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AlleyCat
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Thus begins a recent report by Mark Green, public advocate for the city of New York. Entitled A Plan To Grow New York’s Third Central Business District: Downtown Brooklyn, 2015, the study investigates the competition posed by New Jersey and offers recommendations for building a vibrant, 24/7 high-tech community. Here on Washington Street, smack in the middle of the Brooklyn waterfront, is a neighborhood that has come to be referred to as DUMBO (an acronym for “Down Under the Manhattan Bridge Overpass”) and, thanks to what industry insiders call Silicon Sprawl, it’s rapidly becoming New York’s next Silicon Alley. More than 40 companies have moved in since the beginning of 1999 and more than 20 others are planning to join them before baseball starts up again this spring. Officials at these companies say they are moving for cheaper rents, larger space, and breathtaking views of Manhattan. Some say there’s an additional sense of adventure as well-a sense that they, as young entrepreneurs, are pioneering a new economy in a new industry in relatively unexplored territory. On top of all this, there are economic incentives, too. Just as the U.S. government offered land grants for families to head West way back when, the New York City government offers tax breaks for companies that relocate to Brooklyn neighborhoods-such as DUMBO, Red Hook, Sunset Park, and the Navy Yard-through an economic development program funded by the federal government. “There are so many reasons to move here,” says John Aboud, coeditor of Modern Humorist, an online humor magazine that relocated from Manhattan to DUMBO early last year. “When you sit down and think about all Brooklyn has to offer, it’s hard to imagine why anyone would want to grow a business anywhere else.”
At just about the same time, a friend of Aboud’s who had read about DUMBO suggested that he contact Joe Chan, manager of real estate and business services for the Brooklyn Chamber of Commerce. Aboud had heard that companies were moving into renovated warehouse buildings in the neighborhood and figured he had nothing to lose. When he finally got Chan on the phone, the two really hit it off. Aboud explained that he needed something big enough for 12 employees, with room to grow; Chan said he had just the place, and within days, the two had settled on a 5,000-square-foot parcel in a building on Washington Street. “Five months ago, the Modern Humorist space was legal-document storage, with boxes piled 13 feet high and dust bunnies the size of bowling balls,” Chan says. “Today, it’s some of the nicest space money can buy.” Chan’s assessment turns out to be on the money. The magazine’s new home overlooks the East River, and from just about anywhere in the office, one can see the Manhattan Bridge, the Brooklyn Bridge, the Twin Towers, and the Empire State Building, all in one jaw-dropping, panoramic view. The space is cleaner than a hospital and the new fixtures and exposed brick could be a set out of “Friends.” Throw in three-dozen Internet jacks and T1 connections throughout the building, and the package is complete. The price tag? With a sheepish grin, Aboud states that he pays a monthly rate of $15 per square foot. Chan beams with pride as he hears Aboud bragging about his deal and mumbles something about how Modern Humorist is a “ perfect example” of how a move to Brooklyn can be a “blessing.” For Chan, this is the company line; he’s the man who coordinates the city’s efforts to bring more high-tech companies into Brooklyn. Dubbed “Digital NYC,” this program is an intensive effort too spread digital development across the city. Launched last year as part of Mayor Giuliani’s Commercial Revitalization Plan, the program takes federal funds and redirects them at eight development zones across the five boroughs, four of which are in Brooklyn. The goal, according to Bruce Brodoff, a spokesman for the New York City Economic Development Corp. (EDC), which also oversees the project, is to keep high-tech companies within the city limits. “As rents increase in Manhattan south of 96th Street, many of these firms look to move elsewhere, such as New Jersey, Westchester, or even Long Island,” he says. “This program is our attempt to reverse that trend, to keep our high-tech firms her e in the five boroughs.” Central to this strategy is the city-funded “Relocation Employment Assistance Program” (REAP). As Brodoff explains, companies that move from Manhattan to an economic development zone in one of the city’s boroughs are eligible for tax credits of up to $3,000 per employee every year for 12 years following the move. Other credits provide significant abatements on income and utility taxes, and Brodoff says that, coupled with rents already at the low end of the market, these incentives can lower monthly rent expenses for some firms to as little as $5 per square foot. Such inducements are hard to resist, and a number of Manhattan-based high-tech organizations are giving it a try. Members of the New York New Media Association (NYNMA) are able to receive a discount (undisclosed) on their subscription price if they move outside Manhattan. And at the New York Software Industry Association (NYSIA), president Bruce Bernstein awards a 50 percent membership discount to firms participating in Digital NYC. Bernstein says the discount is the only one of the ways NYSIA is attempting to cultivate a membership base outside Manhattan; this fall, the organization sponsored its annual Software Summit at the Marriott in downtown Brooklyn, and the group has plans to sponsor a number of events in various development locations throughout 2001. “We’re trying to make it so that NYSIA becomes more involved with companies all over New York City,” says Bernstein. “In a city as large as ours, it’s easy to overlook those firms that opt to locate outside of the centers of business. Brooklyn has too much to offer, and we must do whatever we can to include it in the development of our organization and the economy as a whole.” Things turned around when David Walentas, a realtor by trade and president of real-estate development firm Two Trees Management Co., swooped in and purchased a number of buildings on and around Washington Street. In the early 1980’s, Walentas began renting these spaces to artists eager for affordable studios, earning himself a reputation among locals as “the man who saved DUMBO.” Over the next few years, Two Trees made these buildings livable, cleaning out entire floors at a time and discarding tons of detritus, from old engines to rotten trash. Finally, about five years ago, just as the Internet economy was taking off, Walentas had a brilliant idea. If he transformed the buildings into ready to use high-tech “work worlds,” high-tech companies would eventually move in and pay him rents such as he’d never seen. “[My father] felt he could afford to take a long-term, big-picture view of the neighborhood because we owned so much,” says Jed Walentas, now project manager at his father’s firm. “We haven’t seen profits yet, but we know that when we get those buildings filled, when we’re talking about 40 or 50 high-tech companies in each one, then the investment will pay off big time.” But until then, Jed Walentas says he and his dad aren’t about to rest on their laurels. As part of a program called “Downtown Brooklyn Connected,” the duo has committed to working with Brodoff and Chan to market the neighborhood as the city’s new high-tech hotspot. Already, these efforts have yielded huge dividends. At a kick-off cocktail party this summer, more than 700 people descended on Karim Raoul’s new restaurant, Kino Resto-Bar, to celebrate the new neighborhood, and Walentas says he inked a number of new clients that night. Chan and Brodoff are quick to note that revamped marketing efforts in industry publications and at industry events have helped generate some new recruits as well, and that as word gets around, the job will only get easier Walk through the halls of any of the Walentas buildings on Washington and Water streets and ask anyone you see what they think of their new digs. Without exception, you’ll hear raves. At Gigmania, a live-music listing service that relocated to 45 Washington Street last spring, CEO Tyson Daugherty says he’s “sacrificed a tony area code for peace of mind.” Michael Cohn, director of business development at Logicept, an e-business development firm also located on Washington, agrees, rating the facilities as better than those one might find at a four-star hotel or, say, a high-tech incubation building like the one at 55 Broad Street in Manhattan (a.k.a. the New York Information Technology Center). “I don’t think we realized how lucky we’d be when we moved in,” he says. “Forget the view, forget the cheap rent, forget the free-thinking community-the building itself is worth its weight in gold.” Other corporate migrants echo these sentiments but prefer to brag about how moving to DUMBO has improved the quality of life for employees-and improved the business overall. David Manaster, president of Electronic Recruiting Exchange, a human-resources consulting firm that relocated last summer to 100 Water Street, laughs as he discusses how “neat” it is to be able to check out art galleries on his lunch break. Modern Humorist’s Aboud enjoys the galleries as well, but prefers to focus on the facts-since the company moved to Brooklyn, it has grown from 7 to 12 employees and has brought in more revenue than ever before. Still, some of DUMBO’s newest tenants are more guarded when evaluating the decision to move across the river. One executive, who moved just last month and asked to remain anonymous, declined to discuss the financial impact the move would have, and said that while she “loves” her company’s new digs, she longs for the cachet of a 212 area code. Michael Sammut, founder, vice president, and CTO of Four Eyes Productions, a Web development firm at 100 Water Street, says business has been fine but admits that he understands this concern as well. Sammut notes that, from time to time, he, too feels he’s missing out on something by wathching Manhattan from afar. While he says his firm has no plans to move back acrossthe river any time soon, sometimes he wonders what effect such a move might have. “Some
clients will call and they’ll be a little skeptical of the whole
718 thing,” he says. “I, too, admit that sometimes I wish we
had a 212. But you know what? When people give me a hard time, I describe
the place as best I can and find myself using the words ‘gorgeous’
and ‘terrific’ over and over again, so I guess it can’t
be that bad.” Elsewhere
in the Borough In Red Hook, the city has contracted with Pier 41 Associates and OC Construction Corp. to rework three buildings for a total of 200,000-plus square feet of office space is finished, according to Bette Stoltz, executive director of the South Brooklyn Local Development Corp., but much of it should be ready for rental by March or April of this year. When the renovations are done, Stolz says the individual spaces will offer features such as wall-to-wall windows, skylights, central air conditioning and heating, and full Internet access. The promise of features like these lured Denis Piel, CEO of ‘umbershoot, an “ideas development” firm currently located in SoHo, to commit to becoming one of the area’s first tenants. As he inspects a half-finished facility at Red Hook that could someday be his, Piel looks around and describes why he chose Red Hook over DUMBO or another area: “This neighborhood has a casualness that’s very positive-tree-lined streets, families, residential houses,” he says. “I’m not saying DUMBO isn’t great, but we felt Red Hook was a better fit. In our business, ‘fit’ is everything, so we chose accordingly.” For other companies , perhaps the Brooklyn Navy Yard will be a better fit. There, Bernard Dushman, vice president for administration and technology with the Brooklyn Navy Yard Development Corp., says that contractors are working to retrofit a handful of the site’s 40 buildings with features like those found in comparable facilities in DUMBO and Red Hook. To date, Dushman’s organization has set aside more than 65,000 square feet for renovation, but because the property is not subject to any taxes at all, he says his group is prepared to convert twice that amount in no time, should demand persist. Benefits of space in this area include price (lots start as low as $7 per square foot) and security, since the entire complex is gated and kept under 24-hour surveillance. The views aren’t too shabby either-from anywhere on the 264-acre plot, one can see all of Lower Manhattan, Governor’s Island, the Verrazano Narrows Bridge, and Lady Liberty. If neither Red Hook, nor the Navy Yard appeals, there’s also the new high-tech mecca at Sunset Park, where Leah Archibald, marketing director for the Southwest Brooklyn Industrial Development Corp., says more than 60,000 square feet will be available at 269 37th Street, otherwise known as BITC (pronounced bit-see), or the Brooklyn Information Technology Center. Though rents are a bit more expensive here than they are in either Red Hook or the Navy Yard (offers start at $19 per square foot), Archibald says that the available 1,000-square-foot spaces offer tenants access to the vibrant high-tech community that already exists in the BITC building, as well as all of the additional benefits of the restaurants and other cultural establishments that help make Sunset Park one of the most diverse neighborhoods in the borough. The spaces were completed last month, but so far nobody has moved in. Archibald notes, however, that there are a number of offers pending and that the neighborhood should be welcoming its first tenant some time before Valentine’s Day. “We’re way behind DUMBO, but ahead of some of the other neighborhoods in putting this thing together,” she says. “In each and every one of these high-tech zones, all of us are just moving at our own pace.” What’s
Next In the meantime, as the high-tech industry continues to transform the economy elsewhere in the city, residents of DUMBO say they’re psyched for the changes that it will bring to their neighborhood, too. Plans are under way for a slew of new drugstores and dry cleaners, and Chan says upscale grocer Peas & Pickles will be moving into a space down by the waterfront no later than June 1. Locals say they think these businesses will be “awesome for the neighborhood,” and report that they look forward to “benefiting from some of these stores as well.” Even local businessmen seem enthusiastic-Raoul, the owner of Kino, said at the Downtown Brooklyn Connected event this summer that he expects to triple his profits by July 2001, and that the influx of high-tech money should have a trickle-down effect on everyone across the borough. “With all of these companies moving into the neighborhoods, the neighborhoods themselves are sitting on economic gold mines,” he says. “As a result, the new media and high- tech industries benefit everyone.” Only time
will tell if Raoul’s predictions are correct. As Chan so expertly
puts it, Brooklyn’s efforts to lure high-tech business could be fruitless
if the high-tech industry tanks. Regardless of what happens, it’s
clear that King’s County is changing yet again. From DUMBO to Red
Hook, the Navy Yard to Sunset Park, the city’s second-largest cities
in the country-is rapidly becoming a vital part of the Big Apple’s
Internet economy. It’s cheap. It’s pleasant. And it’s catching
on. With a bit of luck-and a bunch of incentives from the government-perhaps
high tech, not just trees, can take root and grow. |