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Rents giving artsy tenants stage fright

The creative arts segment is among the fastest growing segments of the city’s economy, according to a new report from the Center for an Urban Future.

The report shows that New York has overtaken Los Angeles as the nation’s largest creative sector, significantly increasing its share of jobs in each of the 10 industries that make up the city’s creative economy, from advertising and design to visual and performing arts.

But despite their growth, the report concludes that the city’s working artists, non-profit arts organizations and for-profit creative businesses are experiencing more intense challenges than ever before, and that New York faces growing threats from a number of cities — from Shanghai and Berlin to Portland and Detroit — that are aggressively cultivating their own creative economies. While these local niche entities face multiple hurdles,one of the more pressing is the accelerating cost of commercial space.

“Obviously rents have gone through the roof,” said Suzanne Sunshine, founder of S. Sunshine & Associates, a commercial real estate brokeraage that specializes in representation of nonprofit and creative clients.

SUZANNE SUNSHINE
SUZANNE SUNSHINE

“For the 15 years that I’ve been in business, rents for non-profits have gone up,” she continued. “My average rent was $26 per s/f in Midtown South or Lower Manhattan.  Finding $40 per s/f in those same locations now akin to miracle.”

The rising cost of office and work space means that it’s harder for nonprofits and creative businesses to find a home in the city. And the market for space is quite flooded with their brethren.

The study documents that New York City has more arts nonprofits than any other American city. In 2015, the five boroughs were home to 4,224 arts nonprofits, versus 3,051 for Los Angeles, 1,697 for Chicago, 1,068 for Washington, D.C. and 1,017 for Houston. The number of arts organizations in New York City increased by 54 percent over the past decade.

In 2013, New York City’s creative sector employed 295,755 people, seven percent of all jobs in the city. Employment in the sector is up from 260,770 in 2003, a 13 percent jump. Meanwhile, the city is now home to 14,145 creative businesses and nonprofits, up from 11,955 a decade ago. That’s an 18 percent jump.

“Every day, I’m on the phone with someone explaining the bad news,” said David Lebenstein executive managing director of the not-for-profit specialty practice arm of DTZ.

DAVID LEBENSTEIN
DAVID LEBENSTEIN

“Either pay more to stay in Midtown, make a better economic deal if you want to go downtown, or go to Brooklyn or Queens.

“Most of my clients at the end of the day decide to go to lower Manhattan rather than to the boroughs,” said Lebenstein, who is also a board member for the group that released the study.

“There are some isolated examples when they’ve decided to go to Brooklyn and Queens and I’m a little surprised there’s not more,” he said before conceding that accessibility to out-of-town-visitors is what keeps many of his clients from locating in a tertiary home.

Lebenstein said that larger foundations and nonprofits with hefty endowments and other sizeable assets will continue to occupy space in Manhattan, but smaller such entities could soon be almost exclusively pushed to other boroughs. “This is no different than the residential affordable housing that the mayor made a huge priority,” said Lebenstein. “We need ‘affordable housing’ in quotes. [Small and mid-sized nonprofits] can’t afford the rents in Manhattan.”

“Not-for-profits are looking for creative ways to raise money and operate programs,” said Sunshine while discussing how those unable to afford their ideal physical space manage to keep a footprint in Manhattan.

“Their using retail stores right now to hang art and have events that boost sales in those stores and raise money for the philanthropy. That’s a creative way to not have real estate expenses,” she said.

“Another obvious thing that they’re doing is taking less space. Lower Manhattan is the lowest Manhattan rents that they can get at the moment,” said Sunshine.

Sunshine agreed with Lebenstein’s analysis about the lack of affordable neighborhoods. She pointed to the Lower East side as a popular destination, but soon that too could become too expensive.

The report shows recent growth in the city’s creative economy is occurring outside of Manhattan. Between 2003 and 2013, the number of creative businesses located in the four boroughs outside of Manhattan rose from 1,596 to 2,994, an 88 percent jump. In Brooklyn, it grew by 125 percent, in the Bronx by 99 percent, in Queens by 50 percent, in Staten Island by 21 percent and in Manhattan by 8 percent.

 

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