Are Tech Startups Overpaying for Office Space?


In recent years, the tech-startup sector has made a profound impact on revitalizing NYC's economy.  From creating thousands of new jobs to inspiring new neighborhoods and communities, the tech sectors economic impact has been targeted as the cause of dramatic upticks in both real estate prices and rents in NYC.

Fueled by venture capital growth and it's preference on calling Midtown South it's headquarters, some of New York's tech-startups may be on the verge of being priced out of a neighborhood they helped renovate.

According to a recent RE:Tech › Insight study, 65 percent of New York based startups believe they are over paying for office space.  The study focused on startups that are renting between 5,000 to 10,000 square feet and located in Midtown South, the epicenter of NYC's startup scene.  


Q: Is the Price of Office Space Expensive in NYC?


Additionally, nearly 70 percent of survey respondents that have office space between 5,000 to 10,000 square feet stated that they pay over $50 per square foot for office space, a minimum expense ranging from $3,000,000 to $6,000,000 per year.  

"For us, when our lease expires next year we're going to consider sharing space or taking space somewhere else to help manage our real estate expenses," according to a survey respondent in Union Square.   

As demand for Midtown South office space continues to remain healthy, asking rents seem to be remaining bullish.  "It's the price you pay in order to compete," according to a survey respondent in SoHo.  "Between the 6 month security deposit and high price tag for office space, real estate expenses are eating at our operating expenses." 


Q: How Much Do You Pay for Office Space?



According to the study, nearly 90 percent of survey respondents signed their current lease with employee growth in mind.  "The reality is that if you want to have the best and brightest minds working at our company, you're going to have to be here because employees want to be here," according to a survey respondent in Flatiron.