By Laura Kusisto on January 06, 2013.
Most technology companies these days are favoring hip locations like Midtown South, Chelsea and the Meatpacking District. So it might seem a bit odd that, after months of looking, Microsoft Corp. has decided to move its New York operations to 11 Times Square, a recent development across the street from the Port Authority Bus Terminal.
But, as it turns out, Microsoft got a very good deal on lease terms. The software giant's rent for the space, just over 200,000 square feet, starts in the low-$60s a square foot range, according to CompStak, a database of details of leasing deals. That's low for a new office building—many new developments in the city are asking in the $75 a square foot range.
Microsoft was able to cut a good deal partly because the developer of 11 Times Square—a venture of Steve Pozycki and Prudential Financial Inc.—was hungry for a major tenant. The 1.1 million square foot building, which opened a couple of years ago, has signed one other major office deal with the law firm Proskauer Rose LLP.
Mr. Pozycki declined to discuss lease terms. "The rental rate and leasing to a company of this quality has achieved everything the institutional partners like to see," he said. A Microsoft spokesman didn't respond to requests for comment.
The deal marks an expansion for Microsoft, which currently has its offices at 1290 Sixth Ave. In addition to weighing a renewal option, Microsoft had also checked out 51 Astor Place, a hip East Village building, according to people familiar with the matter. "We knew they were really looking for a transportation hub—they have over 500 guests a day that visit their offices," Mr. Pozycki said.
Mitchell Konsker, of Jones Lang LaSalle, the leasing agent of 11 Times Square, said the team went after the Microsoft aggressively. Mr. Konsker says he first talked to the company about 11 Times Square one year ago. "Microsoft was a game changer for the area, for the building," Mr. Konsker said. He said he's now in talks with another technology tenant to take 50,000 square feet, as well as a number of financial companies.
The total value of the deal was more than $200 million, meaning the Jones Lang LaSalle team could have earned a commission in the $2 million to $3 million range, according to a standard industry formula.