Cryptocurrency firms are filling up New York City's office space as they look to stake a claim for the long haul in the Big Apple, competing with Wall Street to become the next financial hub.
Andreessen Horowitz, one of the largest venture capital firms in the world, signed a long-term lease in December for 33,560 square feet at 200 Lafayette Street in NYC for its $3.1 billion crypto fund.
Other crypto firms are setting up shop, too: Chainalysis leased more than 77,000 square feet at 114 Fifth Avenue; Blocktech leased space at 55 Wall Street; Cipher Mining leased at One Vanderbilt; Arca, a digital asset manager, leased space at 75 Rockefeller Plaza; and Coinbase opened its first NYC office for 30,000 square feet at 55 Hudson Yards shortly after it went public last April.
“We have a ton of demand,” Brandon Charnas, co-founder of Current Real Estate Advisors, who brokered the deal with Andreeson and other crypto firms in NYC, told Yahoo Finance. “We're getting a ton of calls for portfolio companies that are NFT-based, Web3-based and blockchain-based where a ton of those companies are opening up space in New York.”
One of the major forces driving crypto firms to set up shop in NYC: luring the best employees. Charnas said companies are looking at office space to nab top engineers as well as an event space.
“What better way to compete for those engineers than to have an incredible space for them to go to that represents the brand, that represents the company, that says more than just it's a place to work, it's a place that shows the ethos of the brand,” he said.
Office space is becoming important to woo investors to raise more money to invest in new crypto companies and ink deals themselves, he added.
“Let's not just have an office space for ourselves,” he said. “Let's have an office space that also contains an event space, a place where we can host founders, as an incubator for founders. That's how we're going to be able to win the best deals.”
Chainalysis is one crypto firm that set up shop in New York, looking to capitalize on talent with an eye toward the city as a new crypto capital.
"As the financial capital of the world and an emerging tech hub, New York is the logical home for cryptocurrency businesses and other organizations investing in web3 and the future of finance,” said Michael Gronager, cofounder and CEO of Chainalysis, in an email to Yahoo Finance. “As Chainalysis continues to grow, we plan to tap into the city's deep talent pool."
As New York competes with Miami to entice start-ups, venture firms, and crypto exchanges, NYC Mayor Eric Adams — a crypto enthusiast who accepted his first three paychecks in cryptocurrency — has pledged to make New York the forefront for crypto to lure talent, create jobs, and boost the local economy. Adams’ positive rhetoric surrounding crypto and similar comments from other local politicians are creating confidence in the business community and luring crypto firms, Charnas said.
"As the historical epicenter of finance in the U.S., NYC is home to a lot of talent and investors from the financial services and technology industries that have naturally transitioned into crypto, so it was clear that investing in our office space here would have long term benefits as we grow," said Hisham Elhaddad, managing partner of HOF Capital, a venture capital fund that invests in blockchain technology companies, in a statement to Yahoo Finance.
Last year, NYC attracted $6.5 billion of total funding for crypto companies, ranking it first among all cities in the U.S. with nearly half of the country's total funding for crypto companies, according to data provider CB Insights.
And Charnas said crypto firms aren’t just testing the waters, they’re looking to create a footprint for the long haul.
“Let's not just sign a short-term lease, let's sign a ten-year lease in New York City,” Charnas said of the firms he’s dealing with. “That, combined with rhetoric from the local government, signal that New York City is big and we're putting our flag down in New York City because it is going to be a hub for these types of businesses.”
It’s also a bright spot for the New York office market, which is struggling to come back from the pandemic. The total availability rate for the market hit 18.5% in the first quarter, up from 18.1% in the fourth quarter and a new post-2005 high, according to global commercial real estate company Avison Young.
“Not only are the investment firms long on prime office space, the new industries and companies emerging to service crypto — like media and banking — are creating new demand for office space,” Charnas said.
Companies are also discussing how to pay portions of their lease for office space with crypto and offering landlords novel forums to participate in the upside they see when valuations soar. Charnas said landlords are offering to take one Bitcoin a month for rent from tenants. He also said sophisticated landlords are speaking with crypto firms and those that invest in crypto to get educated on the valuation and economics of the companies that would be potential tenants.
“They're the new tenants that are leasing office space,” Charnas said, “and they're here to stay.”
Jennifer Schonberger covers cryptocurrencies and policy for Yahoo Finance. Follow her at @Jenniferisms.