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Why Tech’s Troubles Might Not Be So Bad for Manhattan’s Office Market

Thousands of layoffs and cutbacks in space? No problem as finance leasing picks up and office owners convert space anyway.


The numbers look scary:

12,000 at Alphabet, nee Google.

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11,000 at Meta, nee Facebook.

10,000 at Microsoft

18,000 at Amazon (AMZN).

Those are the number of layoffs globally, all either in late 2022 or early 2023, at technology giants as compiled by, a tracking website. All in all, 352 tech companies cut 104,132 jobs through mid-February — just in 2023. And, in all of 2022, there were 160,097 jobs lost at 1,045 companies, according to the website. It stands to reason that a good percentage were in and around New York City, the East Coast hub for the likes of Alphabet and Meta, among others. ( doesn’t break down layoffs by city.)

Of course, if you were one of the 265,000 or so people who lost their jobs, the biggest impact would be on yourself. But commercial real estate in New York could also feel the ill effects, and acutely so. 

The so-called TAMI industries — tech, advertising, media, and information — have been the backbone of the office leasing market since perhaps the Global Financial Crisis in 2008 and 2009, and definitely since the onset of the pandemic until just recently. In fact, for a while there, as improbable as it seemed, it looked like TAMI would overtake FIRE — finance, insurance and real estate — as the primary driver of Manhattan office leasing, a truly seismic shift culturally and financially. 

So, the job cutbacks in this fiercely growing sector — which by itself was largely responsible for creating demand for posh, modern office space in the Midtown South submarket that includes the Flatiron and Meatpacking districts plus SoHo, NoHo and Chelsea — are an even more fearsome prospect.

Or are they? Some in the industry take a contrarian view. 

“If you’re looking just at the numbers, the leasing market and the market for offices are not in a great place,” said Ryan Masiello, co-founder and chief strategy officer of VTS, a software company that automates the commercial real estate management process. “On one hand, the threat of a looming recession might make things worse. On the other hand, it might make things better. Obviously, tech is not going to be in a great place this year, or even early next year. However, what is starting to change is return to office. The first part of returning to office is getting people back in seats.”

It might take a while before the statistics reflect that, Masiello said. But he sees a firm determination on the part of all companies, large and small, to have offices where people can come to, collaborate, be trained, drink in corporate culture, and absorb what it really means to work for a business. It might not mean coming in and working five days a week, eight hours a day, like their fathers and mothers might have, but the office they come to has to be a nice place that entices workers to come in and put up with the dreary commute.

There’s another factor that mitigates any potential fallout from tech’s troubles: Financial services is regaining its appetite for office space, according to the numbers.

Financial services and insurance have taken a greater percentage of the leases signed, according to statistics from brokerage Savills. For the full year of 2019, their combined share was 23.2 percent. For 2020 and 2021, it was 29.8 percent. And, for last year, it was 40.8 percent. At the same time, TAMI went from a 36 percent share of leasing activity to 24.7 percent to 17.5 percent, respectively.

Financial services and insurance companies leased 4.3 million square feet in Manhattan in the third quarter of 2022, a post-pandemic peak, before falling off to 1.6 million in the fourth quarter, normally a slower quarter anyway.

What’s still not clear is just how much office space will be considered appropriate. Companies in most industries are still wrestling with that, and they still have to come to terms with the idea that space might be unoccupied one or two days a week, Masiello said. Amenities will be part of that decision, according to Masiello and others. Well-amenitized spaces — those with open-air terraces, gyms, food and beverage options, plenty of light and filtered air, etc. — will do better than places that don’t have those things.

What’s more, brokers, public officials and even owners have spoken about converting some of these less attractive, less saleable offices into housing, but the cost and logistics of conversion could prove difficult. In a recent New York Times article, Columbia University finance professor Stijn Van Nieuwerburgh said that as much as 40 percent of New York’s office stock could be transformed into “wonderful housing” to make the city work for the decades to come. 

Earlier this month, RXR chairman and CEO Scott Rechler said he was working on the potential conversion of two of its 91 office properties, calling them “challenging.” He said he was in discussion with the properties’ lenders about the conversions. 

Savills found that at the end of 2022, office availability for Midtown remained a stubbornly high 17.2 percent, and that asking rent for that market was $82.81, actually up 2 percent from the end of 2021. Asking rent averages sometimes adjust based on the quality of the space available, meaning that a larger percentage of high-quality space can cause the asking rent average to climb, even as more space becomes available.

Annual venture capital funding for technology companies hit a peak of $118 billion on a national basis, after steadily climbing throughout most of the 2010s, according to Savills. It fell to $79.4 billion last year, a drop of almost 33 percent. Venture capital funding is often a key driver of company growth, which usually in turn leads to more leasing. 

Marisha Clinton, Savills’ head of Northeast research, noted that Meta had before the start of the year given back space in Manhattan, at 30 and 55 Hudson Yards, both new buildings near Meta’s facility at the Farley Building, the sprawling general post office facility across from the west side of Madison Square Garden, whose eastern half has been transformed into a regional train station known as Moynihan Train Hall. The company had also vacated a lease at 225 Park Avenue South. It also backed out of a deal to add some 300,000 square feet at 770 Broadway in the NoHo section of the borough, its longtime base of operations.

“A lot of tech companies were actually shedding space over the last three years, paradoxically as they were adding headcount, moving to more aggressive tenant-remote or hybrid workplace models,” said Eric Lonergan, a Savills broker based in Seattle who focuses on tech firms. “It’s really the first time in my 28-year career that we’ve seen a decoupling between office job employment growth and office demand growth. A lot of the sublease space we’re seeing from the tech sector has already been reflected in market statistics prior to these layoffs being announced.”

In a transformation that might be indicative of what is happening in the market, private equity firm KKR, already a fixture at Hudson Yards, took over 220,000 square feet from Meta at 30 Hudson, one of Manhattan’s tallest skyscrapers and the tallest at the yards, the city’s prime new development area. KKR already controlled about 300,000 square feet at the tower. News of the space takeover came not even a week after New Year’s. 

But it’s not just the giants that are suddenly finding they have more space than they want. Clinton said a company called Twilio, a San Francisco-based provider of communications tools, just announced a second round of layoffs involving 1,700 employees. The first round came last September, and also involved closing offices. Twilio had offices at 110 William Street in Lower Manhattan. It’s leaving behind 36,000 square feet it had rented short term. “These are companies that have actually overhired,” Clinton said. “But they’re adjusting. What we are really seeing is an adjustment to overhiring.”

Lori Albert, director of tri-state research for brokerage Cushman & Wakefield, said that tech has slowed — but that’s nothing new. If FIRE continues to burn brighter than earlier in the pandemic, the Manhattan office market might ultimately absorb all of that lost tech leasing. 

“Since COVID, it’s still roughly a quarter of the market for new leases 10,000 square feet or over,” she said. “But financial services has increased its activity. It’s something we’ve been seeing for several months now. TAMI and financial services have always been the primary drivers of demand, and we don’t see that stopping.”