Kris
March 20th, 2004, 02:20 AM
March 21, 2004
COMMERCIAL PROPERTY | MANHATTAN
Some Dot-Coms Are Alive, and Even Expanding
By JOHN HOLUSHA
ROBERT LOCASCIO and Tim Bixby are running a growing business. They are hiring people and the 7,000 square feet they have in a Garment Center building is getting too tight. So they are looking for 10,000 to 12,000 square feet, preferably in the same neighborhood, where the rents are lower than in Midtown.
Their company, LivePerson, is an Internet-based services operation, the kind of high-technology company that fell under the rubric "dot-com" a few years ago. Many of the dot-coms that blazed so brightly in the late 1990's are gone now, of course, having failed after venture capital financing dried up in early 2000.
But there are increasing indications that the technology companies that survived the implosion are prospering — and increasing their need for office space.
"We are seeing the re-emergence of the dot-com companies that were able to survive the blood bath and strengthen their balance sheets," said Kenneth M. Krasnow, a senior managing director at Cushman & Wakefield, the brokerage and services company.
According to figures compiled by the company, of the top 50 Manhattan leasing transactions in 2002, none involved Internet or computer industry companies. Last year, there were three: I.B.M.'s renewal of 159,000 square feet at 590 Madison Avenue, the Donovan Data Systems renewal of 115,000 square feet at 115 West 18th Street and Microsoft's sublease of 100,000 square feet at 1290 Avenue of the Americas.
So far this year there have been two high-tech deals, totaling 64,000 square feet, according to Cushman & Wakefield.
One of those involved Google, which operates the popular search engine and has greatly expanded its New York operations in the last few years, going from 23,000 square feet to more than 100,000 square feet at 1440 Broadway at 40th Street.
Travelocity, the travel reservations company, has gone from 5,000 square feet to 20,000 square feet in a building at 139 Centre Street, Mr. Krasnow said. Yahoo, another Internet-based company, has outgrown 45,000 square feet of space at 111 West 40th Street, he added, and is in negotiations for 70,000 square feet farther south, at 620 Avenue of the Americas at 18th Street.
Even DoubleClick, an Internet advertising and marketing company that radically downsized after the crash, is seeking to expand again, Mr. Krasnow said. The company once had 400,000 square feet of space in a building at 450 West 33rd Street at 10th Avenue. Subsequently, it moved into 75,000 square feet of space in the old Port Authority distribution center at 111 Eighth Avenue.
Paul Pariser, one of the founders of Taconic Investment Partners, which partially owns and manages the Eighth Avenue building, said he was initially leery about leasing space to an Internet-based company. But he said he found that far from being a start-up burning its way through venture capital, DoubleClick was "a real business with real earnings that is well capitalized."
Brokers said the company was seeking another 30,000 to 40,000 square feet of space in the 2.3-million-square-foot building, which occupies the entire block between 15th and 16th Streets and Eighth and Ninth Avenues. Mr. Pariser said there had been discussions about expansion, although there has been no agreement as yet. "They are growing and need more space," he said.
Technology companies are also becoming more active downtown, although mostly for smaller spaces. Recently, a company named Cobite, which provides services for telecommunications companies, agreed to move from Midtown to downtown, taking 6,000 square feet at 55 Broad Street.
The building, an old financial services structure, was refitted in the 1990's with advanced wiring and fiber-optic telecommunications lines and other equipment to attract high-technology tenants. William Rudin, president of the Rudin Management Company, said that the past few years had been difficult, but that things seem to be picking up recently.
"We have lost tenants," he said. "Some went out of business; some retrenched. But like the rest of the economy, some of the companies are coming back and they are taking advantage of the bandwidth at 55 Broad and 110 Wall," which is another building owned by the Rudin family and managed by Rudin Management.
Recent signings at 55 Broad include Pilosoft Inc., a current tenant that is increasing its space from 1,500 to 6,000 square feet; AmeriNet Communications Group, which took 1,000 square feet; and Pro4ia Inc., 1,800 square feet.
Mr. Rudin said he was prebuilding space at 110 Wall to attract small technology companies that want to move in and set up operations immediately without waiting for the interiors to be built. He said the company is willing to lease the prebuilt spaces for as little as five years, rather than the 10 or more years most landlords want to amortize the cost of construction. "We don't mind five-year deals because we can reuse the space," Mr. Rudin said. "We feel it is a worthwhile investment for us."
Mr. LoCascio, chairman and chief executive of LivePerson, said he was not interested in a lease longer than three years because of the volatility of the high-tech industry. "I want to tie real estate to the business cycle, which means two to three years," he said.
As a practical matter that usually means moving into already completed offices — "built-out space," in real estate jargon — often space that was built for a failed dot-com. That was the case for the space that LivePerson currently occupies on the 21st floors of the building at 462 Seventh Avenue at 35th Street.
"The place was fully wired, and they left it as it was," Mr. Bixby said. "So we moved in here with our Internet phone system and went to work."
Mr. LoCascio said: "We have a strategy of spending all our money on sales and marketing and not on things like furnishings. I don't think we even bothered to paint."
Mr. LoCascio said he had been with the company since 1995, so he has seen both boom and bust. "We've had quite a ride," he said. The company started in a 500-square-foot loft in TriBeCa, moved to 1,000 square feet in Chelsea and then on to 2,000 square feet on Broadway in SoHo and later to 40,000 square feet at 330 West 34th Street.
Meanwhile, the company went public in April 2000, one of the last to do so before the window for high-tech initial public offerings slammed shut. "We were one of the last to make it," Mr. LoCascio said. "Of the 25 that were set to go, only 10 made it."
THE company's stock took a roller coaster ride as well. Starting at the initial offering price of $8 a share, the price plunged to as little as 7 cents a share before gradually recovering to the current price of about $4.50 as the company's viability became more assured. Along the way LivePerson acquired a company in Tel Aviv and shifted all its technical work to Israel, where salaries are lower than in the United States. Employment in New York dropped from 180 to 70, and the 34th Street space became a financial burden and the company moved to Seventh Avenue.
"It only cost them a financial pinprick to get out of there because they listened to their architect and broker and built space that could be used by any financially oriented company," said Alexander Chudnoff, a director at Cushman & Wakefield who has represented the company.
It helped too that LivePerson did not try to overexpand at a time that the prevailing attitude in the industry was to grow as fast as possible to dominate markets, Mr. Chudnoff said. "Everyone else was racing to hire people as fast as they could, so you could have been talking about hundreds of thousands of square feet, but Rob and Tim kept it under control," he said.
So now, having weathered the slump, the company is planning to grow again.
Not everyone in the high-tech industry is expanding. Some are slimming down to reduce costs for competitive reasons. Novell Inc., the developer of networking software, recently signed a lease for space on the 35th floor of the building at 1177 Avenue of the Americas at 46th Street.
The new lease is for about 15,000 square feet, which is down from the 20,000 the company formerly had in the same location, according to one of the brokers, Martin Horner, a principal with the Staubach Company, a tenants' broker. "They decided to do some belt-tightening and shed some space," Mr. Horner said. "They are a mature technology company."
Copyright 2004 The New York Times Company
COMMERCIAL PROPERTY | MANHATTAN
Some Dot-Coms Are Alive, and Even Expanding
By JOHN HOLUSHA
ROBERT LOCASCIO and Tim Bixby are running a growing business. They are hiring people and the 7,000 square feet they have in a Garment Center building is getting too tight. So they are looking for 10,000 to 12,000 square feet, preferably in the same neighborhood, where the rents are lower than in Midtown.
Their company, LivePerson, is an Internet-based services operation, the kind of high-technology company that fell under the rubric "dot-com" a few years ago. Many of the dot-coms that blazed so brightly in the late 1990's are gone now, of course, having failed after venture capital financing dried up in early 2000.
But there are increasing indications that the technology companies that survived the implosion are prospering — and increasing their need for office space.
"We are seeing the re-emergence of the dot-com companies that were able to survive the blood bath and strengthen their balance sheets," said Kenneth M. Krasnow, a senior managing director at Cushman & Wakefield, the brokerage and services company.
According to figures compiled by the company, of the top 50 Manhattan leasing transactions in 2002, none involved Internet or computer industry companies. Last year, there were three: I.B.M.'s renewal of 159,000 square feet at 590 Madison Avenue, the Donovan Data Systems renewal of 115,000 square feet at 115 West 18th Street and Microsoft's sublease of 100,000 square feet at 1290 Avenue of the Americas.
So far this year there have been two high-tech deals, totaling 64,000 square feet, according to Cushman & Wakefield.
One of those involved Google, which operates the popular search engine and has greatly expanded its New York operations in the last few years, going from 23,000 square feet to more than 100,000 square feet at 1440 Broadway at 40th Street.
Travelocity, the travel reservations company, has gone from 5,000 square feet to 20,000 square feet in a building at 139 Centre Street, Mr. Krasnow said. Yahoo, another Internet-based company, has outgrown 45,000 square feet of space at 111 West 40th Street, he added, and is in negotiations for 70,000 square feet farther south, at 620 Avenue of the Americas at 18th Street.
Even DoubleClick, an Internet advertising and marketing company that radically downsized after the crash, is seeking to expand again, Mr. Krasnow said. The company once had 400,000 square feet of space in a building at 450 West 33rd Street at 10th Avenue. Subsequently, it moved into 75,000 square feet of space in the old Port Authority distribution center at 111 Eighth Avenue.
Paul Pariser, one of the founders of Taconic Investment Partners, which partially owns and manages the Eighth Avenue building, said he was initially leery about leasing space to an Internet-based company. But he said he found that far from being a start-up burning its way through venture capital, DoubleClick was "a real business with real earnings that is well capitalized."
Brokers said the company was seeking another 30,000 to 40,000 square feet of space in the 2.3-million-square-foot building, which occupies the entire block between 15th and 16th Streets and Eighth and Ninth Avenues. Mr. Pariser said there had been discussions about expansion, although there has been no agreement as yet. "They are growing and need more space," he said.
Technology companies are also becoming more active downtown, although mostly for smaller spaces. Recently, a company named Cobite, which provides services for telecommunications companies, agreed to move from Midtown to downtown, taking 6,000 square feet at 55 Broad Street.
The building, an old financial services structure, was refitted in the 1990's with advanced wiring and fiber-optic telecommunications lines and other equipment to attract high-technology tenants. William Rudin, president of the Rudin Management Company, said that the past few years had been difficult, but that things seem to be picking up recently.
"We have lost tenants," he said. "Some went out of business; some retrenched. But like the rest of the economy, some of the companies are coming back and they are taking advantage of the bandwidth at 55 Broad and 110 Wall," which is another building owned by the Rudin family and managed by Rudin Management.
Recent signings at 55 Broad include Pilosoft Inc., a current tenant that is increasing its space from 1,500 to 6,000 square feet; AmeriNet Communications Group, which took 1,000 square feet; and Pro4ia Inc., 1,800 square feet.
Mr. Rudin said he was prebuilding space at 110 Wall to attract small technology companies that want to move in and set up operations immediately without waiting for the interiors to be built. He said the company is willing to lease the prebuilt spaces for as little as five years, rather than the 10 or more years most landlords want to amortize the cost of construction. "We don't mind five-year deals because we can reuse the space," Mr. Rudin said. "We feel it is a worthwhile investment for us."
Mr. LoCascio, chairman and chief executive of LivePerson, said he was not interested in a lease longer than three years because of the volatility of the high-tech industry. "I want to tie real estate to the business cycle, which means two to three years," he said.
As a practical matter that usually means moving into already completed offices — "built-out space," in real estate jargon — often space that was built for a failed dot-com. That was the case for the space that LivePerson currently occupies on the 21st floors of the building at 462 Seventh Avenue at 35th Street.
"The place was fully wired, and they left it as it was," Mr. Bixby said. "So we moved in here with our Internet phone system and went to work."
Mr. LoCascio said: "We have a strategy of spending all our money on sales and marketing and not on things like furnishings. I don't think we even bothered to paint."
Mr. LoCascio said he had been with the company since 1995, so he has seen both boom and bust. "We've had quite a ride," he said. The company started in a 500-square-foot loft in TriBeCa, moved to 1,000 square feet in Chelsea and then on to 2,000 square feet on Broadway in SoHo and later to 40,000 square feet at 330 West 34th Street.
Meanwhile, the company went public in April 2000, one of the last to do so before the window for high-tech initial public offerings slammed shut. "We were one of the last to make it," Mr. LoCascio said. "Of the 25 that were set to go, only 10 made it."
THE company's stock took a roller coaster ride as well. Starting at the initial offering price of $8 a share, the price plunged to as little as 7 cents a share before gradually recovering to the current price of about $4.50 as the company's viability became more assured. Along the way LivePerson acquired a company in Tel Aviv and shifted all its technical work to Israel, where salaries are lower than in the United States. Employment in New York dropped from 180 to 70, and the 34th Street space became a financial burden and the company moved to Seventh Avenue.
"It only cost them a financial pinprick to get out of there because they listened to their architect and broker and built space that could be used by any financially oriented company," said Alexander Chudnoff, a director at Cushman & Wakefield who has represented the company.
It helped too that LivePerson did not try to overexpand at a time that the prevailing attitude in the industry was to grow as fast as possible to dominate markets, Mr. Chudnoff said. "Everyone else was racing to hire people as fast as they could, so you could have been talking about hundreds of thousands of square feet, but Rob and Tim kept it under control," he said.
So now, having weathered the slump, the company is planning to grow again.
Not everyone in the high-tech industry is expanding. Some are slimming down to reduce costs for competitive reasons. Novell Inc., the developer of networking software, recently signed a lease for space on the 35th floor of the building at 1177 Avenue of the Americas at 46th Street.
The new lease is for about 15,000 square feet, which is down from the 20,000 the company formerly had in the same location, according to one of the brokers, Martin Horner, a principal with the Staubach Company, a tenants' broker. "They decided to do some belt-tightening and shed some space," Mr. Horner said. "They are a mature technology company."
Copyright 2004 The New York Times Company