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Report: Signs point to slowdown in TAMI market

The TAMI sector has been one of the biggest stories of the past couple years, and in 2015, the workforce grew by 5.4 percent, while existing TAMI tenants expanded 71 percent more than in 2014.

Shared office space companies like WeWork, Coworkrs, and The Yard have been taking spaces all over Manhattan and Brooklyn – WeWork alone leased a total of 900,000 s/f in 2015, accounting for three percent of all Manhattan leasing.

But despite the growth, some signs are pointing to a possible slowdown.

A report from accounting and consulting firm BDO this week found that while 2015 was a banner year for tech companies in the US, with 142 companies exceeding $1 billion threshold, 2016 may be the year the sector takes a break.

BDO conducted a survey of 100 chief financial officers at US technology companies, and less than half (48 percent) expect technology business valuations to increase in 2016, a drop from 62 percent the previous year.  The views reflect a more cautious attitude taken by investors in the fourth quarter of 2015, when a number of mutual funds marked down the value of their private tech holdings, according to the report.

With a total office inventory of more than 500 million s/f, Manhattan tops the list of US cities in terms of square footage by huge margin — the second city on the list, Los Angeles, has just over 200 million s/f.

The report currently lists the average rent for Manhattan at $71.50, with a vacancy rate of 9.6 percent.

A recent Colliers’ office leasing report showed that TAMI firms overtook financial services, insurance and real estate (FIRE) companies in total square footage leased in Manhattan in the third quarter of 2015, but in the fourth quarter, the FIRE sector topped TAMI firms with 36 percent of leasing versus 23 percent for TAMI.

However, the TAMI sector did register the largest deal of 2015, with Publicis Groupe’s 582,000 s/f renewal/expansion at 1675 Broadway.

“Midtown is experiencing a bit of its own Renaissance, Midtown South still remains the tightest market in New York, while Downtown currently offers the best value pricing overall.” said Michael T. Cohen, president of Colliers International Tri-State Region.

Grant Greenspan, a principal at the Kaufman Organization, has been finishing leasing up the company’s portfolio of buildings in the Flatiron/Nomad districts. The buildings were formerly part of The Ring Portfoli, and were purchased through ground leases and renovated by Kaufman over the past two years.

“What I see different in this cycle is that investors are much more judicious in terms of money being invested in startups,” said Greenspan.

He is seeing robust activity in showing and leasing spaces, with tenants taking on average 5,000 s/f. Average rents are at a high point and holding steady around $68 to $72 p/s/f in the area, but that could change.

“They [startups] are not as frivolous with dollars,” said Greenspan, adding that many are choosing leases with shorter lengths and spending less on buildouts. “They’re much more carefully invested this cycle as opposed to previous cycles.”

If a significant downturn does happen in the foreseeable future, the cautious attitude of stakeholders within the TAMI sector will help soften the landing.

“I wouldn’t say cooling off, but venture capitalists are being very careful, they’re putting capital very carefully in terms of growth,” said Greenspan.

 

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