By Keiko Morris
Multicolored Lego blocks sit in a jumble on a conference-room
table. A plastic bubble gun and a mannequin's leg are on desks at
different corners of the room. Rowdy games of ping pong break out,
often preparation for another few hours of work. Late one
afternoon, two men in T-shirts drop to the floor and do
push-ups--the alternative would have been to have a cup of
coffee.
This could be the office of almost any technology startup
sprouting in Manhattan's popular Midtown South neighborhoods, but
it isn't. This is a tech hub of long-established payments giant
MasterCard Inc., which is based in Purchase, N.Y.
Near Union Square, the unit is one of several that MasterCard
has set up around the world. The thinking of company officials as
they explained it: A vibrant tech center in a hip urban
neighborhood with edgy tech firms allows them to quickly tap into
new ideas and to hire from one of the country's richest talent
pools.
MasterCard is one of several big-name financial services firms
that are opting to set up tech divisions in prime Manhattan
real-estate markets outside of their headquarters because many
increasingly see themselves more as technology companies.
"With payments, we're seeing this huge digital shift," said Kim
Slate, who heads MasterCard's emerging payments technology group
and the 60,000-square-foot tech hub in Manhattan. "In the next five
years you will see more change in payments [than in] the previous
50...We need to think differently, design products differently
[and] design products faster than ever."
Capital One Financial Corp. is relocating and expanding the New
York City location of its experimental product-and-technology arm
called Capital One Labs to an office in the same building where
MasterCard has its tech hub. Last fall, J.P. Morgan Chase & Co.
signed a lease at 450 W. 33rd St. with plans to consolidate its
tri-state area digital teams in a 123,000-square-foot space. And
Barclays PLC is bringing its financial technology accelerator
program, which made its debut in London last year, to the Flatiron
District.
"These bigger businesses have understood that to attract the
best tech talent they have to be in an urban environment and in
locations where young millennials want to be," said Bruce Mosler,
chairman of Cushman & Wakefield Inc.'s global brokerage.
MasterCard's Union Square office has more than 125 employees
with room to grow, said Ms. Slate. The office is designed to hold
about 200 workers.
"I think it's absolutely helping us with finding talent and
retaining top digital talent we already have," Ms. Slate said.
So far, it is the Midtown South neighborhoods that have
attracted many of the tech-driven offices of these established
companies. First-quarter average asking rents rose 5.4% to $63.28 a
square foot from $60.02 for the same period last year, according to
Cushman & Wakefield. The vacancy rate dropped to 7%--the lowest
of Manhattan's three office submarkets. Midtown's vacancy rate was
9.4% and the vacancy rate for Downtown was 10.4%.
Barclays is joining forces with startup accelerator Techstars to
set up an office in the Flatiron District, where 10 companies will
take part in a program aimed at developing financial technology
ideas in the investment banking, wealth management and credit card
industries.
"Inherently, banking is a digital product," said Frank LaPrade,
chief enterprise services officer at Capital One Financial Corp.
"It's how people interact with banks today."
Quite often, these tech offices are testing grounds for
workplace designs that eventually are adopted at corporate
headquarters.
"A bank saying we are no longer really a bank, we're a
technology organization has changed the mentality about front
office and back office," said Justin Mardex, director of workplace
strategy at design firm Ted Moudis Associates Inc. "Those people
are your business. You wouldn't exist without them."
As much as these offices serve as recruitment tools, they also
are places for companies to collaborate with other businesses on
projects.
The team in MasterCard's Union Square tech hub hatched the idea
for the company's Masters of Code competitions, which are regional
weekend events in cities around the globe for developers and
entrepreneurs. Both MasterCard and Capital One Labs have hosted
hackathons and meet-ups in their Midtown South offices.
To be able to host events and to establish a bigger presence,
Capital One Labs is moving from its 5,000-square-foot location at
149 Fifth Ave. to a 40,000-square-foot office at 114 Fifth Ave.
"There is an ecosystem there...and a lot of businesses in the
area we want to learn from and potentially partner with," said
James Patterson, head of Capital One Labs, which has two other
locations--one in San Francisco and one in Arlington, Va., just
outside Washington, D.C. He added, "The goal is to embed into the
Silicon Alley tech community as an authentic participant."
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