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Startups are taking over the New York real estate market

The Technology, Advertising, Media and Information companies, collectively known as TAMI tenants, are increasingly taking over the office leasing market as these small incubating companies grow into Amazonian-like monsters.

According to Cushman & Wakefield, over 100 TAMIs are now seeking some 4 million square feet of space. While the majority are focusing on offices of 10,000 feet to 100,000 feet, seven of those hundred are searching for over 100,000 feet, and a few are also new to New York City.

The sheer number of feet being leased each year by TAMIs is also leaping as they grow both in number and in size. From 2011 to 2014, TAMI leases of 10,000 feet and up averaged a total of 4.8 million feet each year.

“Last year, TAMI tenants signed 5.1 million square feet,” said Jamie Katcher, senior director of Cushman & Wakefield.

In the first four months of 2016, TAMIs have already signed 1.8 million square feet, Katcher says, putting them on course for a 6 million-square-foot year.

These deals include Facebook’s at 225 Park Ave. South and its expansion at 770 Broadway, adding up to an additional 240,000 square feet.

There are more stats that are indicative of the TAMI clout. From 2011 to 2014, the average taking rents for TAMI tenants was just under $50 a foot; by 2015, it was $59.33. In the face of a rising demand for offices, from January to April of this year that number jumped to $64.89 a foot.

Additionally, TAMI tenants are pushing the boundaries from their desired Midtown South location to both downtown and even parts of Midtown — think Yahoo at 229 W. 43 St.

“It seems to be the more entrepreneurial companies and minds that are gravitating to the Midtown South area, rather than financial services,” observes John Goodkind, director of leasing with Koeppel Rosen.

“There is also real demand from the 5,000-square-foot to 6,000-square-foot user,” Goodkind notes. “If I had more floors at 45 E. 20th St., I could lease them.”

While most TAMIs still want to stay in Manhattan, Katcher says, the lack of larger blocks is leading them to push boundaries.

Since 2013, Katcher says 173 TAMI tenants, or 22 percent of the total, have leased north of 42nd Street, while a whopping 637 TAMI tenants, equating to 78 percent, have moved south on the island.

As the TAMIs tend to flock together, some are exploring emerging opportunities in Brooklyn and Queens as well as New Jersey, says Mitchell Arkin, executive director of Cushman & Wakefield.

Companies moving from Manhattan are eligible for the REAP (Relocation and Employment Assistance Program), a tax credit Arkin says is an important tool to lower companies’ occupancy costs.

Although this program has been renewed every two years, it does expire again in June 2017. “It makes a difference [for the tenants] even though rents are less than in parts of Manhattan,” Arkin says.

Although New Jersey’s cost savings exceeds the benefit of the REAP, Arkin says some companies still worry about clients or employees getting to Jersey.

That is opening the path to favor locations in both Brooklyn and Queens. With more information and many newly available properties, Arkin says most tenants now concentrate on one area.

Which one depends on where employees and company heads are based, he explains, as well as if they need to have proximity to clients or a certain transportation hub.

Links along subway or PATH lines can become the key to final decisions. When Time Inc. leased space at Industry City in Brooklyn for its digital division, Arkin says subway accessibility to Brookfield Place, where the rest of the company was moving, made a big difference.

Now that MetLife is consolidating at 200 Park Ave., it will be subleasing 200,000 square feet at the Brause Realty–owned 27-01 Queens Plaza North building in Long Island City through Cushman & Wakefield.

A few blocks away from Queens Plaza, near the N and Q trains, Alma Realty owns 30-30 Northern Blvd. This is being renamed the “Apple Building” for its old water tower that had been painted with a Big Apple.

Two stories are being added, and the water tower will become lobby artwork. Arkin and Joe Grotto of C&W will handle leasing.

Another former warehouse at 30-02 48th Ave. in Queens is being repositioned into loft offices dubbed the Bindery by owners Bruce Brickman and Daniel Loeb’s Third Point.

This month, Brickman and Daren Hornig bought The Box Factory at 1519 Decatur St. for $10 million.

Located in yet another new mini-neighborhood — dubbed “Ridgewick” for its location on the border of Ridgewood, Queens, and Bushwick, Brooklyn -— the partners will redevelop the two-story building with over 100 windows and target artists and “makers” with lower rents in the $30s per foot.

“I love working the boroughs,” says Arkin. “They are so dynamic and interesting. We are creating neighborhoods, and the tenants love it.”

Source: New York Post


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