News
HERE COME THE TECHIES
May 2, 2012
| We’re experiencing the beginning of a surge in creative areas, with tech and related tenants looking beyond their traditional markets in NYC, according to Cushman & Wakefield chair of global brokerage Bruce Mosler, a panelist at yesterday’s Bisnow Silicon Alley Real Estate Summit. And with Midtown South so tight on space,Brooklyn, Downtown, and the West Side are the next frontiers. (So get your gadget questions ready.) |
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| Midtown South is so hot that the market now only averages $5 less per SF than Midtown ($67/SF) and $22 per SF more than Downtown, Bruce points out. Brooklyn is already an incubator, attracting startups that need small spaces and ability to grow. (Woody Allen's next movie should be about two startup employees who fall in quirky love as they walk to work in Brooklyn.) And Cornell and Technion-Israel Institute of Technology’s planned 2M SF applied sciences campus on Roosevelt Island will keep New York where it should be from a tech perspective, he says. “New York is where the capital is, and investment into the city helps us in the long run.” |
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| A lack of supply is driving these prices, says Brookfield Office Properties VP David Cheikin (left, with Brookfield SVP Jerry Larkin and CEO of US commercial operations Mitch Rudin). Landlords have to figure out their long-term space in order to meet this demand. When Google moved in with its 111 Eighth deal, a substantial number of firms looked at Brookfield’s Downtown space, he says. |
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| We’re also going to see much more interest in the West Side. For instance, Brookfield and Broadway Partners’ 450 W 33rd St, where we held the event, has 137k SF, 111k SF, 91k SF, and 35k SF floorplates available, with 10 to 12-foot ceiling heights. (Above is our audience of over 300 on the 12th floor.) Adjacent to the building will be Brookfield’s future Manhattan West development, which will add more than 5M SF of office and mixed-use space. |
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| Downtown also has the large floorplates and vacancy needed to attract these tenants, but economic competition is fierce, says Studley exec managing director Greg Taubin. The Midtown/Midtown South asking-rent gap has significantly decreased, shrinking from a $35 to $37/SF difference in ’06 and ‘07. But he says that Downtown will get love from tech companies before Brooklyn or even an area like Long Island City. As tech and creative tenants gravitate toward new areas, hotels and retail will follow, Bruce adds. “It will be interesting to see how Midtown repositions itself as demand spreads,” he says. |
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| But the difference between today and the dot-com days of the late ‘90s is that location is less important—instead, it’s about being in a building that speaks to a tech company’s image, says Newmark Grubb Knight Frank New York Tri-State prez David Falk. When David was hired by Kushner Cos and CIM Group to market space at 200 Lafayette St, all he had to do was send out the renderings to bring in tours. “Make it hip and they will come,” he says. “[Tech companies] don’t want to be in their fathers’ buildings.” |
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| What’s most important to these tech companies? Flexibility, says Thrillist Media Group CFO Eric Ashman—think open plans, low capital improvements, and networking opportunities. Oh, and plenty of coffee shops. (Techies bleed caffeine; don't let that water bottle fool you.) Price drives it a bit, but there’s a lot of cash in the market right now. And this flexibility trumps elaborate lobbies. “Our teams don’t need fancy space,” he says. (Thrillist’s offices are located at 568 Broadway.) If you want tenants like these, you have to offer incentives like expansion rights and ability to change footprints easily, adds David Cheikin. |
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| Moderator extraordinaire Jackie Weiss, a partner at great sponsor Arent Fox. Check out our Monday issue for more from the event. |
