Over 40 members and non-members joined a packed room on March 14 to learn about the unique real estate needs facing high-growth startups. Moderated by Michael Rudin, Rudin Management Company, the panel included Donald DeSantis, Co-Founder and Chief Product Officer, Hightower, Inc., Daria Siegel, Vice President, Economic Development Programs, Alliance for Downtown New York, and Andrew Wiener, Director of Leasing, L&L Holdings Company, LLC.
The conversation began with a discussion about demographic shifts in office tenants. Small businesses of all kinds, not just tech startups, are seeking flexible work space. That’s where WeWork comes in, solving problems for them so that they can focus on their mission. Speaking from the personal experience of growing Hightower, DeSantis explained that WeWork is great for a company in its early stages, however, after it grows, it wants to set the tone of its own culture. “That’s hard to do when the table is set at WeWork,” he explained. In moving out of a co-working space, startups also have a very real worry that they are biting off more space than they can handle. Having recently acquired another floor at Hightower, DeSantis admits to this concern. Growing a startup following the post-WeWork experience, DeSantis imagines a space for companies with 80-100 employees that could share a communal cafeteria that’s private to tenants.
That brings the conversation to food. It’s difficult to ignore its role as it relates to real estate, especially in dense mixed-use neighborhoods, as food halls have grown into a phenomenon unto themselves only in the past couple of years. Wiener admitted that restaurants and food halls don’t have great credit, but they increase the value of office space above. When asked how he determines how and when to take a risk with such a tenant, he responded, “look at who the VC [venture capital] firm that backs the tenant with low credit. If it’s not a well known VC firm, they’re hedging their bets.” However, it’s also a question of what the business is and what percentage of the building they represent. “You have to look at the whole picture,” he explained.
Increasingly, startups demand not only good food but also a density that newer buildings must accommodate. Rudin, who’s developing Brooklyn Navy Yard’s Dock 72 in conjunction with WeWork, explains that elevators, staircases, and bathrooms have been made for more capacity to support higher density offices. Regarding the needs of tech tenants specifically, Siegel says that innovative landlords offer many ISP options, “but there’s a long way to go.”
The program concluded with a lengthy Q&A, a signature of YLG programs. The speakers spoke from their expertise and their personal experiences and challenges with this ever-changing market.