Times have not been great for the tech sector over the past year. Big name tech companies, stung by tough economic conditions, implemented rounds of layoffs that began last fall and picked up speed in the early months of the year. Still, at the same time, a lot of companies cut staff, they doubled down on the office, rolling out stricter mandates around remote work. Microsoft, the software giant headquartered in Seattle, was one of those companies. After first allowing remote work during the pandemic, by early 2022, company leaders began requiring employees to work in person at least 50 percent of the time. Microsoft is a company known for its Windows operating system and Microsoft Office products, but it also makes hybrid tools like Microsoft Teams and has also done wide-ranging studies on the subject, including its Work Trend Index Annual Report. So, in choosing their new Manhattan office, they seemed well-prepared to find something that would meet their workers’ needs.
Microsoft moved into its latest office this past July, less than two years after first signing a lease for the space. The new digs at 122 Fifth Avenue consolidate the company’s advertising division in New York City, serving as Microsoft’s East Coast AdTech Hub. The space totals 150,000 square feet across the building’s top five floors, as well as part of a 13,200-square-foot roof deck and a 5,500-square-foot pavilion. The tech company also has a private entrance on Fifth Avenue. The office building underwent a major renovation before the tech firm moved in. Bromley Companies, the property’s owner, spent $100 million redeveloping the landmarked building, located on a prime retail corridor in Manhattan’s Flatiron District.
STUDIOS Architecture headed up the building’s revamp, which entailed turning outdated interiors into modern loft office space, upgrading infrastructure, and adding high-profile amenities. Relocating elevators and bathrooms created more efficient and larger floor plates ranging from 27,000 to 33,000 square feet. Some of the new building amenities include a bike storage room and a private locker room. Renovations to the building also included adding a sleek new lobby and a separate entrance on 17th Street. High-tech new systems, including touchless technology and smartphone integration, were added, and the building’s size expanded with the addition of the roof deck and pavilion, which brought the property’s square footage to a total of 300,000 square feet.
For a long time, the building’s tenants were the bookstore chain Barnes & Noble and the clothing retailer Gap, but the bookseller moved out just before the pandemic, and Gap moved in the middle of it. “We have this once-in-a-generation opportunity to have the retail and office empty,” Bromley Companies CEO Nicholas Haines said of the building becoming vacant. “We had the conviction that if we can do something really unique, our experience is you are going to find somebody with whom that will resonate.” The company’s prediction was right, and after first marketing the building in the fall of 2020, Microsoft signed on as an anchor tenant by 2021. Retail tenants at the building signed on last year, including the clothing and shoe retailer Allbirds, Parachute Homem, and jewelry chain Pandora. The latest retail tenant to sign on, the renowned Levain Bakery, was announced within the last few weeks.
By the time staffers moved into the building this summer, Microsoft had already shrunk its office footprint in the U.S. significantly. The company previously announced it would reduce its office space by nearly 1.7 million square feet in the Washington State cities of Bellevue and Issaquah by not renewing multiple leases scheduled to expire between 2023 and 2024. Microsoft also paused the development of a campus expansion project, which was separate from its main campus Refresh project. Earlier this summer in Manhattan, the company put 42,000 square feet of office space at 11 Times Square on the sublease market.
Microsoft’s choice to pick a boutique office building in Manhattan’s Flatiron District makes sense for several reasons. The area, which has been called “Silicon Alley,” has been a big draw for tech firms, startups, and other creative industries. Well-known companies like Adobe, Netflix, and DropBox have offices in the neighborhood. It’s a central area in what’s also called Midtown South and got its name from the iconic Flatiron Building, which made headlines recently during a dramatic ownership dispute that took two public auctions to resolve. Since January 2022, more than 450,000 square feet of commercial office space has been leased across the tech, finance, and health sectors, according to the nonprofit group Union Square Partnership. It has some of the best public transportation options, namely, with one of the city’s largest subway stations, Union Square, just a couple blocks away, as well as Madison Square Park, within walking distance.
Microsoft was in a unique position among other big tech firms in that it makes software that supports hybrid and remote work, like the popular Microsoft Teams package used by millions of workers to communicate with colleagues. Building an office that employees want to go into more often is something Microsoft has actually done its own research on. In a wide-ranging report the tech firm released last fall, researchers found that the key to bringing workers back was interacting with others. Of the more than 20,000 full-time workers the company polled in the report, 84 percent said they would be more inclined to go to the office if they could socialize with co-workers, and more than 70 percent said they would go in more often if they knew their work friends or direct team members would also be there.
Still, with the company’s most recent mass layoff several months ago and its overall office downsizing, it will be interesting to see how its newest office will perform. Just a couple of months ago, a leaked internal survey from the tech firm showed that only 47 percent of employees said they would stay at the company if they received a comparable job offer from another firm. The figure was a major drop from the same survey taken last November when 70 percent of staffers said they would stay.
The software giant’s new Manhattan office is for a specific division of its hundreds of thousands of workers worldwide, so it may not represent the overall preferences of the firm’s staff. Though its new building has more scaled-down amenities, what it offers in the roof deck and pavilion align well with the importance of socializing with others, which has been identified as a major motivation for working in person. It’s also an area with a rich variety of retail offerings and is within a couple of blocks of one of the largest transit hubs in the city. Microsoft just moved into the new office, so it will take some time to see how it resonates with workers. But if things go the way the company hopes they will, it will not only be welcome news for company leaders but may just go to show that location and a focus on employee interactions may draw workers more than over-the-top amenity packages. As one of the biggest and most well-known tech firms in the world, other companies will surely be watching Microsoft’s moves with productivity and innovation closely, so if this office proves to be successful, we might see a lot of other companies follow the tech giant’s lead.