Leasing Dips, But Tech in NYC Trends Upward

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NEW YORK CITY—A slower pace in deals since January doesn't contradict the fact that the tech sector's share of leasing in Manhattan grew larger last month, JLL says in a report obtained EXCLUSIVELY by GlobeSt.com. Other metrics for tech in the city keep trending up, including employment and venture capital funding.

In February, the most recent month for which figures are available, tech employment expanded by 8.3% year-over-year, JLL says. That represents the largest yearly change since mid-2012 and the largest employment expansion of any major tenant class in the city. Tech also posted month-over-month gains, adding 1,900 jobs in February.

Growing along with tech jobs is compensation. JLL says the average annual salary of a US tech employee increased nearly 3% Y-O-Y in 2013 to $87,811. In Manhattan, the average is $93,915, nearly 50% above the average US employee's wages but about 13% less than what the same worker would make in Silicon Valley.

Venture capital funding, meanwhile, came in like a lion during March with 40 companies receiving funding valued at more than $260 million, for New York City's largest fundraising month year-to-date. VC funding is up almost 12% from the same time last year.

JLL says that out of the 40 companies that received funding in March, the average company received about $6.6 million, with four companies receiving more than $20 million. M&A activity remained strong during the first quarter of 2014 with 10 New York tech companies acquired, surpassing the number of M&A transactions in the first quarter of 2013.

January's leasing velocity for tech tenants was “atypical” at more than 660,000 square feet, JLL says—in fact greater than the volume for February and March combined. Just 247,483 square feet of tech-oriented office leases were signed during March, compared to 337,785 square feet in February.

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However, tech accounted for a large share of total Manhattan leasing activity in March at 12.6% percent, just behind financial services and about 10 times greater than the share garnered by law firms last month. Leasing activity was especially strong in Midtown, where tech firms signed 12 of 24 total tech leases for the month, followed by Midtown South with eight.

Along with an overall decrease in leasing activity came a drop-off in large transactions. Only one tech lease larger than 25,000 square feet was signed in March, JLL says. The average tenant signed up for 12,880 square feet, which is about 3,000 square feet less than in February.

That lone sizable deal came courtesy of Facebook, which exercised its 60,000-square-foot option to take more space at 770 Broadway. The social media giant initially expected to exercise this option after occupying the space for two years, but decided to act early after seeing the dynamic growth in the area. Sizmek, a digital advertising firm, signed the second largest tech lease of the month, taking 21,100 square feet at 401 Park Ave. South.

However, bigger deals are on the horizon for the near future. Google, which in 2010 paid $1.8 billion to buy 111 Eighth Ave. for its Manhattan headquarters, is in the market for at least 360,000 square feet and as much as 600,000 square feet elsewhere in Midtown South. Amazon is in the market for 300,000 square feet, JLL reported, and there are a trio of tech tenants looking for about 100,000 square feet each: Etsy.com, Usablenet and Uber.