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, . Real estate owners filling space with young 'chippies'

By Peter and Angela Hart Principals Hart of New York Real Estate Company

During the past few years of servicing myriad information technology firms. we have been negotiating deals for space users whose needs are as diversified as the talents and services they offer. For web designers. programmers. technologists. marketers. interface developers. and even artificial robots. the requirements for office space and the deals we negotiate are often com-plex due to several factors. To begin with. while many of these com- panies have experienced high levels of success by anyone's standards. they are still comparatively "young" by landlord's mea-sures. This is still an up market. after all. and landlords would rather err on the side cf caution. Therefore. the preference is to lease to well established firms with a proven track record. For instance. even companies that have successfully received an influx of millions of dollars through initial public offerings of stock can be deemed a "high risk" by con-servative landlords. There is a concern about where and how the capital will be invested. and whether or not the company will even be around in a few years from now. as technology grows not only faster but more expansive in its capabilities. Further. with the rapid speed with which companies must be able to evolve as the industry grows. will these emerging firms become obsolete or be able to maintain their share of the market? To compound the issue for landlords. most of these companies have relatively low revenues. Thus. tenants must be made aware from the start that high security de-posits. and possibly a guarantor. will be required of them because they are still considered "young." Due to the relative newness of the com-puter-related tenant mix with which we are working. the tenants themselves have cer- tain specific needs. Since most of them require under 10.000 square feet. the com-petition for good. reasonably priced space is intense. but not insurmountable. In most cases. a shorter term is also needed. so we can often satisfy the requirement by finding a sublease. However. .since often the sub-lease space lay-outs are not the right "fit." another way to satisfy the short-term space planning needs of the customer is to negoti-ate a termination clause on a direct. long-rermdeal. . Depending on the building's lender's policies. some landlords will provide our customers with a termination option as long as the un-amortized expenses are paid. If the floorplates are small enough. there are even still a few landlords who will actually give the customer options on contiguous spaces to accolIlDlOd2.te potential growth needs. And growing they are! All around Man-hattan. While initially Silicon Alley's geo-graphic heart was considered to be the Flatiron District. it now sprawls down Broadway to the Battery. and up Broadway into suburban y.restchesrer. According to Digitalcity. New York's e-zine of digital age business and culture. there are now more than 1.100 Silicon Alley companies in Manhattan south of 41st Street; another 450 in Midtown; and 571 spread out throughout the rest ofManbattan. Which leads US to the most interesting commnnication experience . of all: Defining for your customer just where Silicon Alley is located! . Although the Flatiron District was the initial location for individual start-ups. The New York Information Technology Center at 55 Broad Street later became the anchor of Downtown's fastest growing totally-wired tech community. known as The Infor-mation Technology District. Many owners have joined the Plug 'n' Go Program. which p10vides pre-built. Internet-ready space designed specifically forgrowingIT compa-nies requiring high-speed Inremet band-width and affordable. good quality office space. However. we have seen quite an increase in the number of buildings which have been upgraded or are slated to be wired in the very near future. The inevitability of most. if not all bnildings. to modernize in this way is certain - including those whichare located in Midtown. Just as the Rudins were the first to devel-op a state-of-the-art technological infra- structure at 55 Broad Street, their building at 3 Times Square will provide the same amenities to information-based' industries, which will become an anchor for the Cross-roads of the World in the heart of New Y orle The building promises to be the "World's Smartest." and will set the stan-dards for technological sophistication in Midtown. Sophisticated IT customers are a challenge to place. Not only are they "young. " requir-ing smaller space. shorter lease terms. arld stringent security deposits. but defining the "location" of Silicon Alley is intangible. and rmding the right building becomes quite an issue. beyond it being merely" Internet ready. " At some point in the not too dlstant future. we predict that asking if an office buildmg is "Internet wired" will be as archaic as asking "is it air conditioned?" For the artistic. creative type. we need to place them in a very" cool" environment. Once. we get past the edu9ttional period of establishfug where they mean when they say "Silicon Alley." the usual area of choice is SoHo.and the space must have "wood floors. high ceilings and sky-lights." For artists really never have thrived in coiporate environ:m:ents.~ have they? And there is. an understandable need for these tenants to have the panache of being in a "cool" space. However. the corporate oriented servicing firms such as recruiters. software compa-nies and marketing consultants usually' gravitate towards typical business areas conveniently located near the major trans- . portationhubs. These spaces offer the tradi-tional office layouts and are often pre:-built for immediate occupancy. As IT companies quickly emerge as the city's prime economic generators. creating jobs and innovative products. and as they grow and diversify and continue to require larger office space. in a few years. these young chippies will soon realize the benefits of a softer real estate market cycle. and the truism of "age before booty" will certainly manifest itself - for as their balance sheets mature. so too will their negotiating strength : c?me of age at .iust the right cycle.

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