NEW YORK CITY— While it's never good when a tenant abandons its lease, one case that happened earlier this week wound up providing a definitive thumbs up to the health of the Midtown South market.
Quirky, a startup for crowdsourcing inventions that filed for Chapter 11 bankruptcy on Tuesday, has pulled out of its 60,000-square-foot lease at the Terminal Stores complex in Chelsea, according to the Real Deal. It had eight full years remaining on its lease. However, Flextronics International USA—a contract design and manufacturing firm with plans to buy a Quirky subsidiary—agreed in short order to sign a new lease for the full space occupied by Quirky.
"This transaction demonstrates the demand from the TAMI market," Savills Studley's executive managing director Greg Taubin, who brokered Quirky's Chelsea lease, tells GlobeSt.com. "To my knowledge, this is the largest amount of creative space to be made available by a TAMI tenant and immediately absorbed by a TAMI tenant."
He continues, “Without officially marketing the space, the transaction was completed in under two months. This allowed the landlord to avoid the unknown downtime and expense of having to put the space on the market.”
Quirky's decline began this summer when the firm quickly suffering big losses and was forced to lay off 159 employees. The formerly promising San Francisco-based company had raised $185 million in funding from General Electric and other venture-capital investors but it was down to $12 million in July.
Last year, the startup reported $50 million in revenue and seemed to be headed for long-term growth. Positive forecasts were matched by its gobbling up of office space here. Following its 2009 launch, Quirky took 5,500 square feet of space at 628 Broadway in Noho. Two years later, the company moved to the Terminal Stores office complex—a 1.2 million-square-foot site owned by Waterfront Realty—at 261-275 11th Ave., where it took 27,500 square feet.
Eighteen months after signing that 10-year lease, the firm added 14,000 square feet to the agreement. The office was the largest of Quirky's four global offices and reportedly was leased at below-market rents in the mid-$30s per square foot.
Quirky and Uber have been the primary tech tenants at the complex, which is undergoing a conversion from mini-storage space to office. Uber signed a 10-year lease for 52,350 square feet in 2014.
Meanwhile, Flextronics' new lease marks the San Jose, Calif.-based company's first office in New York. The company made a deal to allow Quirky to remain in a small portion of the office on a short-term, rent-free basis, according to the Wall Street Journal. Flextronics made a $15 million bid for Quirky subsidiary Wink. Quirky, which had a total of 90 employees as of Tuesday, plans to seek offers for its remaining assets at an auction in November.
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
