Fog Creek Software
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Finding an Office in New York City

Any war stories or advice? Post it here!

Joel Spolsky
Friday, March 28, 2003

If possible talk to previous tenants to know more about the landlord – quite a few of them are a big pain in the a** to deal with, and that’s the last thing you want to be doing.

Prakash S            
Friday, March 28, 2003

Joel-

That was the craziest Joel story yet.  I guess that's what happens when there is so much compeition for a limited amount of space.

The idea I wanted to present is that your article sounded like a circa 1980's PC game.  You know those primarily text based (some ansi graphics) business sims that we all love and still secretly play at work.  Maybe this could be the next Fog Creek software title, you can call it 'Office Munch'. 

The possibilites are endless as you could play as tenant, broker, or landlord.  Anyway....  it was a good break on a Friday afternoon in Austin.

Chad

Chad Pavliska
Friday, March 28, 2003

Just move somewhere else. Why would anyone put up with all THIS hassle? North Carolina will probably PAY you to move down here and hire a few locals in some depressed small town. And I don't mean Appalachia, I mean on the way to the beach. And we have better BBQ and we do iced tea right.

Charles Hall
Friday, March 28, 2003

Great article - very interesting. This article epitomizes why Joel On Software is such a great site; it treats software developers as businesspeople who happen to write software. From my experience, business acumen is critical to the technical professional's career because business considerations will always be the deciding factor in most daily decisions.

Josh Watts
Friday, March 28, 2003


Nice article. By the way, I'm horrified by the amounts of money involved living in New York.

In my little country you can buy an entire building for $100,000 :-)

Leonardo Herrera
Friday, March 28, 2003

Nice article, to be redundant.

Here's a request for a future article along similar lines, though: what about the interior design?  I know your predilection for real offices (and not cubicles), but some further notes on layout, space, ergonomics perhaps, and related would be great!

Full disclosure: We're currently expanding out office space and considering how to use the new space.  It won't be anywhere *near* as nice as Joel's new digs. :7

Rich
Friday, March 28, 2003

One other "extra" to look out for - the building I'm in now turns off the air conditioning at 6pm, doesn't run it on the weekends, and charges something like $200/hr to turn it on.
My big surprise - even when it's 20 degrees outside, an office building with no A/C gets HOT.

If we're talking software companies, make sure you're aware of the "operating hours" of the utilities.

Philo

Philo
Friday, March 28, 2003

The story on Blockbuster is even crazier than you thought. Blockbuster was founded in Dallas, Texas; moved to Florida; and then BACK to Dallas, Texas.

Bob
Friday, March 28, 2003

Gad zooks, I'd thought things had gotten better this year. Isn't there lots of already-wired dot-com empty space? I'm sure a lot of it is whole-floor, but some must be available.

Did you look at subletting any of that space? I'm sure the few agencies that still exist have scads of empty space.

http://webseitz.fluxent.com/wiki

Bill Seitz
Friday, March 28, 2003

Most of the dotcom space has already been absorbed a long time ago.

Also, dotcoms generally had 50 - 150 employees, their spaces were bigger than we want.

And we don't like their ideas of Big Open Space.

Finally -- "prewired" is just not that interesting; I'm not sure why mayors seem to think it's a selling point. Getting a T1 or DSL line or any other kind of telecom installed is trivial.

Joel Spolsky
Friday, March 28, 2003

$20 to $30 a sqaure foot!!!!!  Is that a mis-print? That's that going price in New York!?!?!  You said you were looking for 2000sqft so that's $40000-$60000 a month!!!

The last two companies I worked at, one in Santa Monica right on the Santa Monica Promenade (22 theaters within 5 mins walk, 80 restaurants including 5 in the same building, the beach only 2 block away, a farmers market on the Promenade twice a week, and a beautiful beautiful building with super high ceilings, windows all around) it was only $3 a square foot.

The other company was in Laguna Beach, again 2 blocks from the beach, view of the ocean, windows all around and again, 3$ a square foot.

Normal space, more inland was around $1.25 a square foot.  My own company we had a 22 private office place directly across from the Orange County Airport (a good thing and a good place) for $1.05 a sqaure foot.  5000 sq.ft and that included cleaning service and eletricity.

Seems to me the lesson should be if you want your company to have a chance of surviving don't be in New York were all your money will go to rent.

Gregg Tavares
Friday, March 28, 2003

Doh! That was $20-$30 per year which is alot more reasonable.  My bad.

Gregg Tavares
Friday, March 28, 2003

Joel, great article. Really made me reconsider a move to NY. I think I may stay right where I am !

wenzi
Friday, March 28, 2003

Thanks for this insightful article, Joel. I live and work in Spain, but I'm printing this and filing it in my copy of Hohmann's "Beyond Software Architecture", as a new chapter. It's not offtopic, at all.

jquiroga
Saturday, March 29, 2003

What I mostly got out of this is that locating a software development company in New York may not be a good business decision.

Q
Saturday, March 29, 2003

Great article! Thanks

Matt Harris
Saturday, March 29, 2003

My take on this article is that the intrinsic benefits of having a software business in New York City make renting in the city worth the hassle. A large employee talent pool. Proximity to a large customer/client base. A vast choice of associated businesses necessary for manufacturing or promoting the product: marketers, packagers, distributors, media, etc. Proximity to international air transportation, and exended regional transportation systems. There are also lesser benefits of "prestige" associated with a New York City address and phone number, particularly where international customers are concerned, and proximity to national decision-makers--lobbyists, politicians and industry organizations--which allow a business in the city a bit greater influence on matters affecting their industry than one located in, say, North Carolina.

http://www.worldnewyork.net/

Grant Barrett
Sunday, March 30, 2003

Rents in San Jose are currently under $1/square foot/month.

xyz
Sunday, March 30, 2003

Another more recent and sad example of what Joel cites as the Blockbuster case is "Inexperience hurt shuttle analysis" http://www.miami.com/mld/miamiherald/5241209.htm

din0saur
Monday, March 31, 2003

Joel,
I read with interest your take on what it is like to go about leasing office space in New York City.  I have been a commercial property real estate broker in Manhattan with Insignia/ESG for the past seven years, and it’s rare to see this sort of write up from a space user who recently went through the process of moving from one location to another.  The key point for anyone, which you make, is to ensure you start out early enough to keep yourself in the position where you have the negotiating power that comes from having some real options. 

But encouraging your readers to go out there, find their own space, and cut their own deal is like telling someone to hike from Albany to New York City with nothing but the need to get to NY.  You may ultimately get to New York, but you will be worse for the wear.  For one, you might be very proud of your new deal in your new space, but you have to ask yourself if you should have rather spent the time you put into it serving your clients and getting new business instead.  And how do you really know if you paid the right price for your space? 

Half of your argument against hiring a broker is that they have a financial incentive to allow a higher price on a deal because they would earn more in commission.  So you assume all this motivation on the part of your broker is just in seeking the commission dollar, but you seem unwilling to let that work on your behalf by taking the time to hire the right person for the job.  That is, hire a good broker who works on the basis of a business relationship with you and your firm.  Manhattan is a very large and complex market with many landlords and tenants, buying and trading some 400 million square feet of space between them.  Making sense of the market is not that simple.  And while some brokers do swing from vine to vine, never to be seen again, the good ones will work with you every time you need space or to get rid of some.  It’s not that hard to figure out what kind of a broker your dealing with.  You support the idea of hiring a lawyer in the process, but you seem to assume that your lawyer will know what the state of the market is for office space.  In most cases, they won’t.  Yes, they can help with legal issues, but just as you would not expect them to know anything about making or selling software or hardware the way you do, I would not expect them to know what a fair price is for space.  They know the law and can protect against certain eventualities, like your clients dropping a ring down the elevator shaft while on the way to your office (no, you shouldn’t be responsible for that).

A good broker is not an opportunist.  He can be your best advocate for helping you determine and obtain what it is that you truly need in terms of office space.  Furthermore, most landlords and their brokers actually prefer to deal with a tenant who is well represented (by their own broker), even in a lease renewal situation.  They prefer this, because hey know they are dealing with an informed buyer. 

For those of you who will have to deal with moving or relocating within a year, let me offer you the advice your broker should be giving you.  As you read this, ask yourself if it makes sense for you to try to do it alone.

Thorough planning in advance of your lease expiration date (12 months is ideal) will ensure that you maximize your position in lease negotiations with your current or future landlord.  In no case should you wind up paying what amounts to a premium in rent for the convenience of not relocating, especially when you should be getting a discount that reflects the savings that the landlord will realize from your decision to stay.  It will cost your landlord a great deal more to acquire a new tenant than to keep you, even with a good broker on your side.  You should share in the savings resulting from your decision to stay.  Your rent should be lower than the rent they will charge to a new tenant.

Without very good market information, you will be in a disadvantageous position in any negotiation of the terms of a renewal with your landlord.  They know the market, they know their bottom-line and they know the negotiating process.  Often they know, from market sources, if their tenants are negotiating on alternative locations.  Subsequently, they may also know their tenants’ timing issues.

To gain the upper hand in negotiations, you need someone to assist you in creating an environment where your landlord feels that the rental income accrued from your tenancy could be at risk if they don’t cut a fair deal. You also want to maintain a good working relationship with your landlord – something that is difficult to maintain if you are personally involved in the negotiations.  Landlords tend to yield the best renewal rental rates only after they believe that you are well advised about the market, and that there is a probability of losing you as a tenant.  Most tenants who say “Oh, I have a great relationship with my landlord” should know they are paying for it. 

You can’t very easily engage the market by requesting proposals from other buildings (to assess not only the fair market value of the renewal lease under negotiation, but alert your landlord to the possibility of your relocation as well) as you could with a good broker coordinating things.

In any case, you have to manage the overall process with several key goals:

1.    Timing -- Landlords are familiar with how much time it takes you to make decisions and how readily you can defer action.  The negotiation “window” must open early enough to convince the landlord that there is, in fact, enough time to learn about market prices, negotiate, evaluate and move.  It is in your landlord’s interest to stall throughout the negotiations, effectively eliminating relocation alternatives.  Do you have time to do this and cover your core business?

2.    Understanding the Landlord – A good broker’s research surpasses the market information available to your landlord.  He or she will know the prices at which similar transactions for office space are being made, what the landlords’ overall financial position is, and ideally, their break-even points.

3. Develop Credible Motivation -- The idea that you may need to make changes in your premises, or moving to a new space, must be supported by realistic analyses of your needs, which cannot be met by your current facilities.    Landlords will part with money to alter or improve the space when they think you really need it.

4. Credible Market Search -- Any serious market search should be comprehensive.  The important decision to relocate or to stay requires looking at all of your options.  Doing this on your own by walking from building to building and asking supers to let you upstairs is a haphazard method that will yield you haphazard results.  Only a good broker with absolutely current market information can ensure you get the best deal possible.  No informational source yields pre-qualified options.  Your broker has to know what you need as much as what is out there.

Bottom line:  Manhattan real estate is a sophisticated market place that requires a deft, and knowledgeable, negotiating hand.  The short-lived pleasure of thinking your trading brokerage fees for a good deal is easily eclipsed by 10 years of rent in a bad deal.  Use your good sense of judgement to hire the right person.  Yea, I mean a broker.

David M. Valdez, Insignia/ESG, 212-984-8163, david.valdez@iesg.com

David M. Valdez
Monday, April 07, 2003

As a software guy and expat New Yorker turned real-estate agent, I enjoyed this piece and found it a pretty good commonsense primer on office hunting and the art of negotiating a commercial lease--but on the one matter on which I strongly disagree, Mr. Valdez couldn't have put it better. In fact, if I'd read his comments first, I might not have spent ten minutes making part of the same argument in favor of hiring a broker on your side, which I did here:

http://www.hatless.com/blog/archive/000091.html

It sounds like you got a good education, Joel, but if you have to do this again soon, or if you knew Fog Creek would need offices for five other locations in the next few years, would you want to do all that basic reconaissance again, or would you rather just call an agent who will understand what you mean when you ask for "another space like the one [you've] got, only bigger and closer to Penn Station?"

Steve Koppelman
Thursday, April 17, 2003

Great article.  As someone who's just gone through this process myself, the only thing I would add is that Craig's List is also an excellent resource.

Steve Lavine
Sunday, August 31, 2003

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