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Advertising Clicks

Over the past few months I have focused this column on the demise of numerous businesses whose space has yielded to digital solutions. Well, yesterday there was a pivotal move in the advertising-agency space as giants Publicis and Omnicom announced a $35 billion merger to battle the accelerating transition of the balance of power to digital media. Silicon Valley behemoths such as Google and Facebook, who provide digital ad space automated online, scraping the intermediary ad agencies, now represent 22% of advertising spend, and are growing rapidly. Ad agencies for sure aren’t going away tomorrow, but they are shrinking rapidly, and the Publicis and Omnicom merger is testimony to the new reality. This also represents, yet again, another business segment whose real estate occupancy will decline. Granted, Google and other Silicon Valley users are expanding rapidly, evidenced by Google’s growth in New York City. However, they are orienting to what were fringe locations in aggregately lower occupancies than the advertising giants. This spells trouble for core markets where we have already seen law firms, investment banks, and other large users evaporate or dramatically reduce their office occupancy.

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