City's Tech Firms Strike North to Times Square and Beyond
MIDTOWN — New York's techies and start-up firms are migrating uptown, renting office space as high 50th Street after being driven away by costlier-than-ever prices in hot high-tech hubs like Union Square, Flatiron and Chelsea.
"Firms have been moving further and further away from Union Square because of price," said Jack Shulman, director of Colliers Brokerage.
Average leases have shot to about $65 per square foot in Union Square and $67 in East Midtown, compared to $44 to $61 around Times Square and the heart of Midtown, according to data provided by Costar, a real estate information firm.
"Six, seven years ago, Union Square was a low-cost provider, and low-cost providers are the ones that tech companies are going to go to first, stay there for a year or two, and then expand out," Shulman said. "It became a place a lot of people went to — I mean, just a s--t ton."
The trend has helped transform Midtown and Times Square into the city's newest breeding ground for future Instagrams and Tumblrs. By the time Yahoo announced Monday that it was leasing three floors at the former New York Times building in Times Square, it was simply the latest of roughly a dozen technology firms to open space in and around The Great White Way over the past two years.
In fact, in the past 19 months alone, roughly 87 percent of the real estate transactions in and around Times Square have involved tech firms — up from just 18 percent in the 18 months prior, according to the Times Square Alliance.
"Tech firms have just gobbled up space in Meatpacking and Flatiron, so people are looking elsewhere," alliance president Tim Tompkins said. "We're still at a lower per-square-foot price point than East Midtown, and we're more appealing than Hudson Yards because we're at the center of so many transportation hubs. Plus, Times Square, sort of because of the electronic signs, has always been associated with technology."
Where Tompkins and the alliance draw the lines for Times Square, however, likely differs from how most New Yorkers and tourists define the neighborhood. While the bowtie from 42nd to 47th streets, with its daily throng of tourists, remains about as attractive to tech firms as Windows Millenium — "uncool, unhip," said Shulman, who described the former New York Times building, with the large open floors and high ceilings of its old newsrooms, an exception to the rule.
Instead, so-called sidestreets just north and south of The Center of the World but still within the Times Square Alliance district, have become magnets for the city's aspiring Zuckerbergs.
"During the summertime in Time Square, it's so hard to go through there — I hate it, I despise it," Shulman said. "But four blocks down, it's a little big different: 36th, 37th, you actually have a few buildings that have a little bit of a cooler, hip feel. They have open layouts, open ceilings, concrete floors. The landlords are relatively easy to deal with because they're used to doing cheap deals, and now the pricing is where they're a little more amenable."
Moreover, unlike East Midtown, where the average office building is about 70 years old, office space in and around Times Square is roughly 33 years old, meaning it more likely has higher ceiling, larger windows, and better infrastructure to support tech companies.
And what companies save on rent, they can invest in giving their offices a Chelsea or Silicon Valley feel.
"Companies are competing to provide their employees with a competitive aesthetic — they call it the Google Campus Syndrome," said David Rotbard, co-founder of Micro Office.
The firm provides small office sublets, frequently for new tech firms, and it opened an office at Broadway and 48th Street.
"We have an exposed ceiling, painted a full mural on the wall. Things we didn't necessarily have to do, but it created that Chelsea atmosphere," Rotbard said.
The Times Square space, he added, rents for 25 percent less than the firm's other office in Union Square.