When LinkedIn first set up shop in New York City in 2009, it started with a small sublease in the Empire State Building. As the social networking company grew, it kept devouring space in the tower. LinkedIn now ranks among the biggest tenants in the New York landmark, with 160,000 square feet.
“The way the building’s lease expirations rolled allowed for a very creative strategy expansion,” said CBRE’s Sacha Zarba, who represents LinkedIn in New York. “It’s very hard to find a building that can potentially work for your client five years down the line, but if you want to be a long-term advisor to these clients, you have to think that way.”
Welcome to the world of tech brokers, a group of dealmakers who are grabbing the headlines in the New York City leasing market and are responsible for some of the market’s biggest transactions. Their rise to prominence mirrors the growth in the city’s tech industry, which added 3,000 jobs in January, a year-over-year increase of 5.1 percent that was second only to the retail industry, according to a recent JLL report.
Tech tenants have already signed six leases in excess of 50,000 square feet this year, including IBM’s Watson, which took 120,000 square feet at 51 Astor Place, and Twitter, which inked a deal to take more than 140,000 square feet at 245-249 West 17th Street.
Not surprisingly, brokers for these fast-growing companies boast a particular set of skills that tend to dovetail with their clients’ needs. For starters, the brokers have a keen sense of how the explosive growth in the tech industry plays into demands for space. They also can spot winners out of the hundreds of tech startups that pop up, and have the ability to convince landlords that companies they’ve never heard of are worth courting. Often, they are required to don a consultant’s cloak to advise tech companies, many of which are run by 20-somethings, on how their real estate could play into their overall growth strategy. And they have no problem relying on new-fangled tools to communicate with their clients.
“The good brokers talk to them [tenants] about how the space will impact their balance sheet, and also prep them on how to talk about it to their investors,” said Ryan Masiello, a former JLL broker who is now a top executive at cloud-based leasing portfolio management startup View the Space. “It’s much more of a consultative approach than with other industries.”
It’s essential for tech brokers to have a keen grasp of the movers and shakers in the tech world. “If you’re not reading Wired, Fast Company and Business Insider,” said JLL’s Sean Black, who has represented Foursquare, Business Insider and WeWork, “you’re probably behind the 8 ball.”
CBRE’s Zarba, who has also represented Mashable and Groupon, said that monitoring fundraising in the tech sector is another good way to see when IT companies are ready for a real estate upgrade. “The round of funding and the amount of funding they’re looking for often translates directly to where they are in the search for space,” Zarba said. IT companies tend to get serious about the real estate hunt after securing their second round of financing, known as the Series B round, he added.
Technology companies are also unique in how far they stretch their available space. “In corporate America, if you go below 225 square feet per person, you’d have mutiny within the ranks,” Black said. In the tech world, however, employees are fine with even as little as 150 square feet per person, he said, but “when they grow, they grow 300 percent.”
Case in point: During a recent visit to View the Space’s 2,000-square-foot office at 360 Seventh Avenue, barely an arm’s length separated one coder from another. But the company, which raised about $7.2 million since it launched in 2011, is soon moving its 27 employees to 7,400-square-foot digs at 142 West 36th Street.
To connect with tech tenants, Masiello said it was important to adopt some of the new-fangled tools they use to communicate. Brokers now use file-sharing service Dropbox, for example, to share financial analyses of lease deals with potential clients. “These people are used to working on the cloud at high speed, and then you look at commercial real estate, which is a slack, static process,” Masiello said.
Texting is another preferred way to stay in touch with clients, who are often too busy doing multiple things to communicate over the phone. “It’s not uncommon that you’re communicating solely by text,” Black said.
One of the most prominent characteristics of workers at tech and creative companies, Black said, is their aversion to the squeaky-clean environments preferred by law and financial firms — tenants that have traditionally been the mainstay of Manhattan office leasing.
“You show them [tech tenants] raw space, with exposed brick and concrete, someone throws some chairs in, and you’ve got an office,” he said.
Landlords recognize this preference and have made changes to their buildings to court such tenants. Brookfield Office Properties, for one, even changed the name of its massive Lower Manhattan complex to Brookfield Place, from World Financial Center. “The intent was to get rid of the connotation of the suit-and-tie types,” Black said.
Fledgling technology companies are partial to plug-and-play space, as the mercurial nature of their industry makes it tricky to predict future needs. “A law firm that’s been around for 50 years, they understand their trajectory and head count and growth,” said CBRE’s Ross Zimbalist, who has represented the Winklevoss twins. “But tech companies may be hesitant to invest in space they may outgrow in 24 months.”
Landlords are also more sensitive to tech tenants’ need for flexibility, Zarba said, and are now amenable to doing short-term space deals.
Blackstone Group’s Equity Office, which owns 229 West 43rd Street in Times Square, spent $105 million renovating the 789,826-square-foot building, adding ping-pong tables, a basketball court and renovating 25,000 square feet of outdoor space in an effort to attract tech and media tenants to the Times Square location. Since then, the Newmark Grubb Knight Frank team that handles leasing at the building has signed marquee tenant Yahoo to the top four floors of the building, among other tech and media tenants.
Blackstone managed to position the building as a tech-friendly oasis, Masiello said, despite the fact that the building was, at the time, “30 blocks away from any other tech companies.”