Google's 270,000 s/f Eighth Avenue lease

Real Estate Weekly, Sept 21, 2005 by Daniel Geiger

Internet browser heavyweight, Google, is close to taking 270,000 s/f at Taconic owned 111 Eighth Avenue in a deal that one person familiar with the transaction called a "horserace" because of the fierce competition the Internet giant vaulted in grabbing the space.

Both Infinity Broadcasting and Bertelsmann Music Group each were eager to set up shop in the 2.9 million s/f Chelsea property--which one high profile broker said is so big "it looks like the Empire State Building lying on its side"--but were bested by the sheer size of the Google deal.

Infinity and Bertelsmann's space requirements capped at about 100K-125K s/f apiece, leases that, while lofty especially when taken together, didn't quite match the mammoth chunk Google was in the market for.

Despite its size, Google's space was almost completely accommodated by just one of the building's hulking 210K s/f lower floors. The deal will bring the building to almost total occupancy.

Aside from size, Google's prestige as a household name and much publicized growth also played a role in gaining it entry to the building.

"Google is a pretty hot company right now, they just raised another $4 billion in an IPO, clearly they're in a growth mode and just the kind of tenant that someone like Taconic would want," the source said. Google announced a $4.18 billion stock sale on September 14 to fund acquisitions and product development.

The deal also represents a far greater commitment by the California based company to Manhattan.

"Google has had a presence, but not of this magnitude, this is a pretty major step for them," the source said. Bertelsmann and Infinity meanwhile have been rumored to be perusing space at nearby Rudin building, 32 Avenue of the Americas.

"32 is getting a lot of activity from those displaced from 111," the source said.

Rudin Management's COO John Gilbert confirmed that there is currently vacant space in 32 Avenue of the Americas, but he wouldn't comment on whether a deal with either of the two firms was in the works.

Both 111 Eighth and 32 Avenue of the Americas charge rent in the low $30 psf range.

Google won't be the only household name in 111 Eighth Avenue. Part of the hot Chelsea office market and also boasting excellent infrastructure, the building has built a roster of high profile tenants that includes Nike, Armani A/X, Doubleclick, Deutsch Advertising, and WebMD.

"I think the building has that kind of funky, hip appeal that is really attractive to those kind of industries," the source said.

"It has the big blocks of space that some of those companies are looking for and it has done a very good job of appealing to that segment of the market."

CB Richard Ellis's Brian Gell repped 111 Eighth's owner Taconic Investment Partners in the deal. Gell declined to comment for this report.