10 Trends for NYC’s Office Space in 2015
By Amy Zimmer on January 6, 2015 8:15pm
10 Trends for NYC’s Office Space in 2015
MANHATTAN — For New York City’s office real estate market in 2014, all eyes were on TAMI — technology, advertising, media and information — and that trend will likely continue in 2015, experts predict.
As the No. 7 train starts roaring into the far West Side in early 2015, the mini city rising around Hudson Yards is expected to emerge as the city’s newest corridor for tech companies, and the Financial District — with its shiny new transit hub at Fulton Street — will continue luring tech companies from Midtown, many expect.
Here’s a closer look at what to expect in New York’s commercial real estate market in 2015:
1. TAMI will still be big.
Several tech companies signed splashy deals in 2014, from retail giantAmazon leasing 470,000 square feet on West 34th Street across from the Empire State Building to DIY behemoth Etsy’s plans for a 200,000-square-foot space in Dumbo. Google continued nabbing more property in Chelsea, with a lease for an 180,000-square-foot space in a former Nabisco factory, bringing the company’s footprint in the area up to a reported 900,000 square feet.
Economists predict that much of the city’s employment growth will continue to come from the tech sector. These companies, for instance, added 5,400 jobs in Manhattan in July and August alone, according to a report fromCushman & Wakefield, a commercial real estate firm.
2. But the surprise of 2015 will be the return of legal and finance office deals.
Though JP Morgan Chase scrapped plans to build a new headquarters on the Far West Side, the firm recently secured 123,000 square feet in the area — at Brookfield Properties’ Manhattan West project — to move its digital group there.
“You’re starting to see firms that were quiet at beginning of recovery step back in,” Heidi Learner, Savills Studley chief economist.
3. Office rents are rising.
Manhattan office rents hit an average of $71.66 per square foot, a 4 percent jump from the year before, according to third quarter figures from Jones Lang LaSalle.
Some say that tech companies are pushing rents higher.
“The high point last year was $65 a square foot,” said Conrad Bradford, of Miron Properties, who is working with several tech companies on finding new space. “Now that’s the starting point for certain buildings. And there’s no way around it. For the more established tech companies, they’re looking for that building to give them credibility … and landlords are being very selective about their tenants.”
Buzzfeed, for instance, recently inked a deal to take 200,000 square feet on Park Avenue South, paying a reported $85 per square foot. But some critics say companies like the media giant have an unfair advantage since they are getting government subsidies. BuzzFeed got $4 million in state incentives toexpand its headquarters and add 475 new jobs over the next five years.
4. Hudson Yards gets rolling.
In the coming year, people will see the first signs of real progress in and around the Hudson Yards.
The new home to Coach, L’Oreal, and a Fairway Market is expected to open in 2015, according to the Related Companies, the developer of the $20 billion project. (Time Warner is expected to move to the area a few years later.)
5. Downtown will still be hot.
Besides a publishing nexus of powerhouse companies like Conde Nast — in the recently opened 1 World Trade Center — and Time Inc., which will move to Brookfield Place in 2015, other creative firms will continue the migration from Midtown to the Financial District many said.
Plus, the area will become a major retail destination with high-end fashion and dining coming to Brookfield Place and the World Trade Center, Kiell said.
6. Brooklyn will get hotter.
Creative companies want to be near where their employees live — and that often means Brooklyn, many said.
The number of professional and business establishments in Kings County was up 3.5 percent from the second quarter of 2014 compared to the year before, while Manhattan saw just 0.7 growth in businesses during that time, Learner said, citing census data.
There will likely be anywhere from five to 12 big projects converting warehouse space into offices in areas like East Williamsburg, Crown Heights and Gowanus, said Chris Havens, a broker with aptsandlofts, the leasing agent for 1000 Dean St., a high-profile project that opened in Crown Heights in 2014.
There are roughly 10 office projects happening in Bushwick around the Morgan L train — an area known as “Morgantown” — where rents spiked from $15 to $25 a foot over the past year to $30 to $40, said Havens, who is keeping his eye on what’s happening with the area’s artists.
There may also be some more ground-up developments, like Williamsburg’s 25 Kent Ave.
“You’re having someone build the first California-level tech building in Brooklyn,” he said. “You’ll see others.”
7. Sunset Park’s Industry City will be the “it” place.
Even with the gut renovations slated for properties all over Brooklyn, the borough still has a “tremendous shortage” of space for creative companies, which is why more attention will turn to Industry City, a 6 million square foot, 16-building complex in Sunset Park that’s home to a range of tenants, including distilleries, gluten-free bakeries and soon, the Brooklyn Nets’ practice space.
The complex is in the midst of a $100 million renovation by Belvedere Capital, Jamestown and Angelo Gordon — the team known for its successful revitalization of the Chelsea Market.
“You’re going to see Industry City come more to forefront as the place to go,” Havens said.
8. Long Island City is next.
Jamestown is bringing is magic formula to the 658,000 square foot Falchi building, a former Gimbels department store warehouse in Long Island City. The Coalition for Queens, a nonprofit focused on supporting start-ups, is focused on turning the area into a tech hub, playing up its proximity to the future home of Cornell Tech across the East River on Roosevelt Island.
9. The must-have for new offices: nice kitchens with spaces to mingle…
Breakfast Mondays, lunch on Wednesdays and Thursday bar nights — architect Scott Spector noticed that a lot of the city’s start-ups were focused on providing meals for their employees to enjoy together. In response, his firm has been focusing on designing larger café and pantry areas with flexible multi-purpose spaces for people to sit together and have meetings.
“Millennials all want access to food,” Spector said. “They’re having breakfast together and they’re getting to know each other. And they’re not only eating in these spaces, they’re meeting in these spaces.”
10. And space for food trucks?
Spector is also designing space for buildings to accommodate food trucks, where they can drive into a building’s loading dock and park, he said, noting that he’s doing this in a Long Island City “tech-type” building whose address he declined to disclose.
“It’s a quirky, fun thing,” Spector said. “That’s how you attract tenants.”