New York City already has an established presence in technology – with Google now running major operations out of Chelsea, and many other startups and established companies focusing their expansion on Union Square, the Lower East Side, Flatiron, and other neighborhoods south of the traditional office space in Midtown Manhattan that firms in other sectors typically seek.
This area – referred to as ‘Midtown South’, encompassing the area between Soho to the south and 28th Street to the north – has seen rents increase by over 70% in the past decade with a large portion of that growth coming within the last three years, according to a recent report from Forbes. In the past two years, B-grade office space has reached almost $60 per square foot – outpacing the traditional home of technology companies, Silicon Valley, which currently has a market average of $46 per square foot for the same class office space.
Why do so many technology firms prefer Midtown South – as more office space for rent in New York City’s other neighborhoods has become available, particularly in Midtown East, Times Square, and the Financial District – which now has fully recovered from the effects of Hurricane Sandy and offers plenty of space available as well as lower rents?
The short answer is the culture and neighbors these companies gain from renting an office in Chelsea, Union Square or Flatiron. Many companies in Midtown ‘North’ are focused in advertising, marketing, financials, accounting, or legal services – and the Financial District is primarily focused on finance, although many marketing firms with a focus in digital advertising have taken residence there recently. But Midtown ‘South’ attracts technology firms, which in turn, attracts other tech ventures – companies that desire to work together, collaborate and rub shoulders. For many of these companies, coworking is a better option than a private, furnished office – allowing them to share ideas freely between companies – but many still prefer a private, furnished Manhattan office.