Funded Like Finance, Scaling Like Tech: How Crypto Firms Are Handling The Office Search
Companies born out of blockchain technology, like those involved in cryptocurrency and NFTs, as well as web3 operations, are increasingly looking to lock up office space in New York as a way of luring talent and indicating to investors they have stability for future growth.
But even in a tenant-friendly market, with record-high availability, some landlords are still skittish to offer space to companies that in some cases are younger than 2 years old and, despite high valuations, don’t yet have established credit.
“Landlords are inherently conservative, and they're scared of things they don't understand,” said Current Real Estate Advisors Senior Managing Director Rob Kluge, who said his firm brokered at least 10 deals for crypto-related companies in the city in the last year. "A lot of landlords don't understand web3 and crypto — it’s very new, it's very technical. They don't understand what they're getting, despite the fact that a lot of these companies are publicly raising a lot of money."
Current co-founder Brandon Charnas helped arrange the deal that saw Andreessen Horowitz, also known as a16z, lease 34K SF at 200 Lafayette St. in December for its $3.1B crypto fund.
“We've had to have the founders of these companies, get on the phone and walk the landlord through their financial statements, because [sometimes] some of the money's being held in crypto,” Charnas told Bisnow.
He said at times, they’ve worked with firms that are just 18 months old but have a valuation north of $1B.
“Burn rate is a big thing landlords are curious about," Charnas said. "The more sophisticated they are, the more bullish they are on these types of tenants.”
After CommonWealth Partners bought 441 Ninth Ave., a new, 700K SF West Side office building, for just over $1B late last year, the first deal it has struck at its new property is with a digital asset and crypto technology firm, Bisnow can first report.
Fireblocks inked a deal for 10K SF for new, pre-built space on the 15th floor, in a deal brokered by CBRE, whose Rocco Laginestra and Rob Wizenberg represented the tenant, while Evan Haskell represented the landlord.
Fireblocks is just the latest in a line of crypto lease deals in some of Manhattan's most sought-after submarkets. Last summer, cryptocurrency trading platform Coinbase subleased 30K SF from Point72 at 55 Hudson Yards. Cryptocurrency and blockchain startup Chainalysis subleased 40K SF at 114 Fifth Ave. last year, then doubled its space in January.
Crypto firms want high-end space on flexible terms, brokers who have worked with them said, as well as the ability to easily scale up and down. For many of these companies, they are looking for their first office, a key part of their rapid growth strategy.
“Many of these companies are very fast-growing, so the prebuilt was very attractive for them because they can get into it and be in space quickly," Haskell said of the Fireblocks deal at 441 Ninth. "But what they really liked about the building is the building will allow them to scale while still not being such a monster building that they feel like they get lost in it."
Haskell didn't disclose terms of the deal, but said that particular floor is asking $130 per SF for prebuilt space. He said Fireblocks is the first fintech company to take space at the property, which is also leased to Peloton and Lyft, but the leasing team is in conversation with at least six other companies of that nature, he said.
“Coinbase is just down the block at Hudson Yards … There's a lot of crypto, fintech, cyber tech or new wave of technology that is looking a lot at the West Side; they want premier office space and still be connected to Midtown ... and to be close to the banks,” he said. “A lot of the [engineering] talent comes from New Jersey — Jersey City, Hoboken and whatnot. And so a lot of that engineering talent, the ability to come across the river into Penn Station makes sort of this location very attractive.”
Haskell, along with others who spoke to Bisnow for this story, likened the wave of crypto tenants to the wave of traditional tech companies, like Google and Facebook, taking their first spaces in the city well over a decade ago.
“They're funded like finance, but they scale like tech,” Kluge said. “They start off at 5K SF, because they have 25 to 50 people … then immediately they're like, ‘OK, we need 25K SF in a year, we're going to be 50 to 75K SF over the next coming years.”
Boosters of the nascent sector are facing a flurry of unflattering headlines in recent days. Crypto assets have shed more than $800B in value over the last month, NBC News reports. Meanwhile, the sale of NFTs dropped to a daily average of about 19,000 last week, a 92% decline from a peak of around 225,000 back in September, The Wall Street Journal reported. Tales of people being bilked out of millions in crypto-related scams are piling up.
But Matthew Fetta, the chief operating officer of Coinfund, a company that invests in blockchain technologies, said he doesn’t expect there to be a drop in office demand or a change in how landlords see these kinds of companies.
“Over the course of the next six to 12 months, the prices of digital asset instruments, whether it's NFTs or other instruments, could moderate a little bit, but the amount of capital coming into this space is still tremendous,” he said, though he expects macro trends like interest rate rises, global conflict and sell-offs in the equity markets are more likely to have an impact.
“Given some of the potential economic and geopolitical headwinds we might, in the course of six to 12 months, see a pullback either in demand from digital asset firms or landlords becoming more conservative," Fetta said.
Coinfund was founded in Brooklyn, but operates as a decentralized global firm, Fetta said; it leased its first physical office in a 3K SF prebuilt suite at 5 Bryant Park last year. The reason for the space is to offer employees, most of whom are under 35, a place to work — as well as a space to host investors.
The company has been around since 2015, and even though he expects younger firms to come up against more challenges working with landlords than Coinfund, it hasn't been easy for Fetta's firm.
"The conversation was definitely probably a little bit more challenging than it might have been for a firm in traditional finance,” he said. “I think for us, it might have been a little bit easier than for some other firms that might be younger, because we have a fairly longstanding income statement. We have years of tax returns, we have very strong credit ratings because we've been around for so long."
He said the firm has a remote-first approach, but it is increasingly seeing an office as a key part of development and training.
“We do have a number of folks who are earlier on in their career … [it’s about] giving people the opportunity to come into the office and giving young folks the opportunity to come in and to work directly with the CIO or to work directly with some of the heads,” he said.
New York's office culture has been a draw for firms, too, said JLL Managing Director Brittan Hawken, who works in the brokerage’s national technology practice group out of San Francisco and specializes in blockchain companies.
She has represented at least four crypto firms that have a presence in San Francisco and that are expanding in New York City, and is active with several others looking for space.
“New York is definitely high on the list for San Francisco-based companies to expand, it seems like they're having an easier time hiring, recruiting and retaining engineers in New York,” she said. “Overall, I would say that New York has just come back in terms of the office culture faster than San Francisco, so maybe they're expanding headcount in San Francisco just as fast as New York, but they need more space in New York because more people want to be in the office.”
Kluge and Charnas said New York City Mayor Eric Adams' bid to position the city as a business-friendly and crypto-welcoming location is a key part of its office growth. Adams received his first paycheck in January and immediately converted it into ethereum and bitcoin, making good on a campaign promise. He used Coinbase to convert the funds, and he said in a statement he wants the city to be the center of “cryptocurrency and other financial innovations,” per the New York Post. Freshman Rep. Ritchie Torres, who represents the Bronx, has been a vocal proponent of technology, too.
“More than half our deals at this point are crypto-based companies, and I think that gives us a reputation, and it helps us, you know, attract more business and clients or partners,” Kluge said. “We are making strategic introductions, and presenting deal flow to crypto-related VCs, so we’re part of the community and adding more value than just real estate."