Short Term Space Struggles

To hear Jerry Morecraft tell it, there is something slightly cloak and dagger about short-term office space.

Clients can show up to rent an office or a suite of offices for as much or as little time as they need, and get access to a receptionist, copy room and other amenities.

Displaced workers come there “because a lot of people don’t want prospective employers to know they are out of work.” Out-of-town companies who have downsized but want to at least maintain an address in New York sign up for space.

Business operations that can’t afford executive suites sign up for “virtual offices” consisting of only voice-mail and a physical mailbox, so “no one from the outside knows.”

With unemployment in the city at 8.1 percent in May, amid a dour economy, it might seem like short-term office space would be thriving with those types of clients.

But like the rest of the commercial office sector, it’s struggling.

Morecraft, who is a vice president and general manager at Executive Workspace, which offers 52,000 square feet of space and 175 offices at 1120 Ave of the Americas, said business “tracks closely to what the economy is doing.”

Besides outplacement offices for those who are out of work, Executive Workspace sees lots of attorneys and CPAs, finance ventures, satellite offices for software companies, start-ups and salesman who “need a place to hang their hat.”

Of course, business has dropped off since the Internet boom. “When the dot-com thing was going strong, we were chock-a-block full, with a waiting list,” Morecraft said.

One of the biggest casualties of the Internet bust was HQ Global, which is still the largest supplier of short-term office space in New York, as well as in the nation. Morecraft’s company was a HQ franchise until June, when it decided to separate from the company.

HQ declared bankruptcy in 2001 after finding itself awash in space and millions of dollars in debt. The company closed three sites last year in Manhattan as part of a court-supervised plan to emerge from Chapter 11. It now operates 12 short-term office sites in Manhattan totaling 440,000 square feet, and eight other offices on Long Island.

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“We basically had too much inventory for the demands of the marketplace,” said Eileen Mahoney, an area vice president of service for the metropolitan New York area of HQ. “Some sites were operating right across from one another.”

But because of the consolidation, occupancy rates have actually gone up at HQ offices in the New York area since 2001, from the “high 70s” two years ago to the “low 80s” today, she said. That also means a lot of clients have stayed with the company, she said.

Howard Watler, director of project and operations for Rockefeller Center Business Centers, which operate’s three sites in Manhattan, including two in Midtown and one on Wall Street, said he had seen mixed results recently.

“We’re showing really strong recovery signs in Midtown,” he said. “Wall Street is still lagging behind.”

Different types of short-term office space accommodations vary depending on the company. At Executive Workspace, offices are on the smaller end, ranging from 100 to 300 square feet. Rents are $1,000 to $4,000 a month.

Like at most other company sites, there is a receptionist on duty, and clients can use mail, copy and conference rooms, get lunches catered, and have access to tools like high-speed Internet and video conferencing.

HQ offers larger spaces, up to 2,000 square foot areas that can house 50 employees. Rentals can be set up a matter of hours, and, like at other companies, the minimum stay is generally three months. Rockefeller Center Business Centers offers a maximum of 15,000 square feet of space, according to its Web site, as well as the benefit of a “landmark address” at 45 Rockefeller Plaza, Watler said.

As companies look to boost business, a push is also on to get commercial brokers to refer more business their way. The referral fee is generally 10 percent. HQ has tried to provide more incentive by holding special promotions in New York that raise the rate to 15 percent.

Watler said his company has an “inside track” with Cushman & Wakefield because they are both connected to the Rockefeller Group. But he acknowledges that the commissions brokers get are generally “small potatoes” compared to the other work they do.

Watler hopes, however, that brokers look to short-term office space as an option in “overflow” situations or for use as swing space.

“I don’t think they think of us as much as they could,” he said.

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