Technology is playing a greater role in New York City’s job market and, consequently, in the New York Real Estate market. A recent study found that New York’s Silicon Alley has almost 300,000 jobs in its high-tech “ecosystem,” which includes both tech and non-tech jobs from programmers to sales reps. These jobs pay almost 50% higher than the average city-wide wage. At the beginning of 2014, approximately 7% of the city’s population was in the high-tech industry, generating 12% of the city’s tax revenue. NYC tech jobs, however, are being created at a higher pace than in any other sector - growing four or five times faster than the rate in the rest of the city.
We expect this tech trend to continue for quite some time, as venture capital investments in NYC tech have more than doubled over last year. The number of VC deals in New York during the first quarter of 2014 was 97, up 11% from the same quarter in 2013 and 31% in the same quarter 2012. Internet and mobile technology made up 81% of the deals in the first quarter of 2014. In addition, New York’s share of venture capital has doubled over the last 10 years. Between Q1 2003 and Q1 2014, New York City’s share of investment grew to 11.4% from 5.3%. This, however, does not mean that Silicon Valley is going away any time soon. Silicon Valley’s share still rose to 31.7% from 28.6% over the same period.
In an effort to solidify the city’s future as a tech hub, back in 2010, NYC developed the Applied Sciences NYC initiative. An offspring of the initiative is Cornell NYCTech, a partnership between Cornell University and Technion-Israel Institute of Technology, which will open a 2 million square foot university on Roosevelt Island in 2017 that will allow the city to grow an entirely new pipeline of homegrown engineers and developers. The initiative was shepherded by former Mayor Bloomberg, who was keen on diversifying the economy from its dependence on Wall Street. Some classes are already open to students who are studying out of the Google campus in Chelsea. Four other programs were borne from the institute as well, including the Center for Urban Science and Progress in Downtown Brooklyn, operated by an international consortium of schools led by NYU; the Institute for Data Sciences and Engineering at Columbia University; and Carnegie Mellon University’s Integrative Media Program, to be located at Steiner Studios, New York’s first and largest Hollywood-style film and television production facility, at the Brooklyn Navy Yard. These programs will, undoubtedly, have a great impact on NYC’s future high-tech industry.
Make no mistake about it, however, New York City has yet to create a world-changing tech company like Cisco, Oracle, Facebook or Google. However, whereas the West Coast tech firms have long had a hardware and computational focus, New York tech is focused instead on applying new technology to niches and disrupting business models. The industries most affected have been: media, advertising, marketing services, publishing, commerce, fashion, financial services and retailing. Some of the most familiar homegrown NYC tech companies are: Gilt, ZocDoc, Tumblr, Kickstarter, AppNexus, MongoDB, Buzz Feed, Betaworks, Instapaper, Foursquare, Shutterstock, Upworthy, Outbrain, Gawker Media, Vox Media, Complex Media, Warby Parker, Birchbox, Makerbot, Spotify, Doubleclick, Mediabistro, Shapeways, Dataminr, Lenddo, Behance, and MakerBot, to name a few.
There has been a dramatic uptick in leasing activity from startups and established tech companies in Manhattan. In addition to homegrown tech companies, non-native-NYC tech companies like Google, Facebook, Amazon, LinkedIn, Twitter, Pintrest, Dropbox, eBay, Yelp and Yahoo, along with their supporting venture capitalists and professional services firms, have been actively growing their NYC footprint. In Q1 2014, Amazon, AppNexusm, Facebook, Spotify, eBay, ZocDoc, LinkedIn and Yahoo!, added the most jobs in the city, according to CBRE’s Sacha Zarba. That also reflects recent space additions.Midtown South, NYC’s tech epicenter, now has one of the lowest vacancy rates in the country and some of the most co-working firms (40 to 50) in the city. Co-working firms like We Work, Grind and 500 Startups mostly target tech startups. Other neighborhoods with clusters of technology companies include: Chelsea (Google, Ebay, Buzz Feed), Soho (Square, Zocdoc, Warby Parker), Union Square (Yelp), Flatiron (Spotify, General Assembly, Mashable), and Greenwich Village (Facebook, Fab). Most recently, Lower Manhattan leasing activity reached a 7-year high, as a number of tech firms were driven to this area of the city that has some of the lowest office rents. While Downtown Brooklyn, Dumbo and Brooklyn Navy Yard have seen significant growth in tech leases, most tech startups prefer to be in close proximity to their attorneys and venture capital folks.
The innovation shift that took place over the last decade from tech’s focus on web infrastructure to web services makes NYC a perfect place to incubate information-centric applications for the industries we dominate – Financial Services, Advertising, Publishing, Fashion, Entertainment and, of course, Real Estate. While there is no real way of quantifying the effects of only the tech sector on residential real estate, we have seen, first hand, the great positive effects that the tech industry has had on our Downtown neighborhoods like Chelsea, Flat Iron and most recently NoMad and Midtown South, which only a few years ago was a no-mans land. Given all the activity in the tech space – record high VC deals, record tech jobs and applied science initiatives coming online - NYC is ripe for strong continued momentum in the sector and we expect that both the residential and commercial real estate markets will profoundly benefit from such momentum.
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