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Floor by Floor, Knotel Gulps Down Manhattan Office Space

Company Says it is Making Use of Management Agreements, Calling Them "Increasingly Important" for Growth
March 12, 2018
Knotel will open three more Manhattan locations in the coming months, after signing agreements with landlords in Chelsea, Gramercy Park and Garment District submarkets. The properties will be open for customers in the second quarter of 2018, according to Knotel.

In propelling its business model forward, the office incubator appears to have hit on a sweet spot in the market: space within smaller, older buildings. Of 29 properties CoStar tracks in Manhattan with Knotel as a tenant, 24 were built before 1930, or about 82.75% of the company’s total office footprint. About 72% (21 properties) carry a typical floor size under 14,000 square feet.

At 102 Madison Ave., it has signed a lease agreement with landlord A. Ruth & Son’s Real Estate Co. for 10,000 square feet on the fifth floor. Andy Weiss of Signature Partners represented Knotel in the transaction. Built in 1917, the Gramercy Park asset sits on the corner of East 29th Street. The 128,281-square-foot, 3-Star office building is fully leased by about 22 tenants, including Blue Fountain Media, Maru Group and Philip Habib & Associates. Knotel’s agreement makes it among the largest lessees in the building.

Knotel has also inked a 6,000-square-foot lease for the fifth floor of 115 W. 30th St., a 166,000-square-foot office property located between 6th and 7th Avenues. Justin Management owns the 3-Star office, which was built in 1912. About 22,000 square feet is available for lease in the building, according to CoStar. Digital Divide Data, Titan Technology Group, Receptive and Jarrett Creative are among the property’s tenants.

Subletting aside, Knotel is paving another path for growth. It is beginning to utilize management agreements. These structures are typically seen in the retail and hotel sectors and grant the operator more day-to-day control with mitigated risk.

Last week, Knotel announced a management agreement for the entirety of the fifth floor of 224 W. 30th St. The floors spans 12,683 square feet. Knotel signed the agreement with ABS, which represented landlord MB Hamptons LLC. MB Hamptons is the New York arm of Beijing’s Shokai Group. The deal was negotiated by an ABS team of John Brod, James Caseley and Alison Miller on behalf of MB Hampton and by Aziz Kabbaj of Mirador Real Estate and CJ Net Inc.’s Jessica Tu on behalf of Knotel.

The management structure benefits both parties, according to Knotel.

"Management deals enable owners to immediately increase income from their spaces by introducing flexibility into their buildings, while allowing Knotel to expand its footprint quickly on favorable terms," Eugene Lee, global head of real estate and business development for Knotel, tells CoStar News.

The management partnerships "perform successfully across floor plates of all sizes” and are becoming “an increasingly important component" of Knotel’s growth strategy, Lee said in a release. He added that more owners and landlords are looking to partner with Knotel to manage their spaces and fill vacancies quickly.

Diana Bell, New York City Market Reporter  CoStar Group   
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