The explosive growth of the tech, advertising, media and information (TAMI) sectors has floated all leasing boats. Brokers say there is almost no “bad” office area, with tenants happy to be off the Midtown grid in search of cheap and funky collaborative spaces.
Since tenants want to be in trendy neighborhoods, it’s prompting developers to buy, reinvest and reinvent buildings citywide — including in Harlem, Brooklyn and Queens — said Bruce Mosler, head of global brokerage for Cushman & Wakefield.
In Harlem, three acres around the former Taystee factory in the West 120s is seeing TAMI tenants as well as biotechs affiliated or spun off from Columbia University and other colleges, said Scott Metzner, president of Janus Property Company.
Deals like Etsy’s 200,000 square feet at the Kushner/RFR Holdings’ DUMBO Heights portfolio is egging other buyers onward.
“Brooklyn is definitely underserved in the office market,” said Stephen Shapiro, senior vice president, JLL. “Kushner’s DUMBO buildings are a welcome addition but a drop in the bucket to satisfy the demand.”
Emmes bought the 120,000-square-foot, six-story 35-37 36th St. and is rebranding it the Offices at Studio Square, where a broker party will be held this week, said Ellen Israel, senior director at JRT Realty Group. “They are a value-add company and their partner has a mandate to purchase in the boroughs,” Israel said. “It has a beautiful roof garden.”
Israel is also one of the agents on the Falchi Building in Queens for Jamestown.
Similarly, Time Equities is retooling the Silks Building in Long Island City, at 37-24 24th St. The lofts at the former Scalamandre silk plant were rented to artists for around $20 per foot. But Time Equities is now getting tech tenants who think the new rent of $32 a foot is a bargain, said Brandon Medeiros, director of Office Leasing & Sales.
Also in LIC, Time Equities is preparing the industrial building at 47-37 Austell Place for tech tenants.
Back in Manhattan, Dan Posy, senior managing director at Savills Studley, says the high-end market is extremely hot right now. “It is not necessarily a space race, but there not as many opportunities as there could be for tenants.”
As a result of the Volcker Rule, Posy says proprietary trading groups are spinning off and need additional immediate built spaces.
The number of leases signed mounts every day. The law firm Weil Gotshal just signed a 15-year renewal at the GM Building at 767 Fifth Ave. covering 400,000 square feet.
According to Cushman & Wakefield, there were 21.4 million square feet signed in the first half of the year versus a total of 25.7 million square feet in all of 2013.
“That’s a stunning statistic,” said Mosler. The third quarter alone had 36 deals over 100,000 square feet, but there are still 41 tenants seeking over 100,000 feet.
The Downtown Class B “story” is “the hottest,” said Shapiro as Midtown South space is scarce and many tenants don’t want to be in glass skyscrapers, or aren’t ready to leap across the river.
“Companies feel good about their business and are willing to take more risks, and are also focused on being efficient,” said Peter Riguardi, president of JLL’s tri-state operations.
The Kaufman Organization is now redeveloping the Madison Square Portfolio at 13 W. 27th St., 45 W. 27th St. and 19 W. 24th St., which will have a new lobby by February 2015. Three were vacant for 10 years, said Grant Greenspan, principal of the Kaufman Organization, of the former Ring-owned properties. “If I had the product ready to go I would already have a third of it leased.”
Bright lighting plus new hotels and restaurants are boosting rents in the Garment District side streets, said Steve Kaufman, president of Kaufman. Rents popped from the low $30s a year ago to the current low $40s a foot, he said.
Adams & Co. is also fixing elevators, lobbies and other building items. A $7 million retrofit is underway at 463 Seventh Ave. while 1071 Sixth is getting a new curtain wall and a new address of 4 Bryant Park, said David Levy, an Adams & Co. principal
Bob Savitt, president and founder of Savitt Partners, owns 530 Seventh Ave. and is a partner in 525 Seventh.
“We still want to bring in fashion tenants; it’s exciting for the whole area as there are many creative companies,” Savitt said.
“People are feeling that location, in some respects, is less important,” said David Falk, tri-state president of Newmark Grubb Knight Frank, who helped private equity firm Savanna lease Twitter’s 214,000 square feet at 245 W. 17th St.
“Investors are asking me, ‘If I put in a new hip lobby and new windows and give it a renovation can I get high rents?’”
And in most cases, Falk is telling them, “Yes.”
