Downtown Manhattan Lures Creative FirmsOct 29, 2014
Photo by: Adrienne Grunwald for the Wall Street Journal
Neighborhoods from the Garment District to downtown Brooklyn have billed themselves as New York City’s next tech and creative hub. Now lower Manhattan is bolstering its claim with data showing the number of employees in the coveted fields increased 71% in the past five years.
As the presence downtown of financial-services companies falters, brokers and business leaders have increasingly pitched the neighborhood below Chambers Street as an affordable, conveniently located alternative to neighborhoods such as Chelsea and SoHo, where rents have risen and available space is scarce. In one of the most-watched lease deals, Condé Nast is set to begin moving downtown next week into One World Trade Center.
“It’s the fastest-growing because there’s space and it’s affordable,” said Wes Rudes, a principal at Cresa, a real estate services firm. “If I need 20,000 square feet, what are my choices?…I can go to Hudson Square and pay $60 or $70 a square foot in some cases, or I can go downtown to pay $48, $49.”
Several companies said the hype around other areas has made one of the city’s oldest neighborhoods, marked by City Hall and the vestiges of Wall Street, look like the fresh choice.
“We looked at Williamsburg and Dumbo. It seemed a little 2012,” said Andrew Essex, vice chairman of Droga5, an advertising firm with 500 employees globally that recently moved from NoHo to Wall Street. “We were charting our own path.”
In the past four years, 32% of Manhattan leasing by technology, advertising and media companies was in lower Manhattan, compared with 14% from 2007 to 2010, according to the report by LaunchLM, an initiative of the Downtown Alliance, an association of local businesses and property owners.
Meanwhile, the Midtown South area that includes Chelsea, Flatiron and SoHo saw its share of the pie shrink for those types of leases—to 40% from 47% over the same time period.
Lower Manhattan still faces significant challenges attracting tech and creative companies. It lacks former industrial buildings with expansive layouts. A number of its older office buildings with less costly space were converted to apartments, and young companies that like to bounce their ideas off peers may find themselves isolated.
To address that last concern, LaunchLM on Thursday plans to announce a new, 12,500-square-foot space dubbed “lower Manhattan HQ” at 150 Broadway. The 20th-floor space will give companies an opportunity to network, hold training events and book rooms for special projects. It is scheduled to open next spring.
“It became clear that there was need for a space like this,” said Downtown Alliance President Jessica Lappin.
The center was created with $2.5 million in state money secured by Assembly Speaker Sheldon Silver.
One World Trade Center and the lower Manhattan skyline. ASSOCIATED PRESS
Companies said they are starting to feel less like pioneers than they did a decade ago.
“When we first moved in, it was a lot of government agencies, insurance companies and law firms that were populating the building,” said Scott Anderson, a partner at Control Group, a technology and design company that moved to the Woolworth Building in 2007. “Now the makeup of the people on the street is so much different than it was before.”
Also helping the area is a tax break of $3,000 per eligible employee to firms that relocate some or all of their operations to lower Manhattan. It was established after the terror attacks of Sept. 11, 2001, and extended this year to 2015.
Still, despite the growth in new types of companies, downtown has more empty office space than it did before the recession. More than 10.5% of office space was vacant in the third quarter of this year, compared with less than 8% in the third quarter of 2007, according to JLL, a real-estate brokerage.
Companies said the retail and restaurant scene—long a drawback for companies with young employees— has improved with the addition of spots such as Melt Shop.
Still, Mr. Essex, the advertising executive, said that the area east of Broadway could use more life.
“East of Broadway is a gastronomical wasteland,” he said.