May 5, 2017, 11:56 AM
Tech and the City is a bite-size series from TechSpec. Check back each quarter for a quick taste of what’s happening with New York City tech in 2017.
Following a huge influx of VC funding in 2015 and 2016, New York City is feeling the effects of a national slowdown. A slow quarter in tech leasing pushed the industry’s share of Manhattan activity down to third among all major industries. But steady job numbers show the sector remains on firm footing, especially compared to the financial or legal services.
Tech employment falls, but only slightly: After a strong start to the year, tech labor dropped off a bit in March to end the quarter down 0.1% (Y-o-Y). Still, the city’s tech employment picture remains strong. At 68,900 payrolls, Q1 employment sat 53.8% higher than 2008 recession levels.
Leasing activity dips: Following a strong February, led by Spotify’s move into 4 World Trade Center, tech leasing softened at the end of the quarter. Only three transactions were recorded in March, compared to 7 in February and 8 in January. The three March deals totaled less than 50,000 square feet.
VC funding tightens further: Mirroring the larger national trend of VC tech reductions, overall funding declined in the New York area in Q1 to $1.4 billion. (Tech accounted for $0.9 billion of that.) Quarterly transactions did see a bump from Q4 2016, though smaller funding rounds offset any potential overall gains.
Startup count: 1,669 (+3.0% MoM)
Where are companies moving in?
As space remains limited in Midtown South, companies looked to Midtown as an alternative in Q1. The Midtown market saw the highest number of move-ins during the quarter with 8 companies closing deals.
With its proximity to Midtown South and a pipeline of new development on the West Side, creative tenant interest in Midtown continues to grow.
Top trend to watch in the NYC tech market right now?
Large tech leasing: Spotify’s first quarter lease at 4 World Trade Center saved what could have been a tough quarter for tech leasing. Given Class A asking rents in some of the city’s top submarkets now exceed $80-$100 p.s.f., the smaller players may simply not have enough capital to compete for space. That shifts the burden onto bigger players to make up the difference. But will they? Stay tuned.
Research: Tiffany Ramsay | Editor: Michael Cronin