Tuesday June 18, 2019

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The Real Deal Maps #NYTech Real Estate Boom

NY - South West view

NY – South West view (Photo credit: mat.c)

A lengthy piece in The Real Deal (TRD) recently examined the NY real estate market’s current tech boom. The market is having a difficult time defining a tech company in a world where almost everyone has a tech focus. Tech companies have brought expansion to real estate, but they still only represent a small part of the market. Colliers International reported that 6.4 percent of Manhattan office space leased so far this year went to “computer science and technology” companies and 14 percent went to “information and new media companies.”

Jack Petrie, president of brokerage Office Lease Center, noted that younger customers, such as in the tech industry, are more open-minded about their brokers. This creates an intensely competitive atmosphere for real estate brokers in the tech sector. Despite billions invested in tech by VCs and others, the industry is facing issues– funding over the last year was down 22 percent from the previous year. Google and Apple stocks have not been as strong as expected, and tech leasing in San Francisco is starting to recede.

Some of Manhattan’s largest tech leasing deals in the past two years:

  • Google (75 Ninth Ave. 2.9 million square feet for $1.8 billion): Last month Google also leased 94,000 square feet of space at the Chelsea Market.
  • Microsoft (641 Sixth Ave. 22,000 square feet): Currently considering a move from its Headquarters at 1290 Sixth Ave. to 11 Times Square.
  • LBi (11 W 19th Street. 26,000 square feet): This space gives LBi, an Amsterdam-based global tech company, a total of 78,000 square feet in the building. The firm has two other Manhattan locations.
  • Salesforce (685 Third Ave. 74,349 square feet): This new space is four-and-a-half times the size of their previous office. The lease is for ten years.
  • Spotify (620 Sixth ave. 63,285 square feet): Spotify signed this lease in September after leaving its space in Google’s building.
  • Meebo (641 Sixth Ave. 22,047 square feet): CA-based Meebo signed this five-year lease in August 2011. After being bought by Google, the space was sold to Microsoft.
  • Cafemom (417 Fifth Ave. 35,000 square feet): This website for moms signed a seven year lease on this space, previously occupied by Atari.
  • 100-104 Fifth Ave (55,000 square feet): Apple added 45,000 square feet to this space in 2011. This space is mostly for Apple’s ad division.
  • Ebay (625 Sixth Ave. 35,156 square feet): This lease was signed for ten years and is intended to house the employees for the company’s Tech Center for Excellence.

Brokers are trying to take advantage of the growth of Manhattan’s Internet companies. But they have yet to develop a reliable system for how to classify these leases. TRD broke down and analyzed the different brokers and firms representing tech companies in Manhattan. They found that the city’s top commercial leasing companies are not at the top of the list. Michael Rouzenrouch, president of the small SoHo-based Miyad Realty said, “[A broker] with extensive knowledge is more key than the brand of the real estate company.”

The huge churn rate in the tech lease industry creates an interesting atmosphere for brokers. There is a lot of opportunity for poaching accounts from other brokers. Adding to this pressure is the overall slowdown in the market. The tech industry still has the most leasing potential. However, big leasing brokerages still tend to lease to big tech firms. CBRE did more tenant deals than any of the other firms examined by TRD. CBRE brokered 12 deals totaling 448,329 square feet. Jones Lang LaSalle was next, with 10 deals totaling 287,329 square feet.

TRD also took a close look at powerful techies and where they choose to live–and found they favor downtown Manhattan and Brooklyn.

  • Sean Parker: Parker’s Greenwich Village bachelor pad, Bacchus House, hasn’t helped this Napster and Facebook co-founder shed his party boy image. The townhouse, located on 10th St, was bought in 2010 for $20 million.
  • Christopher Hughs: Facebook co-founder and media expert, Hughs recently purchased a majority stake in the New Republic magazine and became publisher and editor-in-chief. He also bought a downtown 4,164 square foot apartment for $4.8 million in 2010.
  • Alexis Ohanian: Co-founder of Reddit. In 2011, he bought a 1,385 square foot Brooklyn Heights apartment on Furman Street for $1.24 million.
  • Dennis Crowley: Founder of Dodgeball and Foursquare. He purchased a SoHo two bedroom co-op on E. 8th St. in 2007 for $1.15 million.

The Real Deal