While Mr. Zandieh enjoys the relative freedoms afforded to him by ABS Partners, his main career objective is to introduce a sense of structure to fledgling tech start-ups. And for all the buzz about the industry’s effect on real estate—skyrocketing rents in Midtown South, a taste for office design that knocks internal walls down, a surge in co-working spaces—the delicate nature (and shallow pockets) of many young Web start-ups leads to some unique challenges.
“Most brokers push people to take space,” Mr. Zandieh said. “I’ll actually advise these young companies to not take space. I’ll tell them they need to fundraise for a higher value and look for co-working spaces. Because the fact is landlords are risk-averse. My role is to advise start-ups. I preserve and enhance the tech scene.”
“WeWork (WE) is a start-up that was built like a start-up by people who came from start-ups,” he says of the prominent co-working incubator. “I tell [tech entrepreneurs] that they understand their model better than anybody. And it’s month to month!”
When it comes to traditional office space, Mr. Zandieh most often discusses Midtown South. The submarket expanded—at least in real estate parlance—beyond Silicon Alley, a term coined in the mid-90s to denote Broadway from the Flatiron District to Tribeca as New York’s answer to Silicon Valley, to encompass the western half of Manhattan from 34th Street to the Financial District. This summer, East Village blogs erupted in half-joking outrage over realtor descriptions of that neighborhood as the latest Midtown South offshoot, thanks in large part to the arrival of Edward Minskoff’s 51 Astor Place.
“It’s like looking at an energy grid,” Mr. Zandieh said. “You have hubs and offshoots. You need a hub. Silicon Valley is a hub, obviously. And that’s what Midtown South is. The only reason we’re talking about lower Manhattan and Midtown as alternatives is Midtown South and its expansion.”
Mr. Zandieh’s most recent TechStarter report described how the tech sector continued to “disrupt” the Midtown South submarket. The average asking rent for a 1,000- to 5,000-square-foot direct lease in the area was $49.73 per square foot in the second quarter, a slight dip from the first quarter’s $49.88-per-square-foot asking rent. Meanwhile, the sublease market for spaces between 1,000 and 5,000 square feet saw a 5.72 percent year-to-year asking-rent jump, to $42.53 from $40.23. Mr. Zandieh points out that to date 35 percent of new leases for start-ups have been subleases.
Could the plateau in direct lease rents auger an overall slowdown? “It’s a good thing,” Mr. Zandieh said. Speaking of the fertile sublease terrain, he pointed out that “start-ups don’t know where they’ll be in two years.”
As for where tech’s center of gravity might shift in two years, Mr. Zandieh is more bullish on NoMad (until recently lined with stores “selling cologne by the gallon”) than Midtown proper—or, more specifically, the area recently rechristened Times Square South—and lower Manhattan, which has seen an influx of technology and media firms.
“People talk about the progression north,” he said. “Some say it’s high vacancy and low rental rates. That’s an obvious factor. But it’s also low rent, like in lower Manhattan. It’s like Old Navy constantly having a bargain sale—50 percent off! But you only attract a certain customer that way. No disrespect to Old Navy.”
Mr. Zandieh, who lives in Greenpoint, is also a big booster of Brooklyn as an alternative to the Manhattan players. “Brooklyn’s considered to be sexy now,” he said, pointing to the crowd-funding sensation Kickstarter’s $7.5 million purchase of a former pencil factory at 58 Kent Street in his neighborhood for its headquarters. Just last month, he helped tenants bring San Francisco-based co-working “clubhouse” Makeshift Society to 5,000 square feet at 55 Hope Street in a slightly off-the-beaten-path corner of Williamsburg.
Young start-ups “feel like they fit in” in North Brooklyn, Mr. Zandieh said. It’s an area that shares the raffish scene’s “core cultural beliefs. Their peers are here. The nightlife’s here.” In all, it’s a prime submarket (whose real estate headlines have mostly concerned residential and retail booms) in which to achieve the “dynamic density” creative new businesses need.
When it comes to tech and real estate dynamism, Mr. Zandieh perks up while describing the real bottom line of the disruption he analyzes. And money is just a small part of it.
“It’s not about rent,” Mr. Zandieh said. “Rent’s a macroeconomic play. It will always work itself out. All real estate is a product of its environment. Something must occur for the industry to react. This is about the efficiency of space and the new age of work styles and, really, the once-in-a-generation shift in the workplace.”
