By: Greg David
Developers are building projects closer to where workers live
Meanwhile, a consortium of four developers working on a proposal for a Long Island City waterfront property once planned for Amazon’s second headquarters has revamped its plan to increase the amount of office space, to as much as 6 million square feet. The developers seem to believe the new normal will compel companies to locate closer to where their employees live.
“Companies need talent and need to be where the talent is,” said MaryAnne Gilmartin, who spent years working on the development of Brooklyn and is now part of the Queens consortium. “That talent is predominately in the boroughs and especially Brooklyn and Queens.”
“Companies were discovering the waterfront—with affordable places, more green space and shorter commutes—before the pandemic,” said Andrew Kimball, chief executive of Industry City. “That is our leasing model.” Industry City says it is close to signing a lease with a firm that had planned to move to the Hudson Square neighborhood before employees balked at returning to Manhattan.
Cost remains a key to luring companies. Asking rents in Industry City are bracketed around $30 per square foot, with Downtown Brooklyn and Long Island City at about $50. The renewal of the REAP tax credit in the state budget provides an annual tax break of up to $3,000 per employee for 12 years, reducing the effective rate by $10 to $15 per square foot. The average asking rent in virtually all of Manhattan in the first quarter was $75 per square foot, with tax incentives limited mostly to downtown and Hudson Yards.
The pandemic has made the proposition more compelling, both because people are wary of crowded commutes into Manhattan and because the city’s stated commitment in both the Bloomberg and de Blasio administrations to a five-borough economy has become even more of a necessity.
The key selling point of Downtown Brooklyn is that so many people can walk to their job, said Regina Myer, president of the Downtown Brooklyn Partnership. When businesses start to look for space in Long Island City, LIC Partnership President Elizabeth Lusskin said, they discover many of their employees already live there.
The outer boroughs can be the city’s best defense against a flight to the suburbs, Lusskin said.
Landlords and developers have instituted a variety of strategies to pursue office tenants for Brooklyn and Queens.
Industry City says it is open to leases of any length, as companies want to make only short-term decisions while the pandemic’s long-term consequences are sorted out.
“Tenants are asking, ‘Can we move somewhere for a year or two?’” said leasing director Kathe Chase, who allows companies to take more space or less as needed.
However, if the work-from-home experience of the pandemic proves to be long-lasting and companies such as Facebook remain convinced that eventually half the workforce will be doing that, there simply might be no need for additional office space.