Times Square may be experiencing a mini technology boom, with tech companies including Yahoo and Microsoft snapping up 633,000 square feet of space in the neighborhood over the last 18 months, according to data provided to The Real Deal by the Times Square Alliance, a business improvement district group.
Leases signed by companies in the sector have represented approximately 33 percent of the total square footage of all office deals inked in the Times Square area since December 2011, the data show, compared to just 5 percent between January 2010 and November 2011. Moreover, tech firms signed 87 percent of the leases in the neighborhood in the last 1.5 years. By contrast, in the previous period, they accounted for only 18 percent of leases.
Overall, more than half of the 1.17 million square feet of office space currently leased to tech tenants in Times Square was leased within the last 18 months, the data show.
“There’s certainly a larger phenomenon of more tech coming to the city but [tech companies are] reaching capacity in Midtown South, Chelsea and the Flatiron, especially for these bigger floor plates,” said Tim Tompkins, president of the Times Square Alliance. “Times Square is very competitive because of the transportation access and the fact that it’s still a little bit less expensive that Midtown East.”
The average rent for a Class A office space in Times Square in the fourth quarter of 2012 was $61 per square foot, according to the Alliance, compared with $67.05 in Midtown East. The average asking rent in Midtown South in the last quarter of last year was $54.55, according to a report by Colliers International.
Among the largest tech deals inked in Times Square over the last 18 months were an 86,137-square-foot lease signed by Digital Generation at 1633 Broadway; a 205,462-square-foot lease deal done by Microsoft at 11 Times Square; and, most recently, Yahoo’s deal for 176,201 square feet at the former New York Times building at 229 West 43rd Street.
“There was this tremendous symbolism of new media coming into an old media space,” Tompkins said of the Yahoo deal. “Times Square has always been, in one form or another, the home of the media industrial complex. It still has that buzz and that association and that’s what’s helping to bring some of these tech tenants in.”
The Alliance president also pointed to the availability of larger blocks of space in Times Square, where companies can gobble up to 200,000 square feet in one building. By contrast, the office vacancy rate in Midtown South has dropped to 3.9 percent, according to a recent report by Colliers, making it trickier to find larger contiguous spaces. The office stock in Times Square is also newer than in areas like Midtown East, Tompkins said, citing the average age of a Times Square building as 33 years, compared with 70 years in the rest of Midtown.
Some companies have recently changed course and opted to move to Times Square after initially looking at properties in Midtown South. Felix/IAC, which owns the restaurant-focused mobile app Urban Spoon, was actively looking at spaces in the Midtown South area. Eventually, the company chose to move into the New York Times building after negotiations went so smoothly with landlord Equity Office Properties, said Jones Lang LaSalle broker Steven Rotter, who represented the company in the deal.
The building has oversized floor plates, modern amenities and even a basketball court, Rotter said.
“It’s a building within a building,” he said. “It’s something you can’t find in Midtown South. Midtown South is great but if you’re looking for 15,000 or 20,000 feet, you’ve got to start looking at some other places.”
More tech-friendly space may be set to come on the market in Times Square. The Paramount Building at 1501 Broadway, currently 70 percent leased, is getting a $50 million makeover and its owners may be gunning for a tech tenant, it was recently reported.