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Housing the High-Techs
Landlords discover need to be flexible with high-flyers
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Business New Haven
4/17/2000
By: Michele Beck
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Until just last August, NeuVis Inc. was a small start-up company that employed a half-dozen software developers. In August, after four years of development, the company's product was finally launched.
Today, just a little over six months later, NeuVis employs upwards of 240 workers - a growth spurt not uncommon among high tech companies.
The responsibility for housing the burgeoning company fell to Kevin Townsend, the company's senior vice president for
finance and administration. Townsend's saga of piggybacked moves and wheeling and dealing for space is typical of what many technology companies must contend with these days as they struggle to accommodate their phenomenal growth, while planning for the future.
NeuVis initially occupied 6,000 square feet of space in a building in Shelton. It didn't take long, however, before the company was squeezing 50 people into a 30-person space. “We were busting out at the seams,” says Townsend.
At that point the company made an interim move to another Shelton location in which it occupied an entire floor of the building - 34,000 square feet. It was only a month, though, before they had outgrown that. Fortunately NeuVis was able to expand into some space available across the street.
Townsend reports that as of the latest reckoning, NeuVis had just signed a lease for another 100,000 square feet of space in the facility across the street.
Explains Townsend: “We had to sell a real-estate agent and a developer just like you would a venture capitalist. I had to make presentations. You're looking for tremendous commitments with no revenues. In Boston or Silicon Valley, people are used to doing this, but not here.”
This need for commitment to hold or rearrange space - without a guarantee of immediate income - is one of the most challenging aspects real estate people face when working with start-up technology companies. To make matters even more thorny, many high-tech firms need to be able to move very quickly. Says Townsend, “We couldn't wait for a space commitment.”
\drop cap\eMarketWorld is a two-year-old firm (founded under a different moniker) that deals in Internet conferences and trade shows. Eight months ago the Richmond, Va.-based company opened an office in Fairfield.
Vice President for Administration James Milby notes that as eMarketWorld has grown, it has been very difficult to find landlords who can accommodate the company's needs for flexibility - “particularly in your [southern Connecticut] marketplace.
“It's not that you want to hurt your landlord, but you can't anticipate your growth,” he says. “You may expand your staff twenty-fold.”
The real estate firm of CB Richard Ellis has been representing 300 George Street in New Haven. The newly remodeled building houses 550,000 square feet of space, and has been redesigned with high tech in mind.
Says CB Richard Ellis Associate Peter Shiue, “We're putting companies on separate floors in 10,000 to 15,000 square feet and giving them the opportunity to expand into the remaining 50,000 square feet of the floor.” Shiue says that in a situation such as this he will give a high-tech tenant first crack at the space, but may reserve the right to put it on the market in six, nine or 12 months.
Milby says that he would “never ask a landlord to hold space.” Instead, he looks for situations where the landlord has enough space, distributed among a number of buildings, perhaps, that tenants could be moved around in order to provide him with contiguous space when the need arises.
Even moving into another nearby building that could be networked to is a possibility. “It's not the ideal, but it's an acceptable situation,” he says.
What are companies willing to pay for this kind of unusual flexibility and commitment on the part of a landlord? “They pay market rents, are looking for a fair market rate,” says Bob Adnopoze, vice president of the Beazley Co., Realtors, although he adds that in some cases the companies know they will have to pay more in order to get what they want.
“We got lucky,” says Townsend. “We found a developer willing to partner with us on a long-term basis [the Fusco Corp. of New Haven] and got a fair market rate.” But he adds that cost was secondary, and that he would have been willing to pay more.
\drop cap\Right up there with the need for flexibility and quick expansion capability is a technology firm's demand for state-of-the-art cabling, both telecommunications and data. In fact, Shiue says that access to fiber-optic cabling is the No. 1 requirement of high tech companies. Milby says it's the first question eMarketWorld asks when considering a property.
Jeffrey Gage, senior vice president with Albert B. Ashforth, a commercial brokerage house in Stamford, says that the optimum is fiber-optic cabling run both vertically and horizontally in the building (through all floors and throughout each floor), and high-speed broadband access to the Internet.
Many buildings, of course, are not so equipped. However, a building that is capable of being made “smart,” and a landlord willing to make it so will suffice.
Closely related to the need for the latest in cabling is technology companies' requirement that there be some kind of redundancy of power - ideally more than one kind.
“Most of these companies have advanced computer systems, and need a good emergency back-up generator so that they are not out of business in case something happens to the power,” explains Shiue. “System safeguards are key for these guys.”
Gage adds that an additional type of redundancy is provided when a building is located in an area serviced by two power grids.
Something else most high tech companies look for in a prospective space is an open floor plan - a large, loft-like space that can be rearranged over and over again using temporary office dividers.
“An open plan is so important,” says Milby. Otherwise, “You'd be tearing walls down and putting them up.” Many high-tech firms, including NeuVis, prefer to work in teams. Such a work style is utterly incompatible with a rows of small individual offices.
Gage adds that most open spaces also happen to have high ceilings, which bring with them yet another important advantage: they permit the hanging of cable trays, which make it easy to access the building's wiring and change it when necessary.
\drop cap\In terms of location, the quality most often sought by technology firms is easy access to New York. The high-tech industry in this part of the country began in New York, where start-ups took over lofts in abandoned manufacturing buildings in Brooklyn and Manhattan. As the rents in such buildings sky-rocketed (they are now around $42 per square foot, says Adnopoze) the dot.coms began to move out into the suburbs. “Their market is still the New York City market,” Adnopoze points out.
These people frequently have to go into the city to make presentations, says Gage. “New York is still a hub.” He adds that the young people who work for high-tech firms work long hours and want easy access to restaurants and a social life. “They can't afford to be remote.”
So as high tech moves further and further from the city, easy accessibility to the highway - or, better yet, Metro North - have become important considerations as firms ponder locations.
Shiue adds that certain types of high-tech firms also place a considerable emphasis, when considering a location, on the presence of other similar firms.
“Telecommunications companies like to be near other telecommunications companies, and no one wants to be the first one in a building,” he says. “A big question is, 'Who else is in there?' If there are not three or four others [like them] in there already, they're not interested.”
Shiue notes that, oddly, computer firms don't seem to make such a conscious effort to cluster. “If they do tend to congregate, it's just because they have come to the same conclusions about what is a good space,” he says. “It's not a conscious effort to be together.”
With their daunting list of requirements, it is worth asking whether the availability of not just any space, but appropriate spaces, has not played a key role in the concentration of high-tech firms in some of our communities - and their notable absence in others. BNH
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