Study reveals tech tenants will pay to stay.

A recent study of Downtown's high-tech companies revealed that contrary to certain projections, most are opting to remain in New York City, and many are willing to pay higher rents if 1andlords will accommodate their specific high-tech needs.

The purpose of the study, conducted by Julien J. Studley, Inc. and the Downtown Alliance, was to obtain a clearer picture of the current and future leasing habits of more than 700 technology companies located south of Chambers Street in Manhattan, the area that comprises the Information Technology District (ITD). The study is one of several proactive measures to prevent what landlords from all over New York City fear the most - a mass exodus of high-tech companies to the outer boroughs and New Jersey.

According to survey respondents, low real estate costs are one of Downtown's most important benefits. Forty-seven percent said the number one reason for locating Downtown was the cost of real estate, with community ranking second, the city's Plug 'n' Go program ranking third, and tax incentives ranking fourth.

The study also reveals that 40 percent of high-tech tenants prefer to keep their businesses in Downtown's ITD, and more than half prefer to stay in Silicon Alley. Interestingly, only 7.2 percent responded that they considered moving to New Jersey, and only 4.1 percent considered the outer boroughs.

However, companies that indicated that they will remain in Manhattan said their plans are contingent on very specific infrastructure provisions referred to as "intelligent building features." Respondents indicated that redundant power sources, fiber optic cables and energy efficient HVAC were the most sought-after features. Surprisingly, almost two-thirds of Downtown technology tenants do not currently have redundant telecommunications wiring.

Of those interviewed, 52 percent responded that they would pay additional rent to have their preferred intelligent building features added to their buildings, with 63 percent willing to pay up to $1 per additional foot.

The results of this study present building owners with an opportunity to get ahead of the high-tech tenant curve. By installing these intelligent building features, they are not only more likely to retain their current and expanding high-tech tenants, but also attract new ones.

"It is important for landlords to anticipate high-tech tenant needs because these tenants are vital to the continued growth of the ITD and Silicon Alley," said Sharon Greenberger, vice president of economic development for the Downtown Alliance. 'Moreover, the optimistic economic forecast for the high-tech and new media industries present an even greater reason for New York City landlords and service providers to cater to high-tech tenants so that we retain this ever-expanding industry segment."

Seen as a microcosm of the city's booming high-tech and new media industries, the outlook for the ITD bodes well for the rest of New York City. In fact, a full 80 percent of respondents reported that they will require additional space within the next five years. Furthermore, an overwhelming majority of respondents expected to see an increase in revenues in 2000, with 29 percent expecting to generate more than $5 million in 2000. Staffing levels are also expected to increase significantly in 2000, with 20 percent of respondents expecting to have between 21 and 50 employees, and a full 28 percent expecting to have more than 50 employees.

The Downtown Alliance fosters and supports the growth and contentment of high-tech tenants in the ITD. Of those interviewed, a majority expressed satisfaction with the Downtown community. Among the aspects that technology tenants found most favorable were transportation, proximity to clients, and the concentrated technology community.

Wayne LaGary, executive managing director with Julien J. Studley's Downtown office, said "This survey clearly shows that while technology tenants may eventually populate sub-markets throughout Manhattan, Downtown's core group of technology tenants will seek to expand where they are, contributing to the strength of this market in the future."