NEW YORK >> It is a tech takeover.
Google, the tech company with a seemingly insatiable appetite for space in New York, is buying Chelsea Market, the blocklong Nabisco factory turned food mart, office building and tourist attraction, for about $2.4 billion, according to two executives who have been briefed on the deal and requested anonymity because they were not authorized to discuss it.
Chelsea Market sits directly across Ninth Avenue from the company’s headquarters at 111 Eighth Ave., which is larger than the Empire State Building and covers the entire block between 15th and 16th streets.
But it is only the latest example of an internet behemoth, and even smaller tech companies, expanding rapidly in New York City.
Amazon; Facebook; Salesforce, a cloud computing company; and Spotify, the music streaming service, are all enlarging their footprints here by hundreds of thousands of square feet. Employment at technology firms has grown three times faster in New York City than in the rest of the private sector, adding more than 50,000 jobs since the end of the recession in 2010, according to a report by the state comptroller.
“The modern tech sector began on the West Coast when it was about developing new technology and programming,” said Scott Rechler, chairman of RXR Realty, a Google landlord at Pier 57, a new mixed-use space on the Hudson River that is scheduled to open this year. “It’s now about the implementation and application of technology. And that’s presented an opportunity for New York, the business capital of the world. The talent pool is here.”
Google’s pending purchase of Chelsea Market was first reported by The Real Deal, a real estate publication. Google, Jamestown, the investment and management company that owns Chelsea Market, and its adviser, Douglas Harmon of Cushman & Wakefield, declined to comment.
But the executives briefed on the deal said the two companies had signed a $2.4 billion sales contract. The purchase comes with the right to make the building even larger by adding about eight stories, or 300,000 square feet. The current owner obtained the necessary zoning change in 2011 when it wanted to erect a 12-story hotel over the Buddakan restaurant, on Ninth Avenue.
Neither side has made clear what Google’s plans for the building are, and whether the popular food market will stay in place. But getting rid of tenants with leases would be a long-term process.
Tech employment in New York City reached 128,600 last year, according to the comptroller’s report. But analysts using a broader definition of tech put the total at nearly 326,000. The report — “The New York City Tech Ecosystem,” by HR&A Advisors — notes that roughly half the tech jobs are at employers with a main focus that is not technology, such as finance and media companies, or hospitals and government agencies.
New York is one of 20 cities or regions in the running to become home to Amazon’s second headquarters, which could eventually generate 50,000 jobs. The city has sought to build the infrastructure the industry needs to grow, including Cornell Tech, a 12-acre engineering campus on Roosevelt Island.
At the end of 2017, tech firms accounted for 29.3 million, or 8 percent, of the 398 million square feet of office space in New York City, according to CBRE, a real estate company. In a snapshot of recent tech-sector activity, those companies have leased or renewed leases for 21 million square feet of office space in the last 10 years alone. If telecom companies are included, that number jumps to 26.8 million.
Nine years ago, tech firms had only 17.6 million square feet of office space, or 5 percent of the office market.
The tech firms generally prefer industrial spaces to the brass and glass towers of Midtown. Chelsea Market, where Google already leases 400,000 square feet of space, is a former factory building with expansive floors.
Amazon has taken office space in what was once a warehouse at 450 W. 33rd St., although the owner, Brookfield, recently gave the building a face-lift and glass walls.
Facebook has grown substantially at 770 Broadway, a landmark cast-iron building that was once a department store, on an entire block bounded by Eighth and Ninth streets, between Broadway and Lafayette Street.
But that trend may be changing, said Mary Ann Tighe, a broker and chief executive of CBRE in the New York region. When companies grow and need a more robust infrastructure, she said, some tech firms are migrating to traditional office towers.
Salesforce, the cloud computing company based in San Francisco, moved its three Manhattan offices into a 41-story skyscraper at 42nd Street and Sixth Avenue. The Salesforce logo replaced the MetLife branding atop the building.
And Spotify is moving from 620 Sixth Ave. and several other locations into nearly half-a-million square feet at the 4 World Trade Center skyscraper in Lower Manhattan.
But it was Google that prompted real estate brokers, landlords, city officials and economists to sit up and take notice of the burgeoning tech sector a decade ago.
In 2006, the company moved into 111 Eighth Ave., a massive onetime shipping terminal, with tenants that included Verizon, Sprint, Web MD and BarnesandNoble.com. The building sat atop a high-powered fiber artery snaking along Manhattan’s west side. Employees used Razor scooters to navigate the blocklong corridors lined with workspaces, commissaries with free drinks and granola, and massage and game rooms.
Google became a siren for other, smaller tech firms to move to the neighborhood, which was beginning to shrug off its industrial roots.
In 2010, Google bought the building, also from Jamestown, for $1.8 billion, a breathtaking sum at the time. Not so long ago, blue-collar tenants had paid a very modest $6 per square foot for space there.
But Google’s need for space continues unabated. The company has been unable to dislodge the other tenants at 111 Eighth Ave. as quickly as it had hoped. The company has leased large blocks of space nearby, at Pier 57; at 85 10th Ave., another former Nabisco cookie factory, between 15th and 16th streets; and at Chelsea Market.
Facebook has about 5,000 employees now in the Chelsea neighborhood, occupying a total of 900,000 square feet.
Owning Chelsea Market would enable Google to create a campus akin to its headquarters in California, albeit one that is more vertical. Chelsea Market, like 111 Eighth, has been a front-runner in the evolution of the Chelsea neighborhood from an industrial zone to an area known for inexpensive space for food producers, restaurants and office tenants, and now as a tech-sector hub.