Younger Tech Firms Driving Manhattan Office Leases During Pandemic
Manhattan’s office market has slowly started to rebound after a rough 18 months of the pandemic, thanks in large part to younger technology tenants expanding rapidly in the borough, a new report found.
The average age of technology, advertising, media and information (TAMI) tenants inking deals in Manhattan dropped to 13.2 years old during the pandemic, compared with the 16.4 years those companies averaged in 2019, according to a report by Newmark (NMRK).
All told, these younger tenants have signed 567,000 square feet of deals so far in 2021, more than three times what they leased in 2019, and demand from them grew by 315 percentage points during the pandemic, according to the report.
“They received significant venture capital money, they’re doing well and many of them want to take advantage of the market and get into better buildings,” David Falk, Newmark’s tri-state president, said. “They’re looking to make investments into the company and culture.”
And many of these youngsters have decided to ditch coworking spaces like WeWork for more permanent digs in Manhattan. Younger tech tenants moving out of flexible office spaces accounted for 9.3 percent of the positive absorption in the past 18 months, compared with 0.9 percent in 2019.
This includes the 2016-founded TikTok, which made waves when it inked a massive 232,000-square-foot lease at One Five One located at 151 West 42nd Street in May 2020 and left a WeWork, a surprise blockbuster move amid the pandemic real estate freeze.
Falk said that despite an uncertain return to the office for many firms, many of these younger tech companies decided to make longer-term commitments in Manhattan due in large part to the lower asking rents and higher concessions landlords are offering. But they won’t take just any building.
They’re in the market for offices mainly in Midtown South — because of the influx of similar tenants in the neighborhood — and properties that “tell a story” to staff about why they’re going all-in on Manhattan space, Falk said.
“They want to tell the story about why they chose that building, and the story is not going to be a dreary, cheap building,” Falk said.
These firms are on the lookout for amenities in buildings, especially outdoor space, which has bloomed during the pandemic, Falk added.
All of these youngins flooding into the office market has dropped the average age of Manhattan tenants to about 27 years old during the pandemic, versus the nearly 30-year-old age of companies in 2019.
But it’s not just the young tech companies, as TAMI tenants of any age have started to replace finance firms as Manhattan’s office leasing driver in recent years.
Nicholas Rizzi can be reached at firstname.lastname@example.org.