Landlords Heart Tech Firms
By Daniel Edward Rosen March 21, 2012 11:24 amreprints
If you’re a tech firm that has a workforce in its 20s that regularly eschews walking to meetings in favor of Razor scooters or Segways, landlords across the country have the hots for you.
Tech companies have accounted for 29 percent of all growth in the U.S. office market in 2011, The Wall Street Journal reports.
This has also added 10.2 million square feet, “nearly the size of four Empire State Buildings,” both The WSJ and Jones Lang LaSalle claim.
This is largely due to tech firms like Google and LivingSocial looking outside the Northern California/San Francisco tech epicenter.
Google bought the 2.9 million square foot former warehouse at 111 Eighth Avenue, taking roughly half the space for its own offices, then tacked on 100,000 square feet afterwards (it bought out tenants to accommodate this growth). The search engine has also grown in Cambridge, MA (230,000 square feet and expanding) and moved into a former Nabisco cracker factory in Pittsburgh, where it is expanding to 80,000 square feet.
LivingSocial is growing in Washington, D.C, Apple is in plans to build a $304 million campus in Austin, Texas, and Amazon.com is developing up to 3 million square feet of space in Seattle for its headquarters.
In Chicago, tech companies made up for 10 percent of all office leasing from 2010-11. That city’s tech sector, where Groupon has its headquarters at 600 West Chicago Ave., is nicknamed “Silicon Prairie”.
But why would landlords, perhaps already stun when the last tech bubble collapsed, want to gamble on a volatile industry?
Maybe because the buildings themselves are located in “out-of-the-way” buildings and in second-rate buildings, The WSJ says.
And then there is the value-add benefit of having a tech tenant. The Kaufman Organization and Invesco Ltd. purchased 100-104 Fifth Avenue and have since brought in a slew of high profile tech companies (Yelp and Apple’s iAd) to take up over 100,000 square feet.
In Chicago, the site of Groupon’s headquarters sold in September for $390 million, a nice bump from its $289 million sale price in 2007. In San Francisco, Zynga bought the 670,000 square foot building that housed its headquarters for $228 million (it had sold for $131 million in 2006).