Is Manhattan becoming to dependent on e-business?
How much of the boom in the Manhattan office market is resulting from explosion of dot-com companies An organization that offers its services exclusively on the Internet, either via the user's Web browser or a client program that must be installed in the user's computer. Amazon.com, Yahoo!, Google and eBay are examples of dot-com companies. and what will happen when many of these start-ups burn through their venture capital?
An analysis by Edward Warren & Company, an exclusive tenant representative broker that closely studies emerging market trends, indicates that a significant portion of the office market boom is due to new e-commerce companies.
"As e-commerce companies go, so may the market," observes Tris Pough, president of Edward Warren & Company.
"The question is not if many in the current crop of Internet companies fail, but when," predicts Pough. "And this is no secret to savvy venture capitalists Venture Capitalist
An investor who provides capital to either start-up ventures or support small companies who wish to expand but do not have access to public funding.
Venture capitalists usually expect higher returns for the additional risks taken. and market observers, who have said that only a quarter or a third of the companies they fund will likely succeed. The others will merge or fold."
In terms of market impact, the Edward Warren analysis shows that approximately 6 percent of the companies occupying space in Manhattan are Internet-related. Thus, if one-third of these companies get into trouble when the inevitable shake-out hits their industry - and this is a conservative estimate - it could affect the balance of negotiating power between tenants and landlords.
"In a Manhattan market where the current vacancy VACANCY. A place which is empty. The term is principally applied to cases where an office is not filled.
2. By the constitution of the United States, the president has the power to fill up vacancies that may happen during the recess of the senate. rate is in the range of four to five percent, there are two tenants chasing every landlord," explains Pough. "If the rate is bumped by 2 percent by the failure of one-third of all Internet companies in a given time period, the vacancy rate jumps to 6 percent to 7 percent. Thus we'd have two landlords chasing every tenant."
"While we are projecting a failure at a third of the Internet companies, we also foresee fore·see
tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees
To see or know beforehand: foresaw the rapid increase in unemployment. that the surviving Internet companies will experience significant expansion, absorbing at least some of the space vacated by dot-com companies that are acquired or go under," says Pough. "Further mitigating mit·i·gate
v. mit·i·gat·ed, mit·i·gat·ing, mit·i·gates
To moderate (a quality or condition) in force or intensity; alleviate. See Synonyms at relieve.
To become milder. this trend are new dot-com companies moving to New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of ."
"Of course, if Internet companies were to fall completely out of favor with Wall Street, the market disruption Market Disruption
A situation where markets cease to function in a regular manner, typically characterized by rapid and large market declines. Market disruptions can result from both physical threats to the stock exchange or a unusual trading (as in a crash). could be quite severe, swinging the Manhattan office market pendulum back to the tenants' side, triggering a notable price correction," says Pough. "Keep an eye on what the venture capitalists do."