Tech Startups Moving into Manhattan with Subleased Space

The New York Times reports that startup tech companies are adding to the sublet office market with temporary office space in Manhattan. The article gives the example of the Soho space rental by Scholastic that has been subleased to Foursquare. Foursquare, in turn, sublet space to app designer Fueled, which subleases seats to tech entrepreneurs who are working on hitting the big time.

Burgeoning tech firms like subletting, The Times reports, because rent is usually a little cheaper and the contract length is shorter. Sublets also have a smaller deposit and are already built out, offering high-speed internet, conference rooms and more. If their product doesn’t make it past the development stage, it’s easy for the startup to shutter its doors.

An analyst at Studley, the commercial real estate firm, told The Times that flexibility is the key for tech startups, since they don’t know if they will be acquired or receive critical startup funding. The problem is that they could be left homeless if the tenant who is subletting goes bankrupt.

A Studley report found that a third of all tech companies that signed a lease in Manhattan during the first quarter of 2013 entered into a sub-leasing arrangement. Many of these companies are adding to the pool of virtual offices in New York City by subletting to solo consultants and entrepreneurs. The average length of a sublease contract is four years.

Even established companies like online news source Buzzfeed recently signed a two-year sublease with Tiffany at the jewelry company’s new corporate headquarters across from MadisonSquarePark.

 

 

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