A Tale of Six Cities

The tech industry is also making inroads into the city; both Google and Yahoo have opened research facilities there in recent years. Meanwhile, New York mayor Michael Bloomberg is pushing to make the city attractive to biotech firms. He offered more than $13 million in city funds to help build the new East River Science Park, which broke ground in mid-October, plus tax incentives worth more than $250 million over 25 years.

How to cope with the sky-high rents? Experts say you won't find space for less than around $40 per square foot anywhere in the city, but you may be able to trim costs by moving around a bit. Randall ultimately found a bigger site at a 15 percent discount to his original deal by moving across town to the new New York Times building, in a less upscale area. More subleased space, which usually goes at a discount to current rates, may also become available if investment banks continue their layoffs as they retrench from subprime losses.

There is also some relief coming on the supply side; 6.2 million square feet of new space is expected in the next two years, and more after that, including the Freedom Towers, as the rebuilt World Trade Center will be known. For 2008, PPR forecasts that rents will rise by only 4 percent — a deal by New York standards.

New York City

• Avg. rent per sq. ft., Class A: $75.06

• Avg. rent per sq. ft., other classes: $44.99

• Large employers (2005): New York Presbyterian Healthcare, Citigroup, JPMorgan Chase, Verizon, Federated Department Stores

• Percent of population over 25 with bachelor's degree or higher: 34.5%

• Percent with advanced degree: 14.1%

• Median home value: $458,700

• Venture capital invested in 2007 (through Q3): $1.2 billion

Sources: Reis Inc.; U.S. Census Bureau; Crain's New York Business; PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report, Data: Thomson Financial

Charlotte, NC
Anchored by the corporate headquarters of Bank of America and Wachovia, Charlotte is the second-largest financial center in the United States after New York. Charlotte reigns supreme, however, when it comes to demand for office space: for the first three quarters of 2007 its downtown office-vacancy rate hovered around 3 percent, the lowest in the country, according to CB Richard Ellis. At the same time, Charlotte has seen an influx of out-of-town landlords. Steve Gassaway, head of CBRE's Charlotte office, estimates about 40 percent of the downtown inventory has turned over in the past few years, pushing rents up by about 30 percent, to more than $30 per square foot in the better buildings. "We have seen cases where a landlord would rather have tenants leave than lower the rents and mess up expectations," says John Stubbs, a broker with Jones Lang LaSalle. "But it hasn't completely flipped to where it's entirely a landlord's market, either."

For the most part, though, Charlotte is happy to steer clear of comparisons to Manhattan, since one of its big selling points is being "one of the cheapest places to live and to run a business," says Jeffrey Edge, senior vice president of economic development for the Charlotte Chamber of Commerce. That, plus an educated workforce, an international airport, and good weather make it an attractive spot for everything from corporate headquarters to manufacturing facilities to back-office functions. (Fortune 500 companies that call Charlotte home include Duke Energy, Nucor, and Family Dollar.) Some 700 international companies, particularly ones based in Europe, also have operations in the area, thanks to Charlotte's direct flights to the UK and Germany.

Incentives don't hurt. Microban International got a $45,000 state grant, while digital-photo processor Shutterfly, based in Redwood City, California, received a $250,000 state grant and another $3.6 million in future tax incentives when it chose Charlotte as its East Coast hub.

For most companies in the area, the space crunch downtown is easily alleviated by moving outside the city center. Rents in the area near the airport, where Shutterfly chose to locate, are in the low-$20s per square foot, with "a nice product, and it's not like you're in the suburbs," says Stubbs.

Still, as the central business district becomes more desirable, local officials are eagerly awaiting the 2.6 million square feet of new construction due on the market starting in 2009. "The lack of space downtown is probably what will hold us back the most in the next year or so," says Edge. (Of course, some space may free up sooner, with both Bank of America and Wachovia announcing layoffs as part of the post-subprime fallout.)

Charlotte, NC

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