Can AI Boom Save NY’s Ailing Commercial Properties?

In December, President-elect Donald Trump and SoftBank CEO Masayoshi Son announced $100 billion in US investment to create more than 100,000 new jobs in artificial intelligence and related infrastructure.

Then last week, Hussain Sajwani, the chairman of Dubai-based luxury property developer Damac, stood by Trump at Mar-a-Lago to announce a $20 billion investment in the Midwest and Sunbelt for data centers. of AI and chip manufacturing.

Chipmakers are also investing $112 billion around New York State with the Albany NanoTech Complex becoming the home of the CHIPS for America EUV Accelerator, one of three National Semiconductor Technology Centers. It will unlock $825 million in federal research and development funding.

For brokers and building owners who have yet to recover from the pandemic, investing in artificial intelligence is a godsend.

“New York has the second largest number of AI companies after California,” said Rahul Mewawalla of Mawson Infrastructure Group, which builds and maintains digital infrastructure for high-powered data centers that support AI, High Performance Computing High (HPC), crypto mining. and the growth of blockchain.

Over the past decade, AI firms have expanded exponentially in New York from less than 450,000 square feet to over 4.8 million square feet. And although many AI firms are headquartered in Silicon Valley, they are finding the talent they want to lure in the Big Apple.

“New York attracts graduates and the employee base,” added Jamie Katcher of JLL. “Nearly 40% of New York’s movers come from the West Coast, and the venture money pouring into New York is driving some of that growth.”

CBRE reports that there are now nearly 190,000 high-tech jobs in Manhattan, with “more help” wanted ads posted daily.

“AI needs access to a highly skilled workforce with a unique skill set, apart from the wider technology industry,” explained CBRE’s Sacha Zarba. “The fact that employees want to come to the office to work in New York is a big driver of overall demand.”

Sam Altman’s OpenAI just leased 90,000 square feet in the Kushner Puck Companies building at 295 Lafayette St. This deal was replicated by CBRE asking rents ranging from $125 to $145 per foot. “OpenAI has not only capitalized on the unique 30,000-square-foot slab, which is rare in Soho, but on a building with the characteristics that a young tech company wants,” Zarba said of the space that was occupied by NYU.

San Francisco-based Harvey recently leased 17,000 square feet at 315 Park Ave. Jug as it expands its focus from AI for legal services to all professional services companies. Meanwhile, video generation and editing firm AI Captions leased 15,000 square feet at 71 Fifth Ave. in the Flatiron area near Union Square.

But Zarba believes that the ability of these companies to grow and grow in the same building will be key. That’s why AI startups are moving out of submarkets with smaller floors like Soho, Union Square and Park Ave. In the south, in neighborhoods like Chelsea and Hudson Square where they will have room to grow.

London-based Genius Sports, for example, is moving its local headquarters from the glass-and-steel-like 825 Third Ave. in Chelsea and doubling in size to 22,454 square feet at 512 W. 22nd St. near the High Line and near sports fanatics at Chelsea Piers. The last remaining space of the Vornado property and the Albanian property had a rent of $107 per foot.

In Hudson Square, with the help of the state’s Excelsior Jobs Program tax credits, e-commerce company Rokt agreed to expand 34,000 square feet to 100,000 square feet at 175 Varick St. and will add an R&D center to help other companies and workers.

Canadian AI company Cohere.com — with offices in Toronto, Palo Alto and London — opened a downtown space at 1 Little W. 12th St. in the Meatpacking District. This is not to be confused with Cohere.io, with offices at 285 Fifth Ave., which was recently acquired by Ramp at 28 W. 23rd St.

With Amazon investing $8 billion in Anthropic, the San Francisco-based firm is expected to expand its presence in Gotham from a co-op site while looking for dozens more “human engines” here. Similarly, Grammarly, a handy writing tool with hubs in San Francisco, Kiev, Seattle, Toronto and in NoMad at 29 W. 30th St., is looking for more space in NYC, sources say.

“It’s no surprise that these companies are sitting in the core of Midtown South,” Katcher said. “They want to have the flexibility to expand and contract depending on where they are in the growth cycle. They are cautious, growth-wise, and sign short-term leases and are not oversubscribed in their original location.”

Meanwhile, creating power resources to support AI is imperative, with AI tenants often needing 10x more electrical capacity than traditional tenants due to their greater computational traction – and they need it 24/7 .

“You’re going to need twice the electricity you have now,” Trump said. “We will build better.” He’s also telling companies, “Build your power facility next to your plant, and people are loving that idea.”

“New York attracts both the graduate and employee base. Almost 40% of New York’s movers come from the West Coast, and the venture money pouring into New York is driving some of that growth.”

Jamie Katcher of JLL

And right on schedule, DataBank will complete a 45-megawatt center in Orangeburg, which will connect to its Manhattan locations at 60 Hudson and 111 Eighth — along with 165 Halsey St. in Newark.

Mewawalla’s Mawson Infrastructure Group is also actively investing in and prospecting former industrial sites, including steel mills and paper mills, because they used a lot of energy and much of the energy equipment and infrastructure remains.

“We need more support for data and dark fiber,” he said. “Energy will be critical moving forward. Robotics and all data users will require more powerful power sources.”

Moving all that data also needs its own underground highways, and companies “are buying fiber optic infrastructure at an incredible rate,” said CBRE broker John Needham, who specializes in the sale and lease of rights of way, dark fiber and channels throughout the US and Mexico.

The need for processing power and speed is also creating all kinds of construction jobs. A data line now offered by Needham, for example, has “termination options in meeting rooms… or mutually agreed upon wells in Jersey City and Lower Manhattan.”

Of course, behind the scenes, everyone is crossing their fingers that the growth of these companies won’t be a repeat of the debates of the dotcom bubble — when companies sold goods for more than they cost, took up too much space and quickly burned out. venture capital.

“We’re very conscious of the initial cost and the term elements and all those variables, so we don’t get into the dotcom situation where they were long in the space,” Katcher said.