The city’s stock of Class B and Class C office space – space in older and cheaper office buildings that are favored by the technology, media and advertising sectors as well as startups – will be totally occupied by 2018, according to a new report from the city’s Economic Development Corporation. And by 2025, there will be a 6.3 million-square-foot shortage of this space.
The shortage could mean that startups could be hard-pressed to find affordable space. “As office use changes in New York, it’s important to ensure affordable and flexible office space for small, medium and large companies,” Kyle Kimball, the president of the development corporation, told the New York Daily News.
As emerging industries such as technology and media usurp the legal, real estate and financial industries that have typically been Manhattan’s largest tenants, the problem will become even more pressing, according to the newspaper. Indeed, the traditional industries that favor Class A space currently account for only 32 percent of the city’s economy, down from 53 percent in 2002, according to the News. Meanwhile, technology and media firms now account for 25 percent of the economy, a jump from nine percent a decade ago. They’re having a major impact on the leasing front, too- TAMI (technology, advertising, media, and information) tenants accounted for over a quarter of the top ten leasing deals in the second quarter of 2013, as The Real Deal reported.
Developers often shy away from building Class B and Class C buildings, according to the newspaper, because the rents – typically below $40 per square foot – don’t allow them to cover their construction costs. [NYDN] – Hiten Samtani