Downturn Be Damned: Crypto Firms Hardly Fazed In Quest For Office Space
Crypto's crash from the astronomical highs it enjoyed in recent years caused layoffs and bankruptcies in the industry, but ever-confident crypto companies are barely deterred from their steady pace of office leasing in some of the top markets in the U.S.
Riding high after years of price run-ups, crypto-related companies went on a leasing binge earlier this year, taking office space in New York, on the West Coast and in South Florida, but the industry’s fortunes took a turn along with the broader economy this spring.
Token values are down, industry bankruptcies up and reports of fraud are rife. Even so, crypto is still looking for space, though perhaps not with quite as much gusto as before, say brokers who rep landlords and tenants in the space.
"The winners are going to win and the losers are going to lose," Current Real Estate Advisors co-founder Brandon Charnas told Bisnow. "Obviously it's a volatile time, but our clients are still moving forward with their leases, because they still want to open offices in New York."
Besides, Charnas said, a lot of the companies that his company works with aren't tied to the volatility in crypto because they build blockchain products.
"They're building technology for the future, and they're bullish on that future," he said.
In December, Current represented crypto venture capital fund a16z in taking nearly 34K SF in the SoHo district of Manhattan in a 10-year lease, where the company is "putting a ton of money into its office space," Charnas said.
On the West Coast, JLL Managing Director Brittan Hawken sees a similar dynamic.
"Crypto companies don't seem to be worried," said Hawken, who works in the company's National Technology Practice Group in San Francisco, specializing in blockchain companies, among other tech clients.
"That said, a lot of technology companies have slowed hiring," she said. "We've seen some crypto companies either pause or maybe slightly downsize their space requirements, but I haven't seen more of an impact on my crypto clients than my other tech clients."
In short, brokers say their clients are ready to soldier on, whatever the short-term outlook.
Crypto companies themselves, however, are mum: None of them — including crypto exchanges Binance, Coinbase, Jupiter Exchange and others — responded to queries about their physical space plans.
The current tumult has seen the dollar value of bitcoin, the largest cryptocurrency by market cap, down nearly 58% since the beginning of 2022, reaching a low for the year in mid-June. As of Thursday, the digital currency traded just over $20K, down 30% over the previous 30 days.
Ether, the second-leading digital token, fell to below $900 in mid-June. Though ether has recovered to around $1,150 as of Thursday, it is nevertheless down about 76% from its all-time high in November.
But the tumult in the crypto industry is more than just the sinking price of headline tokens. Some crypto-related businesses are having a tough run as well.
Major cryptocurrency lender Celsius Network froze withdrawals in mid-June, while Maple Finance, another crypto lending platform, said on Tuesday that it is facing liquidity pressures. Earlier, Babel Finance disclosed liquidity problems and halted withdrawals, and hedge fund Three Arrows, heavily exposed to crypto, suffered heavy losses recently.
Big bitcoin miners, such as Marathon Digital and Riot Blockchain, sold more bitcoin than they produced in May to reduce debt, which could put further downward pressure on the value of bitcoin, Decrypt reports.
On top of all that, billions in traditional currency have been stolen so far this year in an assortment of crypto-scams, Mashable reports.
For its part, the industry is trying to put a good face on the current tumult, often characterizing it as normal volatility.
“The down periods are certainly challenging, though they are also often the periods where the most meaningful projects get nurtured and built,” he said.
The geographic focus of the crypto industry is still New York, Current Real Estate Advisors Senior Managing Director Rob Kluge said, however volatile the industry might be at the moment.
"When you have an industry like blockchain Web3, which is still in its infancy and growing, companies need to be near the VC money, marketing companies and engineers, which is here," Kluge said. "Many of them are from San Francisco and they're refocusing on coming to New York."
New York is definitely a hub, but crypto companies are still interested in San Francisco and other markets that generally attract tech, Hawken said, since New York isn't the only place with tech talent and capital.
"Austin is also on a lot of companies' radar, and a lot of times people think about Miami," she said. "I personally haven't seen a lot of my clients go down there, but it's a talking point."
For its part, the city of Miami has made an effort to attract crypto companies, with Mayor Francis Suarez selling the city as a crypto hub, an effort that seems to be bearing some fruit. Earlier this year, Blockchain.com inked a lease to occupy 22K SF in the Cube Wynwd development as its new Miami office.
“Companies in the finance and tech sectors make up the largest share of new-to-market office lease transactions [in Miami],” Tere Blanca, CEO of Miami-based Blanca Commercial Real Estate, which represented Blockchain in the deal, told Commercial Property Executive.
Wherever they find space, crypto companies' needs may evolve over time, but Hawken expects that there will be consistent themes in their site selection.
"Everyone's slightly different, based on their culture and what they're trying to achieve, but security is always very high on their list," Hawken told Bisnow. "It's a priority for the industry that not just anybody can just walk into their space off the street."
Flexibility in their space — such as the ability to expand as needed — as well as shorter lease terms, will continue to be important to crypto, she said.
"The mandate is still an open office, but not a 15-year lease," Charnas agrees. "Crypto companies want to do two- or three-year deals, but they are unwilling to sacrifice quality of space for that."
The current volatility might also help well-capitalized crypto companies get better deals on their office space, said Starr Associates partner Shaun Pappas, who has represented both crypto tenants and landlords in New York.
"Landlords are open to potentially reducing commercial rents at this point to bring in tenants," Pappas said.
The volatility this time isn't just about crypto, he said. Considering how many workers still want to work from home, along with wider economic stresses such as interest rates and inflation, landlords are looking to make deals.
"Crypto companies looking for space might be feeling some pain based on the fact that the currencies are down, but they also might get a better deal at this point," Pappas said.