Financial Services and Tech Dominate Midtown South Leasing: CBRE
Terence Cullen May 3, 2016, 10 a.m.
The financial sector seemed all but dead when the Great Recession hit eight years ago. Regulations from the Dodd-Frank Wall Street Reform and Consumer Protection Act were considered to be the final nail in the coffin.
Technology since then has been considered the sector that would supplement the death of the financial industry, which had been the city’s largest employers. But new data from CBRE, provided to Commercial Observer, shows that the two sectors are actually performing well, if leasing is any indication.
Financial sector leases comprised 35 percent of the leasing velocity in Midtown South during the first quarter of 2016, the data show. Technology transactions were second with 20 percent of the activity during the first three months of the year.
“The tech community in New York City remains strong, despite a shaky start to the year in the financial markets—and some underlying concerns in the world of tech, specifically the news of sublease space in San Francisco and [venture capitalists] tightening their belts,” Sacha Zarba, a CBRE broker specializing in technology tenants, said in a statement via a spokeswoman.
Leasing velocity, which includes new and renewal transactions, for financial service tenants didn’t change when compared with the same time a year earlier but was still 25 percent higher than 2014’s first quarter. The financial sector real estate activity is going strong as the industry continues to add more jobs in the city. And the numbers have backed it up. New York City added 4,500 jobs in finance over the course of the year ending March 2016, according to the state’s Bureau of Labor Statistics.
Technology increased to 20 percent of Midtown South leasing versus 8 percent in first-quarter 2015. Indeed, established technology companies such as Facebook and AOL played a key role in the trendy submarket’s leasing performance. Each company signed deals to expand by 80,000 square feet at Vornado Realty Trust’s 770 Broadway between East Eighth Street and Wannamaker Place. Facebook is also reported to have signed a 200,000-square-foot lease at 225 Park Avenue South between East 18th and East 19th Streets.
Additionally, Two Trees Management Company signed technology education company Grovo to 70,000 square feet at its 50 West 23rd Street between Avenue of the Americas and Fifth Avenue.
“Notable mainstays such as Facebook, Salesforce and AOL, along with fast-growing earlier-stage companies such as Grovo and SoundCloud, are terrific examples of tech’s momentum,” Mr. Zarba said in the statement. “This growth, coupled with extremely tight sublease availability, is proof that tech remains a force across New York City.”