Tech Firms Dominate Commercial Real Estate Market

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Delray 55Posted on  by 

www.hipercept.com

Small tech firms have been exploding across major markets in both Europe and the US. These locations have seen office space rent increase 100% in less than 3 years. According to multiple sources, including Commercial Real Estate Tenant Rep firm, Vicus Partners and the Wall Street Journal, these firms are causing disruption in both New York City and London in particular.

“…We at Vicus Partners did a deal about two and a half years ago in a classic Union Square loft for about $30 per square foot with a full work letter and a lot of free rent. In other words, for $30 per square foot, the landlord also had a million dollars in tenant concessions to land this client. …Today that deal would be $55-$60 per square foot, with significantly fewer concessions.

                                                             Andrew Stein and Bert Rosenblatt, Vicus Partners 

With this increase in rent, more firms have turned their eyes to downtown Manhattan for more competitive rates. This means displacing the typical prospects for these spaces, with commercial real estate firms eager to help them find substitutions.
According to Vicus Partners, spaces once previously built out for traditional office tenants are instead, “…being built with exposed ceilings, concrete floors, and lots of open space to attract these tech-centric tenants.”

Last year in London, technology firms rented over 4.4 million square feet, up from 2.3 million in 2012. This is significant because it shows the migration of popular rental space in London, a trend that has not shifted in a number of years. Tech firms have been pushing out players who have previously vacated these spaces and cannot compete.

Tech firms leased 91% more central London office space last year than in 2012, according to a report published Tuesday, which showed the U.K.’s tech boom is extending beyond its East London heartland.

                                                             Ed Ballard, Wall Street Journal 

These trends are becoming more apparent as the real estate industry continues to recover. It will be interesting to see where the office leasing hotspots are in the coming years and what types of firms occupy them. With startups becoming increasingly influential across the globe, we can only project how they will be affecting the technology industry in the next five to ten years. One thing is for sure, they cannot be ignored.

 

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