The Real Deal New York

Are NYC’s office brokers neglecting startups?

New survey finds a third of small tech firms had no contact with leasing agents

August 27, 2015 03:15PM
By Konrad Putzier

zandieh startups

From left: WeWork members at the firm’s Soho location, and Ashkan Zandieh (credit: WeWork)

Considering the real estate industry’s current obsession with tech companies, this number is surprising: a third of New York’s tech startups have never been contacted by a leasing agent, according to a new survey by real estate consulting firm RE:Tech.

This may be because many of these startups are simply to small to appear on brokers’ radars, according to RE:Tech founder Ashkan Zandieh.

“If a company doesn’t announce a funding round or is too small in size, many commercial real estate brokers will be uninformed about the startup,” he said, and may also shy away from spending time and resources building relationships with fledgling companies.

Some brokerages have tried to tap into the startup boom. Earlier this month, tech-focused office brokerage TheSquareFoot teamed up with PivotDesk, which allows startups to sublease office space from larger companies. TheSquareFoot will refer startups looking to sublease to the shared-office platform, while PivotDesk can in turn refer firms looking to upgrade to regular leases to TheSquareFoot. Meanwhile, brokerage giant Avison Young invested in LiquidSpace, a listing platform for short-term office space.

Still, the survey, which included responses from 50 New York startups, seems to indicate brokerages have a ways to go in their courtship of these companies. Brokers who forge an early connection with these startups stand to profit handsomely if the firms take off. Several real estate firms are among the fastest-growing tech startups in New York, attracting millions in venture funding.

Less surprisingly, the survey found that the vast majority of tech startups favor flexible, short-term leases. About 80 percent of respondents said they favor a sublease over a lease. About 60 percent said their ideal lease term is between three and five years, while the remaining 40 percent preferred a lease term of between one and two years. None of the respondents were keen on five-year-plus lease.

“We need flexibility,” one of the respondents wrote. “The future is very unclear and can bring tremendous growth, no growth, or going out of business.”