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A Google logo is seen at the company's headquarters in Mountain View, California. Photo by: Stephen Lam/Reuters

Google plans $1 billion expansion in New York

Silicon Valley is becoming Silicon Nation.

Google announced Monday it will spend more than $1 billion to build a new office complex in New York City that will allow the internet search giant to double the number of people it employs there.

It is the tech industry’s latest major expansion beyond the Seattle-San Francisco Bay corridor. It follows recent steps by Amazon and Apple to set up operations well outside their home areas.

Tech companies are “coming to the realization that the Bay Area, which has traditionally been the major center of tech activity in the U.S., is getting expensive and crowded,” said Andrew Bartels, principal analyst at Forrester Research.

“A lot of vendors are coming to the realization that ‘We can probably find top talent elsewhere at a more affordable costs, and perhaps a better style of life for employees who may be struggling to make ends meet.'”

The Northeast is proving to be a good match, with its large concentration of highly educated young people. New York in particular boasts key qualities, including proximity to the financial industry, a large base of existing tech workers, and the second-largest concentration of tech startups behind the Bay Area, Bartels said.

Google, based in Mountain View, California, will fashion a complex exceeding 1.7 million square feet along the Hudson River in the city’s West Village neighborhood, Ruth Porat, senior vice president and chief financial officer, said in a blog post.

Google opened its first office in New York nearly 20 years ago and now employs 7,000 people in the city. Its footprint has expanded continuously. Google said this year that it would buy the Manhattan Chelsea Market building for $2.4 billion and planned to lease more space at Pier 57, both along the Hudson about a mile north of the newly announced complex.

A month ago, Seattle-based Amazon said it would set up new headquarters in New York’s Long Island City neighborhood and in Arlington, Virginia, creating upwards of 25,000 jobs in each location.

But it’s not just the East Coast that is benefiting from the expansion.

Apple, based in Cupertino, California, said last week that it plans to build a $1 billion campus in Austin, Texas, that will create at least 5,000 jobs.

And Google is expanding elsewhere, too. It plans to develop a 50-acre area into offices, homes, shops, restaurants and parks in San Jose, California, the heart of Silicon Valley. And this year it opened new offices and data centers in cities including Detroit; Boulder, Colorado; and Los Angeles, as well as in such states as Tennessee and Alabama.

The bidding for programmers is driving salaries higher, which in turn is catapulting the average prices of homes in many parts of the San Francisco Bay Area above $1 million. Many high-tech workers are choosing to live elsewhere, forcing major tech employers to look in new places for the employees they need.

Facebook, based in Menlo Park, California, has over 2,000 employees in New York.

Google hopes to move into the new campus by 2020. Porat said that the company’s most recent investments give it the ability to more than double the number of Google employees in New York over the next 10 years.

Tech companies see New York as a way to gain a new perspective, one that is different from that of Silicon Valley, which can be seen as an “out-of-touch echo chamber,” Bartels said.

“New Yorkers consider themselves to be more in tune with the reality of life in U.S. urban centers and believe this helps them innovate products and services that are more closely aligned with the needs of the average American,” he said.

Not all tech companies are investing in areas outside of their original headquarters, however.

Microsoft is overhauling its headquarters in Redmond, Washington, with an 18-building construction project that will make room for an additional 8,000 workers. It currently employs about 47,000 in the area.

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