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A blockbuster Facebook office deal is a make-or-break moment for the future of commercial real estate. 3 leasing experts lay out the stakes.

  • Facebook has been in negotiations for months to lease over 700,000 square feet at the Farley Building on Manhattan's West Side. 
  • Office leasing activity in the city has plummeted, giving the blockbuster deal even more importance as a sign of life in a suddenly lethargic market.
  • The coronavirus has spurred a deep downturn in the economy that is already being felt in the city's commercial real-estate market, prompting a big slowdown in leasing activity.  
  • The rapid expansion of tech in recent years has propelled the city's office market. Real estate execs say that Facebook's big deal is a key barometer. 
  • The crisis also raises questions whether tenants will ever occupy office space the same way as companies and their workforces around the world grow familiar with remote work. 
  • Click here for more BI Prime stories.

Leasing activity in New York City's multi-billion-dollar commercial office market has dropped precipitously as the coronavirus has battered the market and raised questions of when — and even if — tenants can return to the workplace in a post-Covid world.

Amid the growing concerns the crisis will smother what had been robust demand for office space, eyes in the city's real estate industry have turned to a pending blockbuster deal on the West Side that could offer a signal of confidence to the market.

Facebook is in talks to take over 700,000 square feet of space in the Farley Building, a block-long property across Eighth Avenue from Penn Station.

"If that deal happens, then this market will be just fine," said Peter Riguardi, the New York area chairman and president of JLL. "If the deal happens but it's renegotiated, it will be fine, but it will be a trend that every tenant can follow. And if it doesn't happen, I would be very concerned about the market."

Read More: Inside the drama over control of the iconic Chrysler Building: A real-estate tycoon and a prestigious college are renegotiating a critical $150 million deal.

Facebook's NYC real-estate footprint

Last year, Facebook signed on for 1.5 million square feet in the Hudson Yards mega-development just west of the Farley Building, taking space in three new office towers at the project.

For months the $600 billion Silicon Valley-based social media giant has been in negotiations for even more space at the nearby Farley Building, whose interior landlord Vornado Realty Trust is redeveloping to include newly built office and retail space.

Vornado had originally expected to complete the deal with Facebook in early March, according to a source familiar with the negotiations. The talks have continued on as the virus pandemic has brought commerce and social life to a virtual halt. The source expected the lease, which will commit Facebook to pay hundreds of millions of dollars in rent for the space over the life of the lease, to soon be completed.

In a conference call with investors and analysts on Tuesday to discuss Vornado's first-quarter earnings, the company's CEO Steve Roth also hinted that the Facebook deal was still on track.

"There's another large tenant that has been rumored to be that we've been in dialogue with," Roth said, not directly naming the company. "That conversation is going forward aggressively and hopefully maybe even almost complete."

Rapid growth in Big Tech leasing before coronavirus

Recent real-estate decisions by Facebook and other tech companies have worried real-estate executives that they may reconsider their footprint after years of dramatic growth. Facebook on Thursday revealed that the bulk of its over 40,000-person workforce will be asked to work remotely for the remainder of the year, a timeline that appears to show the company is using caution in returning to its footprint.

Read More: Neiman Marcus just filed for bankruptcy, and it could mark a major blow to NYC's glitzy Hudson Yards — one of the most expensive mega-malls in US history. Here's why.

Real-estate executives have expressed concern that tenants may become accustomed to offloading a portion or even the bulk of their workforce to a remote-working model, leading them to drastically reduce their office commitments.

At a minimum, the economic upheaval has appeared to spur a newfound sense of caution in tech companies that have grown rapidly in recent years. Alphabet called off negotiations to expand its San Francisco offices by over 2 million square feet in recent weeks, according to a report from The Information.  

Tech has been a big driver of demand for office space

In recent years the tech industry had become one of the most voracious takers of space in the city, helping to push up commercial rents and spur the construction of new office space.

In 2019, tech firms accounted for 24.5% of the 31.6 million square feet of leasing activity in Manhattan, eclipsing the financial industry as the city's biggest space-taking sector for the first time, according to data from the real estate services and brokerage firm CBRE.

In 2010 tech leasing comprised just 4% of the 24.2 million square feet that was leased in the Manhattan market that year, CBRE said.

"Nothing has buoyed the confidence of landlords more in recent years than tech tenants," said Sacha Zarba, a leasing executive at CBRE who specializes in working with tech firms. "It didn't matter where your building was. If it was attractive to tech, you would stand a good chance to lease your space. If that industry retrenches a bit, it removes a big driver of demand."

The Manhattan office market has slowed rapidly in recent weeks as the virus crisis has battered the economy and shut down daily life.

About 844,000 square feet of space was leased in Manhattan in April, according to CBRE, 64% lower than the five-year monthly average. In the first four months of the year, nearly seven million square feet was leased, a decline of 30% for the same period a year ago. 

So far, however, there are signs that tech continues to snap up space.

After scuttling plans to develop a 25,000 person second headquarters space in Long Island City last year, Amazon purchased 424 Fifth Avenue, a former flagship department store for Lord & Taylor, for nearly $1 billion in March. That property totals about 660,000 square feet. Late last year, before the pandemic hit U.S. shores but had flared in China, Amazon also leased 335,000 square feet at 410 Tenth Avenue.

The commitments of major tech companies absorb millions of square feet in the city, but they also help fuel a larger ecosystem of tenants that occupies an even larger footprint. That means that a decrease in the real estate of just a few big tech players could be multiplied across the market as smaller players in the sector follow suit.

"Those big tech firms do a fantastic job of training and credentialing tech talent on the city," said Matt Harrigan, a co-founder of Company, a space incubator at 335 Madison Avenue that provides offices and community for both startups and more established tech firms. "Google and Facebook spin off talent who start or join other tech ventures that take space. That's what's so important about having the large presence of those companies here."

Have a tip? Contact Daniel Geiger at dgeiger@businessinsider.com or via encrypted messaging app Signal at +1 (646) 352-2884, or Twitter DM at @dangeiger79. You can also contact Business Insider securely via SecureDrop.

SEE ALSO: What to expect when you're back in the office: 7 real-estate experts break down what the transition will look like, and why the workplace may never be the same

SEE ALSO: Major tenants are delaying big leases in NYC as they re-think their office space needs for the post-coronavirus world

SEE ALSO: As WeWork and flex-space rivals stumble, 18 million square feet of space in NYC is at risk. Here's what that means for the real-estate market.

SEE ALSO: BI Prime Edit in Viking Neiman Marcus just filed for bankruptcy, and it could mark a major blow to NYC's glitzy Hudson Yards — one of the most expensive mega-malls in US history. Here's why.

Join the conversation about this story »

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The office as we knew it is dead

  • The coronavirus crisis has proved that companies can remain productive over Zoom. 
  • Remote work will become more common than ever, which will mean fewer people head to the office. 
  • Office designs will change to be centered around collaborative work, and there could be a revival of the suburban office. 
  • To read more stories on the future of the office, click here.

Coronavirus has changed the office forever.

The dense, urban, open-floor plan office has been the defining feature of offices over the last 20 years, with tightly packed flexible-office and coworking locations from companies like WeWork the biggest exemplars of the trend. A recent report by JLL found that up to 70% of all office spaces in the first quarter of 2020 were mostly or partially open floor offices. 

These sorts of offices are nightmares for the transmission of a virus that feeds on density, and they may end up as artifacts of the pre-pandemic start of the 21st century. Remote work, rumored to be waiting in the wings to kill the traditional office since the invention of the fax machine, has finally had its day. 

CEOs, like James Gorman at Morgan Stanley and Jes Staley at Barclays, have questioned the need for their pre-virus office square footage. They've had success running their businesses totally remotely, so why not save a couple of bucks on one of their biggest costs.

But the office won't die altogether. Instead, as the workplace has countless times before, it will evolve.

The evolution will begin with the short-term solutions that will make offices safe before a coronavirus vaccine. These changes will act like a bridge to the future of the workplace: some of these short-term changes will stick and some will eventually look as quaint as this photo of a masked-typist clacking away on a typewriter during the Spanish Influenza epidemic. 

The long-term evolution of the office will be decided in the coming months and years, as companies rethink their business plans to be flexible and resilient to retain productivity in a crisis.

While the loss of life and psychological pain of the pandemic, and the economic crisis following in its wake, are staggering, businesses are seeing it as an opportunity to make foundational changes to how and where they operate.

The choices that companies make now will decide what the office looks like in five years.  

Read more: The coronavirus is a 'nuclear bomb' for companies like WeWork. 10 real-estate insiders lay out the future of flex-office, and how employers are preparing now.

Remote work is here to stay

We're in the midst of the largest work-from-home experiment ever, which will likely be the beginning of a "paradigm shift" towards remote work. Executives and workers alike have seen first hand that business operations can continue online. 

A recent Colliers survey found that 4 in 5 employees hope to work remotely at least once a week after the coronavirus crisis ends. A Gartner survey this March found that 74% of 317 CFOs, half of which oversee the financials of companies with revenue above $1 billion, plan on shifting some employees to permanent remote work. 

Some organizations have already changed their remote work guidelines: Zillow's 5,000 employees will be able to work remotely at their discretion through the end of the year. Others, like Refinitiv, Tradeweb, Nationwide, and the aforementioned Barclays and Morgan Stanley, are signaling that their guidelines will also change. 

"We used to joke about meetings that could have been emails, but now we'll wonder why we can't just do them in our pajamas with our pets on video conference," Nancy Dubuc, Vice Media Group CEO, told Business Insider. "There's a balance of course because some work is actually more productive and better done in person, but it will never need to be 5 days a week, all day every day again."

When these companies begin to shift their business models to accommodate remote work, the office will change. They may cut back on individual workspaces and increase investment in collaborative spaces, turning the office into a cultural and training hub.

"This (more remote work) means adapting some of the office structure to help this way of working succeed, with even more video facilities and more flexible group spaces for brainstorming sessions," Luke Ellis, CEO of investment manager Man Group, told Business Insider

Most leaders aren't considering going fully remote. Instead, they're going to use office space differently, and could potentially even cut back on space. PR giant BCW Global's CEO Donna Imperato is considering taking less office space as more employees work remotely, for example.

"I'm not sure we'll go back to office seating," she said. "We won't need as much real estate because more people will start working from home. That's a cost saving, and they become more productive." 

Read more: The CEO of the third-biggest PR firm BCW lays out how the company will outperform its peers in a tough year

Arnold Levin, director of strategy for the southwest at leading architecture and design firm Gensler, told Business Insider about one health insurance client that had been looking to cut down on their 500,000 square foot office portfolio before the pandemic. Levin produced a plan that utilized desk-hoteling to cut the footprint down to 320,000 square feet, and presented it over a video chat in the midst of the lockdown. 

The CEO told Levin that their workforce had been so effective at working remotely that they actually would prefer to cut back on an all individual workspace in their offices. They're now planning to operate in one 80,000 square foot office building, using it for training, large meetings, and to entertain clients. 

Read more: What to expect when you're back in the office: 7 real-estate experts break down what the transition will look like, and why the workplace may never be the same

Why remote work won't kill the office completely

If every company were to shrink their footprint as drastically as Levin's client, the commercial office market would crumble. This is unlikely to happen for a couple of reasons. For one, if less people came into the office, but offices became less dense to make social distancing possible, companies might still need just as much office space. 

"We, like everyone else, have dreams of reducing our real estate footprint," MSCI CEO Henry Fernandez told Business Insider. However, that dream is constrained by the realities of social distancing.

"The flipside of that is whatever real estate you occupy, you will consume a lot more of it because we have to social distance," Fernandez said.

A whitepaper by Michael Colacino, president at office space company SquareFoot, walks through the reasons why he thinks that the reduction in office space likely won't approach the roughly 25% decrease that's estimated by some experts.

Executives, already most likely to work remotely before the pandemic, would have to give up their dedicated office space, which is usually much larger than a typical employees. Other employees would have to turn to hot-desks (desks that are on a first-come-first-serve basis) and shared workspaces instead of offices or assigned desks.

Hot-desking would lead to an almost-unsolvable coordination problem: how do you make repeatable schedules that prevent the office from getting too crowded while also making sure that the correct people are in the office for any in-person activities, like trainings or meetings? Hot-desking also requires a large amount of cleaning to prevent spread of the coronavirus.

Without workers going remote full-time, the office space won't be able to shrink much. Colacino's model predicts that space demand will shrink about 5%. Given the long length of leases and the high costs associated with breaking a lease or finding a subletter, this shrinkage will happen over a horizon of years, blunting the impact.

Read more: Major tenants are delaying big leases in as they re-think their office space needs for the post-coronavirus world

How do we make offices safe?

Before the advent of a coronavirus vaccine, the near-term return to the office will require lots of operational and technological changes to prevent spread of the virus. The psychological effects of the crisis, and the reality that global catastrophic events are likely to become more common as a result of climate change, means that these changes won't disappear once the virus becomes a distant memory.

"What is going to be the long-term imprint psychologically on any of us?" Levin from Gensler said. "We wake up in the morning, we hear about the virus and we hear about the death tolls. We go to bed, we hear about the death tolls."  

Offices may not feel safe even after a vaccine, and it will be up to companies to make employees feel safe. After 9/11, office buildings in major cities began to add turnstiles and security desks to prevent potential terrorist attacks, and surveillance increased in pretty much every public space. This sacrifice of privacy for security will happen in the office after coronavirus.

Surveillance in a pre-coronavirus office largely meant the watchful eye of a manager trying to see who is scrolling Instagram at their desk or watching a daytime baseball game in the corner of their computer monitor.

After coronavirus, surveillance will include everything from temperature checks at a building entrance to the mandatory installation of contract-tracing applications on an employee's smartphone, all of which are allowed under legal guidance offered by the Equal Employment Opportunity Commission and the Center for Disease Control, according to a Goodwin Procter legal analysis. 

In China, 80% of Class A office buildings are requiring temperature checks at the entrance to the building to prevent the spread of the virus, according to a JLL report

Artificial intelligence company Landing AI has developed demo software that uses video to flag inadequate social distancing in the workplace in real time. AI-enabled video surveillance and utilization monitoring sensors are likely to become much more common.  

The limiting factor for a lot of these changes is their cost, magnified by the economic tightening underway right now.  

"(The costs) add insult to injury within the environment we're operating in," Andrew Sucoff, chair of Goodwin Procter's Boston real estate practice.

Read more: Mandatory temperature-taking is largely seen as a critical way to return workers to offices. But some big NYC landlords are worried about its effectiveness.

The return of the suburban office

Some businesses are considering alternating desks or erecting temporary barriers in the short-term. In the long-term, companies are considering everything from erecting walled, private offices to moving to suburban office spaces. 

A forthcoming report by Dr. Victor Calanog, head of commercial real estate economics for Moody's Analytics REIS traces the last time the suburban office came into, and out of vogue.

In the 1980s, with crime at approaching record highs and federal and state aid to city budgets shrinking, there was a professional-class exodus from the city to the suburbs. Corporations followed suit on a slightly delayed time scale, given the length of typical office leases: from 1989 to 1997, suburban market inventory expanded 1.7 times faster than inventory in cities's central business districts. 

By 1997, suburban office vacancies were 1.8% lower than central business district vacancies, and by 1998, the Building Owners and Managers Association said that the suburban office will be the top real estate investment of the next five to ten years. 

That did not come to pass. City budgets increased, crime fell, and professional workers began to move back to the city. Simultaneously, internet technology and increasing office density lowered demand for office space. The city became the ideal location for office space once again. 

This cycle may repeat itself, with the pandemic replacing crime and budgetary constraints. After 9/11, Morgan Stanley moved employees to offices in Westchester County, New York a suburb outside Manhattan. Before the total coronavirus lockdown, Morgan Stanley moved traders back to the same office again. 

Why is this time different?

The death of the office has been foretold for a while now, but hasn't come to pass.  Dr. Calanog told Business Insider that people have been theorizing the death of the office since the arrivals of the fax machine and the internet.

Levin, from Gensler, told Business Insider that consultants thought the Great Recession would be the catalyst for the future of the office, where "everyone will be like Google." 

The mood at the time is best summed up by a Rahm Emmanuel catchphrase from 2009, by way of Macchiavelli and a pit stop with Naomi Klein: "Never let a crisis go to waste."

"People had short-lived memories," Levin said. "Some changed, but a vast majority went back to cramming as many people into a space as possible." 

This time is different, says Dr. Calanog, because of the international scope of the change and the duration of the shock, which still has no obvious end date. 

Levin said that, instead of focusing on tactical changes or the ideal model for the future office, he's asking clients deep questions about their goals and principles and the threats to their current business model. 

"The best thing is to avoid clever trends and quick fixes, and have organizations face this new reality," Levin said. 

Levin said the organizations that are using this time to realign their business model to be more adaptable will be the most successful going forward. Any changes they make to their office and workplace should flow from that realignment.

"I think organizations are going to see more of a connection with a need to change their business models and how the workplace connects to that for the first time."

SEE ALSO: What to expect when you're back in the office: 7 real-estate experts break down what the transition will look like, and why the workplace may never be the same

SEE ALSO: Mandatory temperature-taking is largely seen as a critical way to return workers to offices. But some big NYC landlords are worried about its effectiveness.

SEE ALSO: 'We should be prepared for a new normal': 3 real estate experts on how the coronavirus is transforming offices and accelerating the rise of industrial property

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A neuroglobin-based high-affinity ligand trap reverses carbon monoxide-induced mitochondrial poisoning [Molecular Biophysics]

Carbon monoxide (CO) remains the most common cause of human poisoning. The consequences of CO poisoning include cardiac dysfunction, brain injury, and death. CO causes toxicity by binding to hemoglobin and by inhibiting mitochondrial cytochrome c oxidase (CcO), thereby decreasing oxygen delivery and inhibiting oxidative phosphorylation. We have recently developed a CO antidote based on human neuroglobin (Ngb-H64Q-CCC). This molecule enhances clearance of CO from red blood cells in vitro and in vivo. Herein, we tested whether Ngb-H64Q-CCC can also scavenge CO from CcO and attenuate CO-induced inhibition of mitochondrial respiration. Heart tissue from mice exposed to 3% CO exhibited a 42 ± 19% reduction in tissue respiration rate and a 33 ± 38% reduction in CcO activity compared with unexposed mice. Intravenous infusion of Ngb-H64Q-CCC restored respiration rates to that of control mice correlating with higher electron transport chain CcO activity in Ngb-H64Q-CCC–treated compared with PBS-treated, CO-poisoned mice. Further, using a Clark-type oxygen electrode, we measured isolated rat liver mitochondrial respiration in the presence and absence of saturating solutions of CO (160 μm) and nitric oxide (100 μm). Both CO and NO inhibited respiration, and treatment with Ngb-H64Q-CCC (100 and 50 μm, respectively) significantly reversed this inhibition. These results suggest that Ngb-H64Q-CCC mitigates CO toxicity by scavenging CO from carboxyhemoglobin, improving systemic oxygen delivery and reversing the inhibitory effects of CO on mitochondria. We conclude that Ngb-H64Q-CCC or other CO scavengers demonstrate potential as antidotes that reverse the clinical and molecular effects of CO poisoning.




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A Tandem Affinity Tag for Two-step Purification under Fully Denaturing Conditions: Application in Ubiquitin Profiling and Protein Complex Identification Combined with in vivoCross-Linking

Christian Tagwerker
Apr 1, 2006; 5:737-748
Research




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Specificity and affinity of the N-terminal residues in staphylocoagulase in binding to prothrombin [Computational Biology]

In Staphylococcus aureus–caused endocarditis, the pathogen secretes staphylocoagulase (SC), thereby activating human prothrombin (ProT) and evading immune clearance. A previous structural comparison of the SC(1–325) fragment bound to thrombin and its inactive precursor prethrombin 2 has indicated that SC activates ProT by inserting its N-terminal dipeptide Ile1-Val2 into the ProT Ile16 pocket, forming a salt bridge with ProT's Asp194, thereby stabilizing the active conformation. We hypothesized that these N-terminal SC residues modulate ProT binding and activation. Here, we generated labeled SC(1–246) as a probe for competitively defining the affinities of N-terminal SC(1–246) variants preselected by modeling. Using ProT(R155Q,R271Q,R284Q) (ProTQQQ), a variant refractory to prothrombinase- or thrombin-mediated cleavage, we observed variant affinities between ∼1 and 650 nm and activation potencies ranging from 1.8-fold that of WT SC(1–246) to complete loss of function. Substrate binding to ProTQQQ caused allosteric tightening of the affinity of most SC(1–246) variants, consistent with zymogen activation through occupation of the specificity pocket. Conservative changes at positions 1 and 2 were well-tolerated, with Val1-Val2, Ile1-Ala2, and Leu1-Val2 variants exhibiting ProTQQQ affinity and activation potency comparable with WT SC(1–246). Weaker binding variants typically had reduced activation rates, although at near-saturating ProTQQQ levels, several variants exhibited limiting rates similar to or higher than that of WT SC(1–246). The Ile16 pocket in ProTQQQ appears to favor nonpolar, nonaromatic residues at SC positions 1 and 2. Our results suggest that SC variants other than WT Ile1-Val2-Thr3 might emerge with similar ProT-activating efficiency.




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Quantification of the affinities of CRISPR-Cas9 nucleases for cognate protospacer adȷacent motif (PAM) sequences [Molecular Biophysics]

The CRISPR/Cas9 nucleases have been widely applied for genome editing in various organisms. Cas9 nucleases complexed with a guide RNA (Cas9–gRNA) find their targets by scanning and interrogating the genomic DNA for sequences complementary to the gRNA. Recognition of the DNA target sequence requires a short protospacer adjacent motif (PAM) located outside this sequence. Given that the efficiency of target location may depend on the strength of interactions that promote target recognition, here we sought to compare affinities of different Cas9 nucleases for their cognate PAM sequences. To this end, we measured affinities of Cas9 nucleases from Streptococcus pyogenes, Staphylococcus aureus, and Francisella novicida complexed with guide RNAs (gRNAs) (SpCas9–gRNA, SaCas9–gRNA, and FnCas9–gRNA, respectively) and of three engineered SpCas9–gRNA variants with altered PAM specificities for short, PAM-containing DNA probes. We used a “beacon” assay that measures the relative affinities of DNA probes by determining their ability to competitively affect the rate of Cas9–gRNA binding to fluorescently labeled target DNA derivatives called “Cas9 beacons.” We observed significant differences in the affinities for cognate PAM sequences among the studied Cas9 enzymes. The relative affinities of SpCas9–gRNA and its engineered variants for canonical and suboptimal PAMs correlated with previous findings on the efficiency of these PAM sequences in genome editing. These findings suggest that high affinity of a Cas9 nuclease for its cognate PAM promotes higher genome-editing efficiency.




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Dopamine transporter trafficking and Rit2 GTPase: Mechanism of action and in vivo impact [Neurobiology]

Following its evoked release, dopamine (DA) signaling is rapidly terminated by presynaptic reuptake, mediated by the cocaine-sensitive DA transporter (DAT). DAT surface availability is dynamically regulated by endocytic trafficking, and direct protein kinase C (PKC) activation acutely diminishes DAT surface expression by accelerating DAT internalization. Previous cell line studies demonstrated that PKC-stimulated DAT endocytosis requires both Ack1 inactivation, which releases a DAT-specific endocytic brake, and the neuronal GTPase, Rit2, which binds DAT. However, it is unknown whether Rit2 is required for PKC-stimulated DAT endocytosis in DAergic terminals or whether there are region- and/or sex-dependent differences in PKC-stimulated DAT trafficking. Moreover, the mechanisms by which Rit2 controls PKC-stimulated DAT endocytosis are unknown. Here, we directly examined these important questions. Ex vivo studies revealed that PKC activation acutely decreased DAT surface expression selectively in ventral, but not dorsal, striatum. AAV-mediated, conditional Rit2 knockdown in DAergic neurons impacted baseline DAT surface:intracellular distribution in DAergic terminals from female ventral, but not dorsal, striatum. Further, Rit2 was required for PKC-stimulated DAT internalization in both male and female ventral striatum. FRET and surface pulldown studies in cell lines revealed that PKC activation drives DAT-Rit2 surface dissociation and that the DAT N terminus is required for both PKC-mediated DAT-Rit2 dissociation and DAT internalization. Finally, we found that Rit2 and Ack1 independently converge on DAT to facilitate PKC-stimulated DAT endocytosis. Together, our data provide greater insight into mechanisms that mediate PKC-regulated DAT internalization and reveal unexpected region-specific differences in PKC-stimulated DAT trafficking in bona fide DAergic terminals.