal could give a boost to Vornado, which, like several of its peers in the office REIT sector, saw its shares drop sharply during the virus crisis. The company’s stock was trading at $34.02 at the close of trading Monday, about 50% off its 52-week high. Vornado has been Facebook’s landlord for years at 770 Broadway, which is owned by the REIT.

“Facebook’s commitment to Farley expands our long-standing relationship,” Steven Roth, Vornado’s chairman and CEO said in a statement.

Roth added that the “commitment is a further testament to New York City’s extraordinary talent and reinforces New York’s position as the nation’s second tech hub.”

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