The Rise of the Tech Firm in NYC: How to Win the Right Space
Less than a decade ago, if you were a tech start-up, you it was all about Silicon Valley. Times have changed. Over the past few years, there’s been a tech explosion in New York City, making it one of the hottest destinations for tech firms, rivaling Boston and Silicon Valley as the place to be. Thousands of start-ups originate in New York City each year, hundreds of which are funded.
With this rapid flood of start-ups to New York City, many founders quickly learn that New York real estate is a special kind of beast, with its own peculiar rules and habits. Beyond the basics of budget and geography, the key to winning a great first space is selling your idea to the landlord. As a new business, typically you have little or no track record and you may not have a lot of cash. The smartest thing you can do is find a broker with a proven track record in finding space specifically for start-ups, aka someone who can guide your pitch to the landlord.
The right pitch will tell a compelling story about who you are as founders, and as a business – and you have to do this in a way that a landlord can understand. This is easier said than done, but can be accomplished with the right approach. Landlords tend to be old, straitlaced and corporate-minded. Tech firms are not. Though the landscape has shifted to a degree, generally speaking, landlords are not savvy about tech, and tend to be wary of young entrepreneurs with limited track records. With this said, they understand growth trajectory and what it could mean for their building—it’s all about the pitch.
After you successfully sell your idea, the next challenge to overcome is financials. This starts with the security deposit. Typically landlords want more security than cash-strapped start-ups are able to post, often a year or more. The last thing a start-up should do is tie up money in a security deposit. This is where smart strategy comes into play.
The last key obstacle to getting a lease signed is term. Most office space leases in New York City are between 5-10 years long; landlords make the bulk of their money by refinancing their buildings, and banks and lenders evaluate the worth of a building by evaluating rental commitments over time. To a lender, a building that’s full of tenants on 10 year leases is worth more than a building that’s full of 3 year leases. For start-ups, 5-10 years is an eternity. You may have 5 people today and 500 in a year. You don’t want to be held back by your real estate. Flexibility is essential. Navigating lease term is tricky, but again, the key is to be smart about it. We’d love to help you find the right space, with the right deal. Every landlord will have a broker helping him or her get the most favorable terms; you too are entitled to representation, which is why the landlord pays our fees.
We would love to be a resource for you. For more information, please call Andrew Stein at 212-880-3745 or email at firstname.lastname@example.org, or Bert Rosenblatt at 212-880-3746 or email at email@example.com.