Developers racing to turn Brooklyn into a thriving technology office market may be finding Manhattan a less-fruitful target for poaching tenants.
Leasing in Manhattan by tech, advertising, media and information tenants -- known to real estate brokers by the acronym TAMI -- fell in the second quarter to the lowest level in more than three years, according to Cushman & Wakefield. Such firms added just 1.21 million square feet (112,400 square meters) in the borough. That’s a 43 percent drop from the space leased in the first quarter.
Demand is cooling as development across the East River surges, with 9.6 million square feet of Brooklyn offices slated for completion by the end of 2020. Developers and investors behind projects including the former Domino Sugar plant, the Watchtower building and the retired Schlitz Brewery are aiming to draw TAMI tenants, and Brooklyn’s emergence as one of the U.S.’s top tech centers is threatened unless there’s a reversal of the slowdown.
“I’m not suggesting that a bubble has burst,” said Mitch Roschelle, real estate analyst at PricewaterhouseCoopers LLP. “It’s just that the growth in the incremental dollars going to tech has subsided a little bit. As markets like Brooklyn grow in popularity and become more expensive, they can price out these nascent ventures...”
“As cool as Brooklyn is, it is a secondary borough to Manhattan,” said Zev Holzman, a managing director at brokerage Savills Studley Inc. “I don’t feel any of these developers feel there is such an incredibly robust tech scene in Brooklyn that it is going to fill all of these buildings.”Brooklyn Office Developers Chasing Tech Tenants Face a Slowdown
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