The Real Deal: Digiterati Deals

By Adam Pincus on November 01, 2012.

The spiritual center of the city’s technology zone remains Silicon Alley, centered on Fifth Avenue and Broadway, but over the past decade it has spread out widely from there, with nodes growing in Chelsea, Hudson Square and even Midtown.

That’s true now more than ever, as the tech industry expands, and companies that were once housed at 111 Eighth Avenue, which Google bought in 2010, slowly move out and look for new spaces. (Google is actually still squeezed for space there because of preexisting leases.)

In addition, there’s a lot of fluidity in the tech industry as firms grow, shrink and get purchased by other companies. As a result of the rapid changes in the industry (and the uncertain economic times), many of these firms are signing short-term leases and staying in commercial spaces for as little as two years.
This month, The Real Deal charts more than 100 of Manhattan’s biggest tech deals of the past two years and does a more in-depth analysis of 15 of the most notable ones.

75 Ninth Avenue

Broker: Kenneth Rapp and David Hollander (CBRE Group)

Less than two years after buying the 2.9 million-square-foot 111 Eighth Avenue for $1.8 billion, Mountain View, Calif.–based Google is boxed in because the building has a bunch of preexisting leases. As a result, the search engine giant, which has approximately 775,000 square feet in the building, is expanding. Last month, it inked a deal across the street at the Chelsea Market at 75 Ninth Avenue for about 94,000 square feet, the Wall Street Journal reported. The firm now has 202,000 square feet in that building.

641 Sixth Avenue
Broker: Lisa Kiell (Jones Lang LaSalle)

Microsoft is another of the global computer technology and Internet firms looking to expand in Manhattan. The firm, which owns the search engine Bing, among other websites, is considering a move from its New York headquarters, now at 1290 Sixth Avenue, to a larger space at 11 Times Square (see “Brokers scramble for tech tenants”). Last month, Microsoft snapped up 22,000 square feet at 641 Fifth Avenue, leasing the entire seventh floor formerly occupied by social media developer Meebo, which Google purchased in June for $100 million. Google relocated Meebo’s staff and put the space on the sublease market in August. It’s one of the few spaces vacated by a shuttered tech firm in Manhattan.

11 West 19th Street
: Jamie Katcher and Frank Coco (Cushman & Wakefield)

In September, this Amsterdam-based global tech and marketing company added 26,000 square feet of space to its main New York office at 11 West 19th Street. The deal was revealed just days after French ad giant Publicis announced it would buy the firm for about $540 million. The new space gives LBi a total of 78,000 square feet at the 11-story building located in the Flatiron District and represents its second expansion in as many years. LBi originally moved to the 19th Street building in 2010 with a 52,000-square-foot lease, after outgrowing the 27,000 square feet it leased at 295 Lafayette Street. The firm, which is focused on social media marketing, has two other locations in Manhattan, at 225 Park Avenue South and 12 Vestry Street.
685 Third Avenue
: Gus Field (Cushman & Wakefield)

The cloud computing firm that is reportedly launching a high-stakes effort to shed its reliance on software giant Oracle signed a lease in August for 74,349 square feet at 685 Third Avenue in Midtown. That’s about four and a half times the space it is leaving at 140 East 45th Street. Interestingly, the company signed a 10-year lease, signifying it’s one of the more stable companies in an industry blitzing landlords with requests for shorter-term leases.

1065 Sixth Avenue
: Jon Mayeske and Frank Coco (Cushman & Wakefield)

Not all the firms signing leases are brand-new start-ups. Online food ordering service Seamless, founded in New York City in 1999 during the last tech boom, signed a deal for 28,681 square feet at 1065 Sixth Avenue at 40th Street in May 2011. It now offers restaurant deliveries in 28 cities around the U.S. as well as London.

Take-Two Interactive
622 Broadway
: Stephen Siegel (CBRE Group)

The Noho-based publicly traded software developer Take-Two Interactive — the company responsible for controversial video games like “Grand Theft Auto” and car racing–themed “Midnight Club” — signed a 69,005-square-foot, 10-year lease renewal at 622 Broadway. The company first moved into the Broadway location in 2002.

620 Sixth Avenue
: David Goldstein and Nick Farmakis (Studley)

The streaming Internet music company is one of the many firms that have been squeezed out since Google purchased 111 Eighth Avenue. But the Swedish company remained in Midtown South when it signed a lease in September for 63,285 square feet at 620 Sixth Avenue, in a large expansion from the 11,000 square feet it had occupied in Google’s building.
1500 Broadway
: Joseph Thanhauser and Benjamin Mohr (Byrnam Wood)

The website signed a lease in June for 45,337 square feet on two floors at 1500 Broadway. The move came shortly before the website’s parent, the New York Times Company, announced in September that it had sold to Barry Diller’s Internet conglomerate, IAC, for $300 million. Despite the sale, the firm is expected to remain at the Times Square location.

641 Sixth Avenue
: Allyson Bowen and Ryan McKinney (Studley)

In some instances, the rapid buying and selling of tech companies is leading to more subletting. The California-based Meebo — a social-media software developer founded in 2005 — signed a five-year, 22,047-square-foot lease for the entire seventh floor at 641 Sixth Avenue in August 2011. But not even a year later, Google bought Meebo and, in September of this year, put the space on the sublease market, where it was snapped up by Microsoft.

261 11th Avenue
: Greg Taubin (Studley)

In 2011, the then-two-year-old crowd-sourced design company Quirky signed a 27,500-square-foot lease to move from Noho’s 628 Broadway to this West Chelsea building. The relocation illustrates just how frequently tech firms are asking for — and often getting — expansion and termination rights, which allows them to increase their space or move out if need be. After finding the Noho space on his own, the firm’s CEO, 26-year-old Ben Kaufman, was initially reluctant to take space outside of the core Silicon Alley tech area. But with the possibility to grow, Kaufman signed a 10-year lease at the 1.1 million-square-foot Terminal Stores Building at 261 11th Avenue and 28th Street. Taubin is now negotiating for another 15,000 square feet on the same floor of the building for Quirky.

417 Fifth Avenue
CafeMom Broker
: David Dusek (Studley)
Atari: 475 Park Avenue South
Atari Broker: Henry Goodfriend and Trent Dickey (NAI Global New York City)

In many instances, tech firms are taking space from other tech firms that are moving, growing or shrinking. In one such case, CafeMom, a website for moms cofounded by former “Melrose Place” actor Andrew Shue, leased space formerly occupied by Atari, the once-dominant gaming company. CafeMom signed a 10-year lease for the 35,000-square-foot seventh floor of 417 Fifth Avenue. At the same time, Atari, which has pared back its business since the days of classic games like Frogger, moved to a much smaller space, with just under 8,000 square feet, at 475 Park Avenue South.

100–104 Fifth Avenue
: Martin Horner (Jones Lang LaSalle)

In one of the most high-profile tech expansions over the past two years, iPad and iPhone maker Apple added 45,000 square feet at 100–104 Fifth Avenue in late 2011. That was a year after first taking about 10,000 square feet in the building, which is in the epicenter of Silicon Alley. The bulk of the new space is for Apple’s advertising division, iAd, which Fortune reported last month is not doing well.

1 Madison Avenue
: Neil Goldmacher and John Moran (Newmark Grubb Knight Frank)

Just a few months before online listing firm Yext announced it would sell its profitable ad service business to the CityGrid division of IAC for a reported $30 million, it signed a lease for 36,823 square feet at the 1.2 million-square-foot 1 Madison Avenue in Midtown South. Yext’s roughly seven-year lease was signed in May. The company is vacating 28,744 square feet at Chelsea Market, which is being gobbled up by Google, in its recent deal there for 94,000 square feet.

625 Sixth Avenue
: Sacha Zarba, Ben Friedland and Frederick Fackelmayer (CBRE Group)

The more established tech firms like online auctioneer eBay are often the ones in the tech industry signing longer leases. The company, headed by CEO John Donahoe, inked a 10-year deal at 625 Sixth Avenue for 35,156 square feet. The firm expects to move as many as 200 people into the space in the next several years in what it is calling its Technology Center of Excellence. The online auction house now owns the fast-growing, Web-based PayPal.

Regina Glick

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