How exciting has this tech and new media expansion been for our business and for our great city?
Technology and new media firms have created thousands of new jobs and have leased millions of square feet in the last four years. They have re-energized our business and the City of New York, affecting not only employment but also transportation, housing and local businesses, and reinvigorating neighborhoods as well. They have also been at the forefront of changing the way that people use their office space and even the way people dress when they come to work.
With the advent of technology, most companies can empower their employees and staff by granting them access to their work online even when off campus. Landlords have also taken notice and have adapted through creative reuse of space; they are building new office floors with the “open feel” in mind. It seems that “suites”-type companies have taken office space in almost every major building in Manhattan, leasing floors and often expanding once they are in place, as they attract startups and incubators, so many of which are in the technology and new media fields.
Yet some brokers are starting to feel a little uneasy about these two industries. Why? Seasoned brokers remember the Internet bubble that burst more than 10 years ago and are beginning to ask the question: Is everything okay?
MHP has been fortunate to represent many tenants and buildings in Midtown South over the last several years. Many buildings on Fifth Avenue in the Flatiron District and on Park Avenue South have crossed the $55-to-$60-per-square-foot range while filling their buildings and virtually eliminating vacancy rates. One survey of space between 2,000 square feet and 10,000 square feet located on Fifth Avenue between 14th Street and 23rd Street indicates that there are only eight spaces available on a direct basis, while on Park Avenue South, another survey indicates that from 16th Street to 32nd Street, tenants seeking space between 2,000 square feet and 10,000 square feet have just 34 direct spaces to look at.
The pragmatist must inquire, though, about how these companies are doing when some start making calls to their brokers or to the building’s agents, seeking to possibly restructure their leases or asking if they can sublet some or all of their space. But this is not news; it is not an upheaval or a “rush to the door.” This is “survival of the fittest,” and it happens in every field.
Many of the tech and new media firms feel priced out of their prime location and have stretched their boundaries to remain close to where they need or prefer to be. Many have savvy brokers who know that when the difference in average rent between Midtown and Downtown crosses that imaginary $25-per-square-foot border, Downtown begins to look very attractive to a company that might not have considered it earlier.
Just a year ago, I was crowing about how the New York economy would continue to lead the nation with the addition of the Cornell tech campus now being created on Roosevelt Island in partnership with New York City. Mayor Bloomberg, again leading the way.
New York is the healthiest big city in the country, and it is the innovation created by people willing to put their name, reputation and hard work—and often their own money—on the line to succeed that makes New York great.