Sabey Earmarks Half of Manhattan Skyscraper for Office Space

Sabey Data Center Properties is planning to replace walls on many floors of the former Verizon building in Manhattan it bought three years ago with floor-to-ceiling windows and turn those floors into office space.

Since the acquisition, the Seattle, Washington-based data center developer and operator has marketed its east-Manhattan skyscraper primarily as data center space. Leasing some of the building as office space has always been in the plans – and there are already tenants with both data centers and offices there – but earmarking 15 floors of the 32-story building for “window-walling” signals an increased focus on offices.

While supply of fully built-out data center space in Manhattan is tight, there are highly connected buildings with lots of space (including Sabey’s) whose owners prefer to sign a lease before spending capital on building out data halls. There is also plenty of relatively low-cost data center space available in New Jersey – just across the Hudson River.

Office space on the island comes at a premium. Commercial real estate services firm CBRE reported in April that Manhattan landlords had increased prices on about 1.4 million square feet of available office space on the island because of high demand, sparked primarily by an influx of technology companies.

Connectivity and Nice Views

John Sabey, the company’s president, said the opportunity to provide offices in such a highly connected building in Manhattan was significant. There are many companies looking for office space on the island, and the building at 375 Pearl Street, with 1 million square feet of floor space total, has plenty to offer.

In addition to connectivity, robust mechanical and electrical infrastructure and the option to have office and data center space in one building, it offers stunning views, since there are no other buildings around that are this tall. “The views up and down the river and back into the city and … Midtown are quite spectacular,” Sabey said.

Most companies in the market for Manhattan offices are in the tech industry, including giants like Google and Microsoft, he said. There is also some interest from Manhattan’s traditional financial vertical. The building would also be suitable for health and life sciences companies.

While the landlord may turn up to 15 floors into office space, it is starting with less than half that. “We will do probably six or seven floors right away, but we have the ability to continue to install windows very quickly if a large user comes along,” Sabey said.

Market Will Decide

Ultimately, the market will decide what the split between data center and office space in the building will be. A little over one floor (about 45,000 square feet) is built-out office space today, and about 150,000 square feet of data center space – a lot of it occupied.

Sabey bought 375 Pearl in 2011 for $120 million in partnership with local developer Young Woo. The company said then it would upgrade power capacity from 18 to 40 megawatts and enhance network connectivity. The building was officially opened for business under its new name Intergate.Manhattan in 2013.

Tenants who have moved in since the opening include telco and managed services provider Winstream and Datagram, a New York-based hosting company whose previous data center in lower Manhattan experienced a prolonged outage after electrical infrastructure in the building was flooded in the aftermath of Hurricane Sandy in October 2012. Datagram now occupies both data center and office space at Intergate.Manhattan.