Here is something to tweet about: tech and social media office leasing took off in 2013, with the top five Manhattan deals for social media adding up to more than 400,000 square feet.
Established social media brands led the way, with Twitter and Facebook inking deals estimated to be worth more than $150 million combined, according to real estate data provider CompStak.
Tech and social media companies “are not looking for the perfect glass-and-steel building,” said Newmark Grubb Knight Frank’s vice chairman Brian Waterman, who represented the Blackstone Group in one of last year’s biggest tech deals, with Yahoo. “They want to be located in neighborhoods where their employees will be happy spending long hours.”
The top three
It is no surprise, then, that all of 2013’s top social media deals took place in the café-, bar- and restaurant-heavy neighborhoods of Chelsea, the Flatiron District and Noho.
The biggest deal came from Twitter, which leased 144,000 square feet in private equity firm Savanna’s 245-249 West 17th Street, between Seventh and Eighth avenues in Chelsea. In 2012, Savanna paid $76 million for the pair of buildings, which total 284,000 square feet.
Announced in January 2014, the 10-year lease for the micro-blogging site, is worth an estimated $86 million, according to CompStak. The deal was a big win for Savanna because Twitter was also reportedly considering Edward Minskoff’s new spec tower 51 Astor.
However, in late December, IBM’s Watson Group — the tech giant’s incubator for entrepreneurs and developers — nabbed the space Twitter was considering at 51 Astor, taking 118,435 square feet worth approximately $92 million.
“I think what we are seeing in this sector is that supply is getting very tight,” said Newmark’s David Falk, a member of the team that represented Savanna in the Twitter deal. “There is a finite supply of tech-friendly buildings in Midtown South and small tech companies that you have never heard of are taking 30 to 40,000 square feet.”
Among that wave of tech firms with little brand recognition, AppNexus, Mediaocean, Adap.TV, Infor and xAd all signed sizable leases in Manhattan last year, according to CompStak data.
And sources told The Real Deal that several desirable, publicly traded tech brands like Google and eBay are still on the hunt for Manhattan office space.
Meanwhile, the second largest social media deal of last year came from perhaps the most ubiquitous firm in the game: Facebook.
Facebook, which had also been eying 51 Astor, took 98,570 square feet for 10 years in Vornado Realty Trust’s 15-story 770 Broadway in Noho. The value of the deal is estimated at $67 million, according to CompStak.
The third-largest deal in the sector last year came from Buzzfeed. The promulgator of quirky news and memes signed a 57,691-square-foot deal in tech-dense Midtown South. The firm’s new space, located at 200 Fifth Avenue between 23rd and 24th streets, is a two-year sublease from high-end jewelry retailer Tiffany.
Buzzfeed previously occupied about 24,000 square feet at 54 West 21st Street, a building owned by Olmstead.
Meanwhile, the socially integrated digital-music-streaming platforms Spotify and Pandora also inked big deals in Manhattan. Spotify expanded by 51,958 square feet in RXR Realty’s 620 Sixth Avenue, for a total of 123,000 square feet.
Pandora signed a slightly bigger 52,481-square-foot lease in the Grand Central area at 125 Park Avenue. The two deals were valued at $31 million and $27 million respectively, CompStak data shows.
Small, but growing
Most social media start-ups are, of course, looking to become the next Twitter or Facebook. As a result, sources say many of the smaller social media firms shopping for space are looking for a building that can accommodate an expansion or one that has a good amount of tenant turnover.
For instance, when the social-media-news blog Mashable upgraded its office space early this year, it took just over 38,000 square feet at L&L Holding’s 114 Fifth Avenue in Chelsea — a building with approximately 240,000 square feet still available for lease. The website, which was founded in 2005, moved from 304 Park Avenue South.
“Social media companies tend to have highly aggressive growth strategies, so finding a property where there is room for expansion is just as important as rent,” Newmark’s Falk said. “Ideally, social media firms want outdoor recreational and lounge space, some kind of branding on the building, and a neighborhood where their employees can interact with employees from other firms. But the key to leasing social media clients is having an orderly growth plan in a building.”
Falk added that some firms will lease additional space and then sublease it, so they can manage their growth. Other firms will go so far as to lease excess space and warehouse it in anticipation of future expansion.
On the smaller end of the leasing spectrum, LinkedIn and Tumblr also signed deals in Manhattan last year. LinkedIn expanded its operations in the Empire State Building by roughly 37,000 square feet, bringing its total space up to nearly 110,000 square feet. And the blogging site Tumblr expanded its lease by approximately 20,000 square feet, for a total footprint of 50,000 square feet in Centaur Properties’ 35 East 21st Street, in Midtown South.
Some in the industry had speculated that Tumblr might move to Yahoo’s offices, following its $1 billion acquisition by the search engine in May. (In mid-2013, Yahoo moved to Blackstone’s 229 West 43rd Street, signing a 176,201-square-foot lease — the biggest lease of the year by a major tech brand.) But sources said Tumblr was eager to keep its own space, in order to maintain a separate identity.
While the big deals are eye-catching, the most interesting tech and social media deal of the year may be one of the smallest. Google, whose social media arm, Google+, has struggled to take off, expanded in the Chelsea Market by 7,658 square feet, giving it over 300,000 square feet in the building.
But sources close to the transaction told TRD that Google, which famously purchased 111 Eighth Avenue for its New York headquarters for nearly $2 billion in 2010, is already looking to expand into other buildings after struggling to push out tenants with long-term leases.
However, at press time a deal was nearly done at Related Companies’ 85 10th Avenue for as much as 360,000 square feet, sources said.
“What’s unique about tech and social media companies is the extent to which they value quality,” said Falk, who represents Chelsea Market and is involved in the 85 10th Avenue deal. “They like large floor plates … but equally as important is the quality of life, both in the building and on the street.”