NEW YORK CITY- From Facebook to Foursquare, Manhattan’s three core Midtown, Midtown South and Downtown markets are rife with Web 2.0 leaders. But the future of the fast-paced digital industry also lies in the hands of foreign tech start-ups looking to grow and expand their companies in the US.
In an effort to educate and inform the international community, CB Richard Ellis, in partnership with the New York City Economic Development Corporation, hosted a “World To NYC” panel discussion at their Midtown offices yesterday morning, providing foreign technology companies from London and Singapore with the American business basics of real estate, legal, accounting and recruiting. The panel included CBRE’s first VP Gregory Kraut, attorneys Allan Rooney and Tim Fisher of Allan J.P. Rooney, P.C., Emre Ozgu of Barst Mukamal & Kleiner LLP and Dee Reynolds of Stateside Solutions.
With 223 million square feet in Midtown, 65 million square feet in Midtown South and 82 million square feet Downtown, Kraut spoke about the various subletting and leasing options available for New York City newcomers. On average, he said average asking rents in Midtown--the largest office market citywide--range from $50 to 60 per square foot, but explained that most new media and technology companies flock to Midtown South, where average asking rents rank in the mid $30s to $40s per square foot.
“Midtown South is one of those markets that doesn’t go up or down much, however, you may want to take a look at the sublet availability rate, which is the amount of sublease space on the market,” Kraut advised the audience. And according to first-quarter market data from CBRE, strong leasing of 550,000 square feet occurred in Midtown South this year, leading to 160,000 square feet of positive absorption. The overall availability rate in Midtown South edged down 0.2 points in March 2011 to 11.5% from 11.7% in February; however, the sublease availability rate climbed 0.1 point to 1.8% during the month.
While CBRE has executed several large Midtown deals recently, like Facebook’s 15-year lease for 40,220 square feet on the 17th Floor of 335 Madison Ave. and networking giant LinkedIn’s 6,800-square-foot space at 350 Park Ave., the bulk of tech growth is in Midtown South. Some the area’s notable web and tech companies include Pandora Media at 19 Union Square West, Foursquare at 36 Cooper Square, AK Networks at 381 Park Ave. South and eMusic at 39 W. 13th St., all recent transactions completed by CBRE. Midtown South is also home to heavy hitters such as Google at 111 Eighth Ave., Yahoo! at 620 Ave. of the Americas and AOL at 770 Broadway.
But for new companies, there is also room to grow. Kraut said sublease space was “gobbled up” by dot-com start-ups in the early 2000s who started out in smaller 3,000 square foot spaces and moved into bigger spaces as the companies expanded. “What we are seeing when a lot of start-ups come here, they go to one of the incubators for the first one or two years and that’s the most cost-effective per person,” he said. “When the sublease availability rate was really high back in 2002 and 2003, it solely because all these companies went from 5,000 and 10,000 square feet to 40,000 square feet. And then there was all this bigger space available and smaller space available as well.”
As an alternative, independent tech firms are also looking across the East River to the DUMBO and Williamsburg sections of Brooklyn, which offer subway access, two bridges and NY Water Taxi service. For example, CBRE represents online handmade-fashion marketplace Etsy at 325 Gold St. in DUMBO.
In terms of rent concessions, Kraut said the deals vary citywide. “If you were in the marketplace right now for 10,000 square feet, it all depends on the building, who you are and what location you are in,” he said, describing Chelsea’s Meatpacking District as “very hot” with limited concessions and little landlord build-out, “Typically on a 10-year deal in Midtown, you could get probably six months of free rent. The reason why sublet availability rate is so low in Midtown South is because most of the technology and media companies want space that is already built-out and furnished so they basically could move right into it.”
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