
Google is buying Chelsea Market building for over $2B - uptown
https://therealdeal.com/2018/02/06/google-is-buying-chelsea-market-building-for-2b-plus/
======
aresant
This is such a fascinating cycle.

Large pensions & sovereign wealth funds are so desperate for yield vs. low
treasuries that they have pushed income producing commercial real estate
values to all time highs.

As a result these fund managers are then forced to take on larger risks to
cover their liabilities by making larger portfolio allocations into public
techs like Google, and privates like AirBNB & Uber.

And this dry powder has helped the technology companies get so insanely big
and sophisticated that they are hiring away the best fund guys to manage their
own treasury desks and drive commercial real estate transactions like this
one!

Funds would have KILLED to get a deal with Google locked into a long term
lease.

But because Google is taking themselves off the market as a tenant, the funds
again have to go and chase riskier yield, like larger allocations in tech . .
. the entire macroeconomy is just turning into a bizarre Möbius strip . . .

~~~
RestlessMind
It also means it is a great time to be able to produce value and be in control
of its distribution (eg. start your startup and control the equity). People
with lots of money are hungry for yields and will push your valuation higher
and higher.

See: cryptocurrencies (bitcoin etc) or sharing economy startups (uber, airbnb
etc)

~~~
matt4077
Yeah, Uber is perfect example of the superiority of startup founders to run
later-stage companies. Can't wait to see where Kalanick takes it next.

Edit: Now I'm wondering if I'm being downvoted by those who don't get the
sarcasm, or by Kalanick himself.

~~~
dang
Could you please not post unsubstantive comments to Hacker News?

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

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CodeSheikh
Google NYC is literally right across the block from Chelsea Market. This
transaction would mean that Google will occupy the real estate above the
actual market. Chelsea Market is an amazing place with great offerings of food
etc. As long as this transaction does not ruin the ecosystem of CM then New
Yorkers are OK with this transaction. Lets face it who would not want to sell
their real estate to The Google?

~~~
Touche
There are other office occupants though, and it sounds like Google's going to
squeeze them out. So the food offerings might stay, but it's going to begin to
feel like a Google cafeteria.

~~~
saalweachter
Do the businesses in Chelsea Market rely heavily on traffic from the office-
workers above? Store-fronts in NYC tend to be pretty disconnected from the
office/residential spaces above, with a few notable exceptions.

~~~
jowiar
Last time I went to Chelsea Market I got the feeling of "Nobody (local) goes
here... there are too many tourists and the experience walking around here is
miserable" Times Square-esque

~~~
epc
I live in the neighborhood. It's a nightmare to walk throthere during the day,
but fairly quiet in the morning until 10. Also a decent place to pick up
dinner after 6:00, especially if you enter through one of the side doors.

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cletus
NYC Xoogler here.

Speaking from experience, the main office (111 8th/76 9th) is amazing. I think
Google's decision to buy that years ago has totally been vindicated. I'm
surprised more high cash surplus companies don't do this, just to control
their destiny in a way you simply can't as a tenant (eg if you're a large
tenant, each floor you rent in the same building is going to get more
expensive, being a tenant limits what you can do).

Other posters have pointed out the Chelsea Market is a mishmash of other
buildings (4 IIRC). All true. It's a super-annoying building to get around in
though. To get from the 6th floor on one side to the 6th floor on the other
side you might have to go to the ground floor and find the right elevator (out
of like 20 in 12 different locations) that goes to that floor in that
building. Some parts are only served by a single elevator. Others have a bank.
Honestly I'd hate to work there, particularly if you had to go through the
crowds to get to your one blessed elevator.

One outcome of this might be that Google may well fix this situation by
combining floors and elevator banks.

I don't think anything will happen to the ground floor of Chelsea Market.

~~~
ChuckMcM
I totally agree.

Fun historical note, IBM generated cash in its early days as Google and Apple
do today, it bought a _lot_ of real estate all around the world. In the 90's
when it seemed liked it was doomed, it "saved itself" by selling off big
chunks of that real estate. That gave the company operating capital without
having to go to the equity markets or debt markets.

Given the ups and downs of tech, it seems like a much better place to hold
your spare cash than t-bills or other cash equivalent securities.

~~~
vram22
>In the 90's when it seemed liked it was doomed, it "saved itself" by selling
off big chunks of that real estate.

Wonder if that was during Lou Gerstner's time as CEO at IBM. I had read his
book Who says Elephants can't Dance, about what he did to turn IBM around. It
was an interesting read.

Don't remember if selling off some of their real estate was part of what they
did, though it could have been.

A review of the book by an IBM insider:

[https://www.ibm.com/developerworks/rational/library/2071.htm...](https://www.ibm.com/developerworks/rational/library/2071.html)

~~~
epc
The real estate fire sale started in 1992 along with the spin–outs of various
divisions (some of which completed, like IBM Federal Systems and Lexmark,
others were halted by Gerstner like AdStar (storage systems) and Pennant (big
printers).

~~~
vram22
Interesting. I'm reading that book (again) from the Archive, should be worth
it.

~~~
vram22
I read some of it.

This is a good part: The Click Heard Round the World.

It's in Chapter 4: Out to the Field (of the PDF of the book).

------
SFLemonade
Between this $2B deal and the $5B Apple Park deal, I start to wonder how
companies are justifying these purchases as remote and distributed work
becomes more feasible.

They're probably focused on the fact that productivity is still higher in co-
located settings and the best talent pools are in major metro areas. But what
if, instead, they invested $500M in remote work research and $500M in building
a remote work infrastructure for the company. Then they can go ahead and
pocket that extra $1-4B in real estate costs, and perhaps another ~$10B long
term as they avoid future real estate purchases and scale this across the
company. Also, save several hundred million in hiring and retention, as they
attract more talent from around the world and retain employees by offering
remote work as a benefit.

Could this be a more forward-thinking approach? I'm merely posing the
question.

Real estate is super expensive, and most people would consider being able to
live anywhere a huge perk. In other words, the only reason talent is so
concentrated in New York, is because it has to be right now. But what will
happen as more companies offer distributed work? Will people choose to
continue living in metro areas with astronomical costs of living (perhaps even
away from family or in a climate they don't prefer)? Or will they leave and
work from wherever they want? And then what will happen to the value of this
real estate? And what will happen to the companies that invested in it?

I find it odd that innovative tech companies seem to not be questioning one of
the more non-innovative and dogmatic practices of today - physical office
space. Not only that, but they're investing billions into that idea. Why not
challenge it?

Or what if you took a hybrid approach? Have a collaborative space in New York
that everyone can use to come together, but everyone can also work from home.
You may be able to cut down the required space by 3-4x.

~~~
ionforce
I don't think working remote has proven itself fully. Otherwise everyone would
be doing it.

> They're probably focused on the fact that productivity is still higher in
> co-located settings and the best talent pools are in major metro areas.

Exactly this.

~~~
SFLemonade
Definitely. But there's also been very little investment into remote work,
both from a research and infrastructure perspective.

I just wonder, if they were to take some of this cash and invest it into
proving out remote work, would it turn out to be a better long term
investment?

In most of the cases that I've observed, companies enter into remote work
literally by just letting their employees start working remotely. Maybe they
get a nice contract with Zoom and hire a specialized lawyer or two. But what
if we were to really try investing in it, in the same way (or even in a
fraction of the way) that we're investing in real estate?

~~~
ghaff
Another point that I’m not sure gets much attention is that, as these
companies build huge campuses and spread out to multiple locations across a
region, how co-located are employees anyway? Sure you can move people around
to be with primary teams but it’s certainly not like everyone can pop over to
talk with someone or can depend on a lot of serendipitous hallway
conversations.

~~~
SFLemonade
That's a great point. Google tends to collocate teams by product, so that may
be their answer to this. But it's true that you'll eventually reach a scale
where you're going to have daily remote interactions, regardless of whether
those people are in an office or not. Even at the Googleplex, if you're in an
office across campus, it's better to connect to the meeting remotely than walk
over.

------
JumpCrisscross
I first heard about this deal around Thanksgiving. I am curious how everyone
kept the real estate brokers' mouths shut for this long. For New York City,
this might be a record.

~~~
gowld
Because it's not really news? Google has been growing in Chelsea for years.

~~~
JumpCrisscross
> _it 's not really news?_

Yes, it is. It's a large deal for a large plot of land in the centre of a
neighborhood legendarily protective of itself.

------
downandout
$1600/ft seems shockingly high for commercial real estate, even in New York.
Just because you have lots of money (that theoretically belongs to your
shareholders) doesn’t mean you should overpay.

~~~
djtriptych
It's not shockingly high by a long shot. Paying 1.6M for a 1000 sq ft condo in
that area is totally feasible.

~~~
karambahh
Unless I'm mistaken, isn't commercial real estate usually cheaper than
residential?

~~~
downandout
Yes, it is. That was my point.

------
reaperducer
What is it with Google and food warehouses? Its Chicago HQ used to be a meat
cold storage facility.

[https://www.chicagoarchitecture.org/2015/03/12/dogs-and-
adap...](https://www.chicagoarchitecture.org/2015/03/12/dogs-and-adaptive-re-
use-in-a-single-story-but-of-course/)

~~~
vthallam
Easy to convert to an open office I guess?

------
ucaetano
Wow, they really got a good deal on the 111 Eighth Avenue, they bought it in
2010 by $610/sqft, and now it is probably worth the same as the Chelsea
Market, $1600/sqft, a 160% return on the investment.

~~~
airstrike
Annually that was "only" 13% which is still great but not 160%-great.

------
rambleraptor
At what point does it become cheaper to buy real estate in cheaper cities and
use the excess money to attract talent there?

~~~
majormajor
Depends on just what drives the desirability, I think.

Google is covering their bases in terms of both "suburban areas" (Mountain
View) and "dense cities." So they can attract people who prefer either style
of living.

If there's a significant subset that prefers "cheap" directly, then they're
missing out on that group. Otherwise, it might be more cost effective to
simply keep offering higher wages in the high-cost areas, if cost and
desirability are roughly correlated for most people.

Where I see it breaking down personally is that the expensive areas aren't
that bad for 20-something folks who want to rent anyway. Say you throw an
extra ten to twenty grand a year at rent, that can be easily covered by a
compensation premium. But once you start looking at moving from renter to
buyer, down payment requirements make expensive areas a lot rougher. This
might be fine at Google-level compensation, but there's a lot of other
companies who could have a harder and harder time retaining people as they
age.

~~~
tropo
They haven't covered rural. I don't think they are even close.

I know people in multiple states who like to shoot rifles (AR-15 style) and
shotguns in their yards. One hunts pigs in his backyard. A different one can
hunt turkey.

I can't really imagine that in Mountain View or San Francisco or Manhattan.

And yes, those people are tech talent.

------
bhartzer
Interesting to see that Chelsea Market Google My Business listing isn't
claimed yet.

------
spydum
I wonder if this has anything to do with the Cyber NYC effort?
[https://www.nycedc.com/opportunity/cyber-nyc-
rfp](https://www.nycedc.com/opportunity/cyber-nyc-rfp)

One of the stated objectives is to actually build out a Cyber Center in NYC as
part of the jobs program. This could potentially align with Alphabet's recent
"Chronicle" business being launched? I looked thru the NYCEDC
Suppliers/bidders, didn't see anything resembling alphabet or chronicle
though.

~~~
CydeWeys
Doubt it. It most likely has to deal with Google continuing to expand its NYC
office, and thus needing more office space.

------
kartan
I visited Chelsea Market Google offices by mistake. I was at the market, and
not knowing so much about it, I though that was small. So me and a friend got
into the elevator to go to the next floor.

The elevator just opens and there it is. It was Google´s offices with a big
green Android figure. I took a picture and just went back to the market using
the elevator.

As it was a weekend, I was on vacation, there was no one.

So "suddenly Google" is one of my memories to my travel to New York.

------
smpetrey
I wonder if this will be used for Google NYC HQ, or is Google attempting to
get into the co-working game?

~~~
CydeWeys
This area already is our NYC HQ, and we own the much bigger 111 8th Ave
building next door too. We've got many thousands of employees here already; no
speculation is needed as to its status.

------
jeffchuber
"Peter Thiel comment about Google not having good ideas for how to spend their
money"

~~~
elarahn
What's wrong with expanding / not leasing a long term office ?

------
fancyfacebook
Google has largely ruined Boulder, CO after building a huge new sprawling
thing and effectively dictating to locals and politicians exactly how they
want the neighborhood and city to be structured going forward. Everyone who
isn't a googler hates them and wishes we hadn't allowed that, much less given
them massive amounts of corporate welfare.

Resist googlers if you can, they destroy communities.

~~~
geofft
The real answer is for cities to be built up so much that even a Google-sized
company is a drop in the bucket. Google NYC right now is about one city block
(111 8th), expanding to two. That's a tiny part of Manhattan, which isn't even
all of NYC.

My old church is located under the old Citigroup Center skyscraper at 601
Lexington, which is also an entire block; Citigroup used to have both that
building and the block across the street, 399 Park, for a couple of decades.
When they moved out of those buildings to another neighborhood in Manhattan,
that caused a drop in noon mass attendance but that was really about it. Their
presence didn't destroy the neighborhood, let alone the city, and their move
didn't destroy it either.

The fact that NYC is capable of handling Citigroup-sized companies and Google-
sized companies moving in and barely even noticing is one of the deep reasons
I like living in NYC. I wish more other cities would do the same, because I
don't think there's anything unique to NYC about the ability to do this. Maybe
population - although the Denver-Aurora-Bolder metropolitan area, at 3M, isn't
_that much_ smaller than NYC (8.5M). The internet is telling me the Google
Boulder office can support up to 1,500 employees. You shouldn't give them
corporate welfare, but also you should just be able to accommodate them
without that, they're not that big. It should just be a building, and you
should have lots of those.

~~~
hueving
>The real answer is for cities to be built up so much that even a Google-sized
company is a drop in the bucket.

That's a repulsive suggestion to many people who live in Boulder. Living in a
city of <250k people is a feature, not a bug. Boulder is not cheap, if people
wanted density they could already move to Denver for the same price and
climate.

~~~
tptacek
Boulder can't have it both ways: you can't ask for blockbuster skyline
employers _and_ low density; or, you can, but as you can see from SFBA, the
result is inhumane.

If Boulder wants to be Ann Arbor of the Mountains, that's fine. But I suspect
that's not what Boulder really wants; people who live in Boulder want to have
a competitive employment market with multiple options for where to work and
little risk of being forced to relocate out of town if their job doesn't work
out. That's a basket of benefits that you can't humanely get while holding
density constant.

~~~
hueving
Boulder doesn't 'want things' as an entity. The people that will be hurt by
Google moving in were not the people clamoring for large employers for well-
off people in the first place.

So it's not a case of wanting things both ways, it's a case of the city
choosing economic expansion over the subset of people that want to keep things
affordable and uncrowded.

------
zerostar07
Excellent. instead of hiring some poor chaps to remove some of the spam, lets
give more money to the poor chap who owns whatever building.

------
pixelpp
Nooooooo! I love the Chelsea Market :/

~~~
Xorlev
It's not like CM first level is going to change. The other floors are just
offices, perhaps a majority of it already allocated to Google.

------
kbumsik
So Google is buying the real estate for office use. I guess it is not
something like Amazon buying Whole Foods, right?

