In part one of this series of posts, we chronicled the rise, fall and rebirth of New Tech and the surge of leasing in Manhattan tied to what we’re calling New Tech 3.0. In this installment, we’ll look at the factors contributing to this third wave of technology in Manhattan.
It’s Where the Money Is
When asked why he robbed banks, legendary bank robber Willie Sutton was reported to have said, “Because that’s where the money is.” No one can prove Willie Sutton actually said that — much like the malapropisms attributed to the late Yogi Berra that drove him to say, “I never said most of the things I said.” But, the logic is unassailable.
By the same token, Manhattan is increasingly where the customers are for New Tech companies. It’s where companies that depend heavily on high technology do business and where industries that rely on technological innovation have major presences. In short, it’s where the revenue is generated.
Manhattan is also where the investors in New Tech are. This is an opportunity for tech companies to be closer to their backers, many of whom are even increasing their presences here.
Case in point: Silicon Valley Bank, which has a dominant position among startups and venture capitalists in California. Silicon Valley Bank set up shop in Midtown Manhattan a number of years ago. Crain’s New York reported in July 2016 that Silicon Valley Bank was expanding its footprint in New York City and moving into space that is closer to the tech community. Capital One and Union Square Ventures have also made similar moves.
It’s Where the Talent Is
There is an abundance of high-skilled high-tech workers in and around Manhattan — the very people New Tech companies need. Such people are in high demand, which is one reason why tech jobs are considered among the most desirable — claiming 14 spots in Glassdoor’s “50 Best Jobs in America” survey. They should know; Glassdoor is the nation’s second-largest online job site.
Tech specialists aren’t the only ones in demand. New Tech companies need talented sales and marketing people to grow their customer bases. New York attracts more of these folks than just about anywhere else.
Take Microsoft, for example. They already have a large presence at 11 Times Square. But in an increasingly popular twist on traditional workplace strategy, they have also secured WeWork memberships for about 70% of their international sales force based in New York City to better accommodate their customers’ various locations.
Indeed, New York presents the perfect combination of sales and engineering intellectual capital. That, plus access to platform builders, software administrators, project managers, training specialists and solution architects, has built New York into a hub for New Tech — an office-hungry, self-sustaining juggernaut of an industry.
According to New York State Comptroller Thomas P. DiNapoli, “The high-tech industry’s young, creative workforce is attracted to New York City because of its culture, diversity, public transportation system and the opportunities it offers to live and work in the same community. World-class academic institutions and creative industries also draw people to New York City, providing new ideas and talent for the industry.”
That talent pool is about to increase even more as New York University has begun a 10-year, $500 million expansion of its technology, engineering and new-media footprint in downtown Brooklyn.
It’s Where the Opportunity Is
One of the driving forces behind the increase in New Tech leasing activity is that almost all businesses are becoming “tech businesses” and many are housing more of their tech-related operations in Manhattan.
As Glassdoor’s Chief Economist Andrew Chamberlain puts it, “The proliferation of technology-related jobs is due to those skills now being needed at businesses that don’t consider themselves traditional tech companies … The theme this year is the diffusion of tech jobs out of the traditional tech sector and into healthcare, finance and even in some cases government and retail. That’s a big change.”
In particular, banking and financial services companies are making increased use of high technology and they have greater need for space to house those portions of their operations. MasterCard, for example, installed their tech department in the Flatiron District in recognition of the importance of proximity to the neighborhood’s millennial workforce.
The new guys on the tech block are tenants like ZocDoc, Grovo, Intersection/Sidewalk Labs, Take-Two Interactive, Movable Ink, The Trade Desk, Taboola, DoubleVerify, Datadog and Chinese e-commerce giant, Alibaba. All are positively affecting net absorption.
So, when you put it all together, a happy confluence of factors — access to customers, talent, financing and the expansion of tech into virtually every business sector — has made New Tech 3.0 a thriving organism that is fueling leasing activity in the Manhattan area. Opportunity is knocking. It’s a good time to open the door.
In our next and final installment of this series, we’ll look at how to take advantage of the opportunities that New Tech leasing has to offer.
As president of National Office Services for Colliers, Cynthia Foster leads our national office platform across multiple service lines, including capital markets, tenant representation, leasing agency, property management and valuation