From CBRE's "Special Report | NYC Tech 2012: Implications for Real Estate":

New York City, the longstanding global capital for finance, is rapidly emerging as the fastest-growing hub for tech companies in the United States[1]. In the past five years, nearly 1,000 tech start-ups have been created in New York City, while tech giants such as Google, Facebook, eBay and Twitter have significantly expanded their presence. In 2011 alone, venture capitalists invested $2.7 billion in 379 deals in the New York metro area, bringing the New York region into the company of such established tech hubs as Silicon Valley and Greater Boston in terms of attracting venture capital investment[2]. This has led to a marked increase in information technology jobs, with employment rising by 28.7% from 2007 to 2012, according to the nonprofit Center for an Urban Future[3].

Furthermore, government agencies, as part of a campaign to diversify an economy that has historically been heavily dependent on Wall Street, have made strategic investments to lure tech companies to the city, including $1.8 million to establish 10 incubator spaces that house 550 start-ups; $100 million for Cornell University—in partnership with Technion—to establish a top-tier engineering school in the city; and $15 million for New York University’s new applied sciences center in Brooklyn.[4][5]

Tech’s growth is clearly impacting New York’s commercial real estate market. There has been a marked increase in leasing activity from established tech companies expanding their footprints in the city as well as growing start-ups graduating from incubator spaces. Midtown South, New York’s tech epicenter, boasts the lowest office vacancy rate in the United States and has seen average asking rents steadily rise, with 21.3% growth from year-end 2009 to May 2012. By comparison, during the same period, Midtown average asking rents grew by 13.7% and Downtown rents remained relatively stable, with a 4.5% increase. However, in light of the 2000 dot-com bubble, many critics question whether the city’s tech sector growth is sustainable. A key difference is that many tech companies in the 2000 boom-and-bust were funded despite nonexistent profits and thin business plans. Today, startups must clearly provide investors with viable—and ultimately profitable—business models before they are funded. In addition, the present wave of tech start-ups is less about building new technology than applying it to industries such as advertising, media, fashion, and finance—areas in which New York already excels.

Making New York their home allows tech companies to more easily access and collaborate with potential customers and partners from these industries, many of which don’t have a presence in Silicon Valley. Finally, unlike a decade ago, the city now has an established and growing tech community of experienced engineers, entrepreneurs and venture capitalists—a proliferating talent pool that will continue to drive the growth of the industry in coming years.

1. “New Tech City.” Center for an Urban Future. 2012.
2. Includes Metropolitan NY area, northern New Jersey, and Fairfield County, Connecticut.
PWC Moneytree. 2011.
3. “New Tech City.” Center for an Urban Future. 2012.
4. New York Economic Development Corporation.
5. “Digital Media and Cleantech Incubator on Varick Street Nurture 22 grads.” New York Daily News. 28 Mar 2012.
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