Office Space

Has Digital Dumbo Reached Maximum Capacity? Techies Drive Down Vacancy Rates for Office Space

2td3qmsxiumjizmlldyeqsgbzhmmdjww3ln1v4vmwbkakms1 Has Digital Dumbo Reached Maximum Capacity? Techies Drive Down Vacancy Rates for Office Space

Esty's Dumbo office via Fred Wilson on Foursquare

At an industry breakfast yesterday, the commercial real estate brokers at Cushman & Wakefield announced that New York City has reached a tipping point: For the first time since 1999, the information and media sector (including technology) beat out financial services terms of office leasing.

In the first quarter of 2012, information and media accounted for 27.8 percent of office leasing by square footage, compared to the financial sector’s 26.3 percent. “New York is not just a financial town anymore,” Cushman’s managing director Ken McCarthy told the Real Deal.

You don’t have to tell Dumbo. Yesterday, the Brooklyn Paper reported that commercial vacancy rates in the neighborhood are down to 2 percent, prompting city planners to try to make Downtown more appealing to Brooklyn’s creative class. “Everyone in the tech industry wants to be in DUMBO,” said the paper. And here we thought the ideal spot was spitting distance from Union Square Ventures.

Betabeat reached out to real estate broker Chris Havens, an expert in Dumbo’s cobblestone streets and East River vistas, to find out more.

According to Mr. Havens, who pegged the vacancy rate at 3 percent, it’s a matter of capacity. Dumbo has 1.26 million square feet of leasable office space across just nine buildings, which Mr. Havens said was equivalent to “a few blocks in Midtown South.” One hundred and fifty leases have already been signed in the last year and a half.  “This has been building for a long time and it has a lot more to do with the economy,” he said noting the proliferation of graphic design, affiliate marketing, consumer tech, architectural, and other creative startups in Dumbo. “It’s getting tighter and tighter and tighter.”

Mr. Havens said three counties in the country dominate in terms of creative business tenants: L.A. county, New York county, and Kings county. “Brooklyn is booming. In fact some people think there are more creatives in BK than Manhattan,” he said, but added a note of skepticism, “Who knows?”

In Dumbo, the two biggest tech tenants are Etsy, “an Ebay for twee people,” as the Brooklyn Paper describes it, and Wireless Generation. The amount of space those two companies have taken up has “pushed other tenants out,” said Mr. Havens.

But don’t founders want to be General Assembly-adjacent? “There’s way more tenants like this in Union Square,” Mr. Havens admitted. “But this is $27 dollar [per-square-foot] space. So it doesn’t matter what people like in Manhattan.”

For Brooklyn residents that want to work close by, there are increasingly fewer options, he said. “There’s no space in Fort Greene. Gowanus is tight too. They don’t like Downtown.”

As the Brooklyn Paper notes, neighborhood groups are trying to do something about that.

“The DUMBO Improvement District, Brooklyn Navy Yard, and Downtown Brooklyn Partnership have joined forces to launch a task force seeking ways to nurture the borough’s tech sector, both inside DUMBO and beyond. That includes making Downtown more palatable for startups by improving streetscapes, creating a shuttle-bus system between the startup neighborhoods, and providing attractive commercial space.”

We’re inclined to go with commenter SwampYankee, who wrote, “Because anyone that works in software for a living will tell you a really cool nabe is essential to delivering a quality product in a timely manner. Talent really has nothing to do with it.” But maybe we’re just jelly. Betabeat is stuck in The Observer offices at Hell’s Kitchen, which aside from some standout tacos and a Shake Shack outpost, really lives up to its name.

Follow Nitasha Tiku on Twitter or via RSS. ntiku@observer.com

Comments

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