Office Outlook New York. Q3 2013

Transcription

1 Office Outlook New York. Q Strong activity Downtown boosts Manhattan market The Manhattan office market is performing well at the edges. Value space, high value space, Midtown South and subsections of Downtown are in demand, while fully priced core Class product is struggling. t the one-year anniversary of Superstorm Sandy, little impact can still be seen in the Downtown market. Leasing activity is higher and vacancy is lower, not only for all of Downtown, but also for those properties that were most affected by the storm. The Downtown Class vacancy rate dropped to 15.5 percent from 16.6 percent last quarter. The New York investment sales market saw significant activity in the third quarter of 2013, with nearly $6.5 billion in deals closed during the quarter. Sales activity experienced a marked shift upward, with much of the activity in the Class Midtown and Downtown office sectors, as well as the multi-family and development site sectors.

2 Jones Lang LaSalle Office Outlook New York Q New York overview The Manhattan office market is performing well at the edges. Value space, high value space, Midtown South and subsections of Downtown are in demand, while fully priced core Class product is struggling. Undercut by large blocks of discounted sublease space, the Midtown Class asking rent average has remained in the mid-$70s per square foot for months. Little activity, however, has occurred at the average; the bulk of leasing activity has been south of $60 per square foot or north of $80 per square foot at the edges. Strong Downtown and Midtown Class leasing drove absorption positive for the quarter, but overall Manhattan absorption remains negative year-to-date. While profits have surged in recent quarters, Wall Street continues to control costs. lack of new sources of revenue in the face of increased regulation, namely the full implementation of Dodd Frank, is the most common reason given for weak employment growth in banking. nalysts have also cited declines in fixed-income trading revenue of 20- to-30 percent compared with a year ago. This late in the recovery, most large Manhattan banks are still long on space. Meanwhile, stagnant employment growth in Manhattan legal services, typically the second driver of the large block Class market, combined with improving space efficiencies have resulted in overall negative absorption for the industry. Over the next year, mergers and acquisitions could further erode the legal industry s total footprint. Growth in legal services where it exists has been in small to medium-sized firms, non-new York-based firms, and those specializing in the legal needs of technology and media companies. These law firms have different space needs than Manhattan s more traditional firms; many are choosing value spaces in less conventional buildings or locations outside Midtown's Trophy inventory. eyond these two vital industries, much of New York s economy is flourishing. Since the beginning of 2009, investors have poured more than $8 billion into New York-based startups. t its current run rate, 2013 will set a five-year high in venture capital deal and funding levels. Large Midtown transactions were down significantly for the quarter; only five leases exceeding 100,000 square feet were signed in the market, compared with eight in the second quarter. The largest lease of the quarter was a sublease of 208,950 square feet by Capital One at 299 Park venue. Of note, two of the largest Plaza District transactions to date Capital One s lease and Morgan Stanley s second quarter commitment at 1290 venue of the mericas were subleases at discounted pricing. (The direct extension at 299 Park venue, in contrast, was in line with current top-tier pricing.) Four of the top five leases of the quarter were renewals, including ING US s renewal of its 144,000-square-foot space at 230 Park venue the only other financial services tenant to place in the top ten leases of the quarter. t the other end of the spectrum, the number of top-tier transactions, which are defined as having starting rents greater than $100 per square foot, increased to 46 year-to-date from 28 in the same period of 2012.

3 Jones Lang LaSalle Office Outlook New York Q t the one-year anniversary of Superstorm Sandy, little impact can still be seen in the Downtown market. Leasing activity is higher and vacancy is lower, not only for all of Downtown, but even for those properties that were most affected by the storm. The Downtown Class vacancy rate dropped to 15.5 percent from 16.6 percent last quarter as the result of strong leasing activity, including three of the top ten transactions of the quarter in Manhattan. Creative industries surged to 34.9 percent of all Downtown leasing as activity from advertising and technology firms accelerated. In Midtown South, Sony announced it will lease approximately 500,000 square feet at the top of 11 Madison venue. The company recently sold its iconic Midtown headquarters, which is expected to be converted to hotel or residential use. Much of Sony s presence in New York is from its music and entertainment divisions, so a move to Midtown South is in keeping with the downtown migration of the creative industries. Several large leases are expected to close by the end of the year from a range of industries, including the lackluster legal and financial services sectors. Much of this activity will be consolidation or renewal, rather than growth. Strong interest remains in value space: Class sublets, discounted base floors, peripheral avenue locations, Class space, and Downtown. Midtown South continues to attract tenants from the creative industries that can still afford the increasingly expensive rents, while others are looking to more conventional buildings in Midtown and Downtown. Employment forecasts, including those for the vital financial services industry, are more bullish for 2015 and Since much of the new product in Midtown is expected to be completed beyond 2016, vacancy should tighten in those submarkets and rents could begin to see significant increases. Tristan shby Vice President, Research Director

4 Jones Lang LaSalle Office Outlook New York Q Capital Markets overview The New York Investment Sales market saw significant activity in the third quarter of 2013, with nearly $6.5 billion in deals closed during the quarter. While sales activity through the first and second quarter was heavily weighted to the Class office sector, the third quarter experienced a marked shift, with much of the activity in the Class Midtown and Downtown office sectors, as well as the multi-family and development site sectors. The third quarter has been the most active quarter for Downtown since 2007 as investors are finding the price per square foot spread (versus Midtown and Midtown South) to be appealing, coupled with greater leasing activity, especially among tenants in the fashion, media and technology industries. Land prices have witnessed an unprecedented appreciation this year with welllocated residential development sites achieving pricing of more than $700 per square foot. There were 33 office transactions closed or under contract in the third quarter. The average Class office sale price per square foot increased slightly to a new record of $1,069, while cap rates remained nearly unchanged at 4.4 percent. Demand for Class product has not abated, rather, there has been a lack of product available to satisfy demand. There are three significant Class buildings currently on the market which are expected to sell this year: 450 Park venue, 717 Fifth venue and One Chase Manhattan Plaza. The debt markets remained steady through the quarter in the face of a very uncertain macro-economic picture. Concerns over the government shutdown, ObamaCare and the debt ceiling have caused the Fed to take a cautious approach to the markets and continue their $85 billion monthly bond buy-back program. Interest rates have remained at record low levels with the 10-year treasury at 2.61 percent, which is only 9 basis points higher than the end of last quarter when the 10-year treasury was at 2.52 percent. Spreads have remained nearly unchanged with 10-year CMS benchmark spreads of 106 basis points, down 14 basis points from the end of the second quarter. Financing remains plentiful as lenders vie for quality product for both income producing properties and development deals. Year-to-date closed sales activity is $15.8 billion while total sales and under contract activity totaled $25.9 billion which is nearly $1 billion more than the total for percent of sales activity has been in the office market, 12 percent of the activity has been in the land/redevelopment sector, 11 percent in multi-family, four percent in retail and eight percent in hotel and other. Notable deals this quarter include: Office Midtown: 7 Times Square: (45.0% partial interest) $684,000,000 ($1,098 p.s.f.) Office Downtown: 100 roadway: $150,000,000 ($395 p.s.f.) Land/Redevelopment: 36 Central Park South: $650,000,000 ($1,757 per buildable s.f.) Multi-family: 305 West 33rd Street (The Olivia): $386,000,000 ($1,159,159 per unit) Portfolio: 90 Lexington venue Jon Caplan Executive Managing Director Richard axter Executive Managing Director

5 Jones Lang LaSalle Office Outlook New York Q New York property clock Midtown South Peaking market Falling market Rising market Stabilizing market Midtown Downtown Clock description This diagram illustrates Jones Lang LaSalle s estimate of the location of each prime office market within its individual rental cycle at the end of the quarter Markets can move around the clock at different speeds and directions The diagram is a convenient method of comparing the relative position of markets in their rental cycle The position is not necessarily representative of investment or development market prospects The position refers to prime face rental values Q positions Midtown South Despite price increases and some tenants decisions to look elsewhere, many large technology, fashion and advertising companies increasingly view a Midtown South location as key to their ability to attract and retain a strong workforce. Long term migration trends among young and increasingly senior professionals to rooklyn, the waterfront of New Jersey and the nearby neighborhoods of Downtown have reinforced Midtown South s future as a vital regional office market. Midtown With the retrenchment of many Midtown tenants, particularly in the legal and financial services sectors, demand for fully priced large blocks of Class space will remain soft. ctivity at the top of the market will continue to flourish as smaller financial firms seek high-quality space in limited Trophy assets. Robust leasing activity is expected through the end of the year including large leases in the financial and legal sectors but fueled largely by renewals and consolidations rather than growth. Downtown The Downtown office market will remain favorable to tenants in the near term as the abundance of Class supply offers significant opportunity and leverage in negotiations with landlords. dditions to this supply of available space, however, should notably slow over the next year as most of the new construction is already accounted for in the current statistics.

6 Jones Lang LaSalle Office Outlook New York Q New York market definitions The New York City market is comprised of three major submarkets: Downtown, Midtown and Midtown South Manhattan. These markets are further divided into three, five and five submarkets, respectively. Downtown submarkets: City Hall/Insurance, World Trade Center, Financial District Midtown submarkets: Columbus Circle, Plaza District, Grand Central, Times Square, Penn Plaza/Garment Midtown South submarkets: Chelsea, Hudson Square, Gramercy Park, SoHo, Greenwich Village

7 Jones Lang LaSalle Office Outlook New York Q New York space statistics Current inventory Under construction YTD completion Overall net absorption YTD overall net absorption YTD overall net absorption (% of inventory) Overall vacancy Overall asking rent (gross $ p.s.f.) Downtown City Hall / Insurance 17,295, ,528 66, % 6.1% $36.35 Financial District 42,892, ,942 (337,849) (0.8%) 12.2% $41.26 World Trade Center 42,702,460 5,865, ,690 (49,094) (0.1%) 18.2% $57.56 Downtown market totals 102,890,667 5,865, ,020,160 (320,113) (0.3%) 13.7% $49.91 Midtown Columbus Circle 25,238,234 1,052, , , % 9.1% $70.74 Grand Central 69,995, ,571 (722,979) (1.0%) 12.8% $58.38 Penn Plaza / Garment 43,553,463 2,173,672 0 (82,843) 136, % 12.6% $49.55 Plaza District 100,107, , , % 12.3% $78.45 Times Square 37,985, , ,331 96, % 9.6% $73.64 Midtown market totals 276,880,552 3,225, , , , % 11.8% $66.79 Midtown South Chelsea 21,420, (211,261) (241,904) (1.1%) 8.9% $56.48 Gramercy Park 22,642, (136,953) (241,488) (1.1%) 7.8% $55.43 Greenwich Village 6,042, ,000 14, , % 9.3% $73.94 Hudson Square 9,539, (28,356) (219,494) (2.3%) 10.6% $54.88 SoHo 4,811, ,646 (44,830) (0.9%) 5.4% $52.25 Midtown South market totals 64,457, ,000 (348,543) (374,897) (0.6%) 8.5% $57.52 Market totals 444,228,244 9,091,452 1,117,000 1,445,891 (587,822) (0.1%) 11.8% $61.11

8 New York Downtown Jones Lang LaSalle Office Outlook New York Q

9 Jones Lang LaSalle Office Outlook New York Q New York Downtown boundaries City Hall / Insurance ordered by Canal Street, the East River, Maiden Lane, roadway, arclay Street and Church Street. World Trade Center ordered by Canal Street, Church Street, roadway, attery Place and the Hudson River. Financial District ordered by Maiden Lane, the East River, State Street and roadway.

10 Jones Lang LaSalle Office Outlook New York Q Downtown Quarter in review Demand for Downtown Manhattan office space accelerated in the third quarter as tenants leased 1.6 million square feet in 64 closed transactions. Total leasing velocity was up by 42.0 percent year-overyear, and at the highest level seen during We expect strong leasing trends to persist as tenants remain focused on value space. This, in our view, will lead to more relocations Downtown in the fourth quarter. Year-to-date, relocations Downtown have totaled more than 1.1 million square feet, already continuing the market s streak of more than 1.0 million square feet of relocations to three years. mong these tenants, 43.5 percent of them are coming from the increasingly expensive Midtown South market. If this proportion from Midtown South holds through the final quarter, it will mark an all-time high level of migrants from that market. Creative industries, led by advertising and technology companies, drove leasing activity in the quarter. Collectively, creative tenants leased more than 450,000 square feet, or 28.4 percent of the Downtown total. Droga5 signed the largest lease in the sector, inking a deal for 91,442 square feet at 120 Wall Street. The ad agency will more than triple in size when it relocates to the Financial District from Midtown South. Meanwhile, financial services, the traditional core of Downtown office demand, accounted for 15.5 percent of total leasing. Scotiabank signed the largest financial services lease in the quarter. The Canadian bank signed a lease for 99,462 square feet at 250 Vesey Street (4 rookfield Place). The new lease will relocate the bank from One Liberty Plaza, which is also in the World Trade Center submarket. Continued leasing strength combined in the quarter with limited amounts of new supply just under 1.2 million square feet were added to the market in the quarter, compared to over 2.4 million square feet in the second quarter to push down availability. Resulting from 1,020,160 square feet of positive net absorption the most in a single quarter since the second quarter of 2004 total availability declined by 85 basis points from the previous quarter to 13.7 percent. However, availability Downtown remains historically high compared to a ten-year average of 11.0 percent. The average asking rent continued to increase, rising by 0.6 percent from the second quarter to reach a new post-recession high of $49.91 per square foot. t this level, the average asking rent is up 33.2 percent from cyclical lows hit in the first quarter of 2010 and just 2.5 percent off the 2008 high. The increase in average asking rents came primarily from a jump in Class rental rates. The Class market, which currently boasts an availability rate 231 basis points below its ten-year average, saw asking rents increase by 3.5 percent to $37.33 per square foot. While these quoted rents are the highest seen since the first quarter of 2009 and 6.5 percent above cyclical lows, rents at Class properties remain 20.8 percent below the 2008 high. Submarket boundaries map Key market indicators Stock Overall net absorption 102,890,667 s.f. 1,020,160 s.f. Overall vacancy rate 13.7% verage asking rent Under construction $49.91 p.s.f. 5,865,630 s.f. Market outlook The Downtown office market will remain favorable to tenants in the near term as a glut of high-end, Class product hangs over the market. While we expect vacancy to trend downward over the next several years, dueling forces will persist in the market. ccelerating leasing velocity and residential conversions will continue to work to the favor of landlords. We note that strong demand for residential units across Manhattan has resulted in a surge in planned units Downtown. Currently, we are tracking over 2.0 million square feet of office space that will likely be converted to residential in the next few years. Conversely, while we anticipate less space to hit the market than in recent years, we estimate that an additional 2.5 to 3.0 million square feet of shadow space remain in the market.

11 Jones Lang LaSalle Office Outlook New York Q Downtown verage rental rates (Class vs. Class ) Overall new deliveries / overall net absorption / overall vacancy rates $ p.s.f. $60 $55 $50 Class rental rate Class rental rate s.f. in millions New deliveries YTD Vacancy Class YTD Net absorption YTD Vacancy Class YTD 18% 16% 14% $45 $ % 10% $ % $30 6% $ Q Q % Significant lease transactions Large availabilities New York City Health and Hospitals Corporation 240,000 s.f. Four World Trade Center Class 55 Water Street 1,304,969 s.f. Scotiabank 250 Vesey Street 99,462 s.f. One World Trade Center Class 852,513 s.f. Droga5 120 Wall Street WeWork 25 roadway 91,442 s.f. 86,322 s.f. 250 Vesey Street Class 834,324 s.f. 225 Liberty Street Class 816,206 s.f. Recent sales transactions One North End venue 502,000 s.f. 100 roadway 393,355 s.f. 180 Water Street 509,000 s.f. 123 William Street 569,160 s.f. Class $398/p.s.f. Class $381/p.s.f. Class $297/p.s.f. Class $234/p.s.f.

12 New York Midtown Jones Lang LaSalle Office Outlook New York Q

13 Jones Lang LaSalle Office Outlook New York Q New York Midtown boundaries Columbus Circle South of West 66 th Street, west of Central Park West and venue of the mericas, north of West 50 th Street, east of the Hudson River. Plaza District South of East 65 th Street, west of the East River, north of 47 th Street, east of Sixth venue. Grand Central South of East 47 th Street, north of East 30 th Street, east of Fifth venue. Times Square South of West 50 th Street, west of Sixth venue, north of West 40 th Street, east of the Hudson River. Penn Plaza / Garment South of 40 th Street, west of Fifth venue, north of 30 th Street, east of the Hudson River.

14 Jones Lang LaSalle Office Outlook New York Q Midtown Quarter in review lthough Midtown leasing slowed in the third quarter, demand for discounted space, including base floors and sublets, and conversely high value space those buildings with taking rents above $80 per square foot drove overall vacancy lower and rents slightly higher in the third quarter. The Class asking rent remained flat during the quarter at $74.36 per square foot, but increased 2.3 percent from $72.70 per square foot at this time last year. bsorption turned positive for the quarter but remains negative for the year. ctivity varied widely between Midtown East and Midtown West, with renewals and subleases taking place mostly in the eastern submarkets while new leases accounted for most of the activity on the West Side. The largest sublease of the quarter was Capital One s 208,950-squarefoot commitment at 299 Park venue space formerly occupied by US. East Side renewals included Weill Cornell Medical School s 182,000-square-foot lease at 575 Lexington venue and ING US s 144,000-square-foot lease at 230 Park venue. In contrast, nearly 73.0 percent of all leasing activity in Midtown West which includes the Penn Plaza/Garment District, Times Square and Columbus Circle submarkets involved new and expansion transactions, the largest of which was the New York Police Department s 65,900-square-foot lease at 469 Seventh venue. Pricing is clearly one factor contributing to the migration west, as tenants remain focused on value. Class starting rents on the West Side are a 29 percent discount to those on the East Side. The Plaza District experienced the greatest growth in asking rent of the quarter in Midtown a 1.7 percent increase to $81.49 per square foot yet this was largely a function of the leasing of lower priced sublease space. With weakness in fully priced, large-block Class space the type of space typically leased by banks and established law firms the Plaza District has increasingly become an enclave for smaller, high-end tenants. The average direct lease in the third quarter within the Plaza District measured 10,000 square feet. s a consequence of the western migration and change in leasing dynamics, Grand Central and the Plaza District now have the highest vacancy rates at 15.7 percent and 13.1 percent, respectively. The lowest Class vacancy rate is 9.0 percent in the Penn Plaza/Garment District, followed by 10.0 percent in Times Square. Overall vacancy declined to 11.8 percent from 12.1 percent in the second quarter as few large blocks of space came to the market. The Class vacancy rate decreased slightly during the quarter to 12.6 percent from 12.8 percent. Class leasing accounted for 70.0 percent of total Midtown absorption. The Penn Plaza/Garment District, with its concentration of Class buildings and low asking rents, accounted for more than half of leasing velocity on the West Side. While overall vacancy within the Penn Plaza/Garment District increased with the addition of Class space to market, the Class vacancy rate decreased to 13.8 percent from 14.4 percent in the second quarter as a result of several new leases. Increased demand, however, has begun to push pricing higher in the submarket; for example, more than ten buildings in the submarket recently increased asking rents by $1 to $5 per square foot. Submarket boundaries map Key market indicators Stock Overall net absorption 276,880,552 s.f. 774,274 s.f. Overall vacancy rate 11.8% verage asking rent Under construction $66.79 p.s.f. 3,225,822 s.f. Market outlook With the retrenchment of many Midtown tenants, particularly in the legal and financial services sectors, demand for fully priced large blocks of Class space will remain soft. ctivity at the top of the market will continue to flourish as smaller financial firms seek high-quality space in limited Trophy assets. t the other end of the spectrum, demand for value space is unlikely to subside as tenants in media, technology and apparel find Midtown options more affordable and viable than Midtown South. Robust leasing activity is expected through the end of the year including large leases in the financial and legal sectors but fueled largely by renewals and consolidations rather than growth.

15 Jones Lang LaSalle Office Outlook New York Q Midtown verage rental rates (Class vs. Class ) Overall new deliveries / overall net absorption / overall vacancy rates $ p.s.f. $100 $90 $80 $70 $60 $50 $40 $30 Class rental rate Class rental rate s.f. in millions New deliveries YTD Vacancy Class YTD Net absorption YTD Vacancy Class YTD 16% 12% 8% $20 $ % $ Q Q % Significant lease transactions Capital One 299 Park venue Weill Cornell Medical School 575 Lexington venue ING US 230 Park venue Empire State Development Corp. 633 Third venue aker otts 30 Rockefeller Plaza 208,950 s.f. 182,000 s.f. 144,000 s.f. 104,200 s.f. 104,161 s.f. Large availabilities 330 West 34 th Street Class 566,058 s.f. 7 West 34 th Street Class 398,204 s.f. 250 West 55 th Street Class 335,883 s.f. 150 East 42 nd Street Class 335,759 s.f. Recent sales transactions 499 Park venue 292,000 s.f. 425 Lexington venue 750,000 s.f. Class $1,318/ p.s.f. Class $885/ p.s.f.

16 New York Midtown South Jones Lang LaSalle Office Outlook New York Q

17 Jones Lang LaSalle Office Outlook New York Q New York Midtown South boundaries Chelsea ordered by 14 th Street, 29 th Street, Fifth venue and the Hudson River. Hudson Square ordered by Canal Street, 14 th Street, Sixth venue and the Hudson River. Gramercy Park ordered by 14 th Street, 29 th Street, the East River and Fifth venue. SoHo ordered by Canal Street, Houston Street, the East River and Sixth venue. Greenwich Village ordered by Houston Street, 14 th Street, the East River and Sixth venue.

18 Jones Lang LaSalle Office Outlook New York Q Midtown South Quarter in review Fewer large transactions, combined with the addition of several blocks, caused the total Midtown South vacancy to increase in the third quarter. Leasing volume declined by almost 25.0 percent from the second quarter while the total vacancy rate pushed upwards by 40 basis points to 8.5 percent. Despite this letup, many tenants still find the current Midtown South office market limited and increasingly unaffordable. Overall asking rents moved higher by 1.4 percent to $57.52 per square foot, which is just off the all-time high of $57.53 per square foot set in In contrast to Midtown, new leases drove transaction volume, accounting for 68.0 percent of the total, while renewals and expansions made up just 30.0 percent. Subleases took up the final two percent. The largest lease of the quarter, however, was a renewal eth Israel Comprehensive Cancer Center s 98,825-square-foot lease at 111 Eighth venue. While transaction volume from creative industries fell in the third quarter, to 55.0 percent from 72.0 percent in the second quarter, it still represented by far the largest share of the market s activity. Technology companies alone accounted for a 34.0 percent share of leased space in Midtown South, followed closely by business services and advertising with 16.0 percent and 13.0 percent, respectively. mong the four large leases signed in the third quarter, two were from apparel companies, which have been extremely active throughout the year. Warby Parker, an online prescription eyewear retailer, moved its headquarters into 54,000 square feet at 161 venue of the mericas and Tory urch, the women s high-end clothing brand, signed a sublease/expansion at 11 West 19th for 52,000 square feet. IMG Worldwide, a global leader in sports, fashion and media renewed and expanded for 72,080 square feet at 304 Park venue South. The current Midtown South Class rent average now eclipses that of Midtown Class at $75.06 per square foot. While asking rents continue to trend upwards, however, the pace of the appreciation has slowed. Year-to-date, overall asking rents have increased by 1.9 percent, compared to 17.8 percent rent growth through the first three quarters of 2012, which was the result of both new and renovated inventory coming to market. While Class only represents 24.0 percent of the market in Midtown South, it accounted for 40.0 percent of all absorption thus far this year. t 101 venue of the mericas, lue State Digital relocated into a full floor, while Two Sigma further expanded its footprint by taking an additional full floor. These two leases contributed to the Midtown South Class recording its fifth straight quarter of positive net absorption. The total Class vacancy rate declined for the third straight quarter to 6.75 percent, its lowest since Significant space additions in the quarter included the General Service dministration vacating 165,612 square feet at 601 West 26th Street, 62,969 square feet hitting the market at 135 West 18th Street, and Interpublic leaving 25,000 square feet at 28 West 23rd Street. In addition, a large number of smaller tenants have recently decided to leave Midtown South as prices continue to rise. Submarket boundaries map Key market indicators Stock Overall net absorption 64,457,025 s.f. -348,543 s.f. Overall vacancy rate 8.5 % verage asking rent Under construction $57.52 p.s.f. 0 s.f. Market outlook Despite price increases and some tenants decisions to look elsewhere, many large technology, fashion and advertising companies increasingly view a Midtown South location as key to their ability to attract and retain a strong workforce. t the close of the third quarter, both Google and Sony were said to be near signing what would be the two largest Midtown South leases of the year. Long term migration trends among young and increasingly senior professionals to rooklyn, the waterfront of New Jersey and the nearby neighborhoods of Downtown have reinforced Midtown South s future as a vital regional office market.

19 Jones Lang LaSalle Office Outlook New York Q Midtown South verage rental rates (Class vs. Class ) Overall new deliveries / overall net absorption / overall vacancy rates $ p.s.f. $80 $70 $60 $50 Class rental rate Class rental rate s.f. in millions New deliveries YTD Vacancy Class YTD Net absorption YTD Vacancy Class YTD 12% 10% 8% 6% $ % $ % $ Q Q % Significant lease transactions eth Israel Comprehensive Cancer Center 111 Eighth venue IMG Worldwide 304 Park venue South Warby Parker 161 venue of the mericas Tory urch 11 West 19 th Street 98,825 s.f. 72,080 s.f. 54,000 s.f. 52,000 s.f. Large availabilities 51 stor Place Class 363,218 s.f. 114 Fifth venue Class 328,774 s.f. 11 Madison venue Class 213,285 s.f. 601 West 26 th Street Class 165,612 s.f. Recent sales transactions 623 roadway 37,869 s.f. 415 West roadway 38,885 s.f. Class $1,056/ p.s.f. Class $1,054/ p.s.f.

20 Jones Lang LaSalle Office Outlook New York Q ppendix New York appendix Statistics Contiguous space New construction and map Glossary

21 Jones Lang LaSalle New York Office Outlook Q ppendix New York Statistics YTD completion Inventory Direct net absorption YTD direct net absorption Total net absorption YTD total net absorption YTD total net absorption (% of stock) Direct vacancy Direct vacancy (%) Total vacancy Total vacancy (%) Under verage asking construction / rent ($ p.s.f.) renovation Downtown Class 0 66,068, ,870 73, , , % 9,126, % 10,238, % $ ,865,630 Class 0 36,822, , , ,624 40, % 3,128, % 3,839, % $ Totals 0 102,890, , ,545 1,020, , % 12,254, % 14,078, % $ ,865,630 Midtown Class 717, ,234, ,440-1,377, , , % 17,003, % 21,856, % $ ,225,822 Class 0 103,646, , , , , % 8,670, % 10,757, % $ Totals 717, ,880, , , , , % 25,674, % 32,614, % $ ,225,822 Midtown South Class 400,000 15,189, , , , , % 985, % 1,025, % $ Class 0 49,267, , , ,712-1,160, % 3,637, % 4,483, % $ Totals 400,000 64,457, , , , , % 4,623, % 5,508, % $ Market Totals Class 1,117, ,492, , ,133 1,104, , % 27,116, % 33,121, % $ ,091,452 Class 0 189,736, , , , , % 15,436, % 19,079, % $ Totals 1,117, ,228,244 1,235, ,843 1,445, , % 42,552, % 52,200, % $ ,091,452

22 Downtown Jones Lang LaSalle New York Office Outlook Q ppendix YTD completion Inventory Direct net absorption YTD direct net absorption Total net absorption YTD total net absorption YTD total net absorption (% of stock) Direct vacancy Direct vacancy (%) Total vacancy Total vacancy (%) Under verage asking construction / rent ($ p.s.f.) renovation City Hall/Insurance Class 0 6,769, , ,386 80, , % 234, % 325, % $ Class 0 10,526,082-44,551-99,316-11,053-68, % 704, % 732, % $ Totals 0 17,295,324 66,045 82,070 69,528 66, % 939, % 1,058, % $ Financial District Class 0 31,740, , , , , % 3,250, % 3,881, % $ Class 0 11,152, , , , , % 968, % 1,346, % $ Totals 0 42,892, ,857 52, , , % 4,218, % 5,228, % $ World Trade Center Class 0 27,559, ,495 80, ,859 15, % 5,642, % 6,031, % $ ,865,630 Class 0 15,143,412 83,332-2,216 66,831-64, % 1,454, % 1,760, % $ Totals 0 42,702, ,827 78, ,690-49, % 7,096, % 7,792, % $ ,865,630 Market Totals Class 0 66,068, ,870 73, , , % 9,126, % 10,238, % $ ,865,630 Class 0 36,822, , , ,624 40, % 3,128, % 3,839, % $ Totals 0 102,890, , ,545 1,020, , % 12,254, % 14,078, % $ ,865,630

23 Midtown Jones Lang LaSalle New York Office Outlook Q ppendix YTD completion Inventory Direct net absorption YTD direct net absorption Total net absorption YTD total net absorption YTD total net absorption (% of stock) Direct vacancy Direct vacancy (%) Total vacancy Total vacancy (%) Under verage asking construction / rent ($ p.s.f.) renovation Columbus Circle Class 0 16,981, ,439-74, , , % 1,538, % 1,877, % $ ,052,150 Class 0 8,256,287 39,085 75,146 34, , % 327, % 415, % $ Totals 0 25,238, , , , % 1,865, % 2,292, % $ ,052,150 Grand Central Class 0 34,882, , ,942 85, , % 4,391, % 5,487, % $ Class 0 35,113, ,328 47, , , % 2,627, % 3,462, % $ Totals 0 69,995, , , , , % 7,019, % 8,950, % $ Penn Plaza/Garment Class 0 11,464,227-60, , , , % 664, % 1,030, % $ ,173,672 Class 0 32,089, , , , , % 3,733, % 4,436, % $ Totals 0 43,553, , ,474-82, , % 4,398, % 5,466, % $ ,173,672 Plaza District Class 0 80,743, , , , , % 8,021, % 10,555, % $ Class 0 19,364,511-76,036 74,000-72,382 31, % 1,487, % 1,719, % $ Totals 0 100,107, , ,166 55, , % 9,509, % 12,275, % $ Times Square Class 717,000 29,162, , , , , % 2,386, % 2,906, % $ Class 0 8,823,153 8,409 15,003-26,197-88, % 494, % 723, % $ Totals 717,000 37,985, , , ,331 96, % 2,881, % 3,629, % $ Market Totals Class 717, ,234, ,440-1,377, , , % 17,003, % 21,856, % $ ,225,822 Class 0 103,646, , , , , % 8,670, % 10,757, % $ Totals 717, ,880, , , , , % 25,674, % 32,614, % $ ,225,822

24 Midtown South Jones Lang LaSalle New York Office Outlook Q ppendix YTD completion Inventory Direct net absorption YTD direct net absorption Total net absorption YTD total net absorption YTD total net absorption (% of stock) Direct vacancy Direct vacancy (%) Total vacancy Total vacancy (%) Under verage asking construction / rent ($ p.s.f.) renovation Chelsea Class 0 4,684, , , % 69, % 69, % $ Class 0 16,735, , , , , % 1,635, % 1,840, % $ Totals 0 21,420, , , , , % 1,705, % 1,910, % $ Gramercy Park Class 0 6,605, ,455-4,752-48, % 329, % 368, % $ Class 0 16,036,958-88, , , , % 1,119, % 1,395, % $ Totals 0 22,642,607-87, , , , % 1,448, % 1,764, % $ Greenwich Village Class 400,000 1,652,500 20, ,060 20, , % 342, % 342, % $ Class 0 4,389,854-10,572-84,094-5, , % 170, % 218, % $ Totals 400,000 6,042,354 9, ,966 14, , % 512, % 561, % $ Hudson Square Class 0 2,102, , , , , % 244, % 244, % $ Class 0 7,437, , , , , % 501, % 770, % $ Totals 0 9,539,581 4,921-91,026-28, , % 745, % 1,014, % $ SoHo Class 0 144, % 0 0.0% 0 0.0% $ Class 0 4,667,691 17,110-64,779 13,646-44, % 211, % 258, % $ Totals 0 4,811,691 17,110-64,779 13,646-44, % 211, % 258, % $ Market Totals Class 400,000 15,189, , , , , % 985, % 1,025, % $ Class 0 49,267, , , ,712-1,160, % 3,637, % 4,483, % $ Totals 400,000 64,457, , , , , % 4,623, % 5,508, % $

25 Jones Lang LaSalle Office Outlook New York Q ppendix Midtown buildings with contiguous space 43 locks 8,528,386 s.f. 330 West 34 th Street 566,058 s.f. 7 West 34 th Street 398,204 s.f. 250 West 55 th Street 335,883 s.f. 150 East 42 nd Street 335,759 s.f. 685 Third venue 328,489 s.f venue of the mericas 536,617 s.f. 55 West 46 th Street 290,863 s.f venue of the mericas 285,872 s.f. 666 Fifth venue 284,930 s.f. 11 Times Square 279,862 s.f. 9 West 57 th Street 247,500 s.f. 622 Third venue 196,487 s.f. 280 Park venue 191,126 s.f. 335 Madison venue 190,824 s.f venue of the mericas 180,689 s.f venue of the mericas 169,753 s.f. 101 Park venue 169,750 s.f. 711 Third venue 167,886 s.f roadway 163,835 s.f. 229 West 43 rd Street 159,527 s.f. 730 Third venue 159,292 s.f venue of the mericas 155,894 s.f. 237 Park venue 121,569 s.f. 10 East 53 rd Street 114,844 s.f. 1 Penn Plaza 113,945 s.f. 510 Madison venue 113,463 s.f. 150 East 42 nd Street 113,060 s.f. 10 East 53 rd Street 109,296 s.f. 330 Madison venue 108,665 s.f. 350 Fifth venue 104,647 s.f. One Park venue 104,351 s.f. 825 Eighth venue 102,648 s.f. 335 Madison venue 101,635 s.f. 112 West 34 th Street 235,594 s.f. 919 Third venue 152,935 s.f. 450 West 33 rd Street 222,037 s.f. 450 West 33 rd Street 138,905 s.f. 114 West 47 th Street 209,176 s.f. 2 Park venue 134,119 s.f. 299 Park venue 206,493 s.f. 31 West 34 th Street 133,080 s.f. 475 Fifth venue 198,158 s.f venue of the mericas 125,700 s.f. Contiguous blocks greater than 100,000 square feet

26 Jones Lang LaSalle Office Outlook New York Q ppendix Midtown South buildings with contiguous space 8 locks: 1,596,307 s.f. 51 stor Place 363,218 s.f. 114 Fifth venue 328,774 s.f. 11 Madison venue 213,285 s.f. 601 West 26 th Street 165,612 s.f. 395 Hudson Street 160,000 s.f. 245 West 17 th Street 132,000 s.f. 249 West 17 th Street 120,000 s.f. 90 Fifth venue 113,418 s.f. Contiguous blocks greater than 100,000 square feet

27 Jones Lang LaSalle Office Outlook New York Q ppendix Downtown buildings with contiguous space 18 locks: 7,613,295 s.f. Four World Trade Center 1,034,969 s.f. One World Trade Center 852,513 s.f. 250 Vesey Street 834,324 s.f. 225 Liberty Street 816,206 s.f. 180 Maiden Lane 728,736 s.f. 85 road Street 637,127 s.f. 225 Liberty Street 612,536 s.f. One World Trade Center 492,984 s.f. One New York Plaza 324,759 s.f. One Liberty Plaza 242,356 s.f. 123 William Street 179,523 s.f. 250 Vesey Street 147,736 s.f. 25 roadway 130,037 s.f. 26 roadway 129,464 s.f. 200 Liberty Street 125,075 s.f. 60 Hudson Street 121,218 s.f. 40 Rector Street 103,572 s.f. 11 roadway 100,160 s.f. Contiguous blocks greater than 100,000 square feet

28 Jones Lang LaSalle Office Outlook New York Q ppendix Market CD under construction Market/building Class Developer/owner R Pre-leased Major tenants signed Net rent Delivery date CD Downtown One World Trade Center Port uthority of NY & NJ/ Durst 3,020,630 s.f. 57.0% Condé Nast, China Center, GS N/ 2014 Four World Trade Center Silverstein Properties 2,845,000 s.f. 64.9% Port uthority, City of New York N/ 2013 Midtown 501 West 30 th Street Related 1,700,000 s.f. 77.3% Coach, L Oreal, SP N/ West 55th Street oston Properties 1,052,150 s.f. 54.1% Morrison Foerster, Kaye Scholer N/ ryant Park Hines/Pacolet Miliken 473,672 s.f. 0.0% N/ N/ 2014 Midtown South CD totals 9,091,452 s.f. 59.9%

29 Jones Lang LaSalle Office Outlook New York Q ppendix Manhattan CD select sales Midtown 499 Park venue Midtown South 623 roadway Class Class R 292,000 s.f. R 37,869 s.f. uyer merican Realty dvisors uyer Emmes sset Management Seller Hines Seller ISE Realty Price per s.f. $1,318 Date sold July 2013 Price per s.f. $1,056 Date sold ugust 2013 Midtown South415 West roadway Midtown 425 Lexington venue Class Class R 38,885 s.f. R 750,000 s.f. uyer Centurion uyer JP Morgan sset Management Seller Willet Seller Hines Price per s.f. $1,054 Date sold July 2013 Price per s.f. $885 Date sold July 2013

30 Glossary Jones Lang LaSalle Office Outlook New York Q ppendix

31 Jones Lang LaSalle Office Outlook New York Q ppendix Common real estate terms ctive requirements: Tenants actively seeking space in the market verage asking rent: Quoted at a gross price exclusive of tenant electricity based on a weighted average of available space vailable space: Existing space that is being actively marketed for immediate or future occupancy, including both direct and sublease space uild-out: The cost of configuring and finishing new space in accordance with a tenant s specifications uild to suit: method of leasing property whereby the landlord builds a new building in accordance with a tenant s specifications Capital improvement: ny major physical development or redevelopment to a property that extends the life of the property. Examples include upgrading the elevators, replacement of the roof and renovations of the lobby Class: uilding classification system broken down by Trophy, Class, and C buildings. Location, building amenities, mechanical / HVC systems, age of building and tenant roster are some of the components that determine an office building's class Concessions: Cash expended by the landlord in the form of rent abatement, build-out allowance or other payments to induce the tenant to sign a lease. The level of concessions fluctuates with supply and demand conditions in the market and is up for negotiation in a similar fashion to rental rates Contiguous space: djoining office space Delivered buildings: uildings that have completed construction and are ready for tenant build-out. May or may not yet have a Certificate of Occupancy Direct rent: Rents quoted directly from the landlord on vacant space Effective rent: The rental rate actually achieved by the landlord or tenant after deducting the value of concessions from the base rental rate paid; usually expressed as an average rate over the term of the lease Face rental rate: The asking or nominal rental rate published by the landlord Gross leases: The quoted rents include tax and operating costs (property taxes, insurance and maintenance expenses) Hard cost: The cost of actually constructing property improvements Indirect (soft) costs: Development costs other than material and labor costs, which are directly related to the construction of improvements, including administrative and office expenses, commissions, architectural, engineering and financing costs Lease: legally binding agreement whereby the owner of real property (i.e., landlord) gives the right of possession to another (i.e., tenant) for a specified period of time (i.e., term) and for a specified consideration (i.e., rent) Leased space: Existing space under contract, regardless of if it is occupied; also includes subleased space NNN leases: The quoted rents do not include tax and operating costs (property taxes, insurance and maintenance expenses) Net absorption: Net change in occupied space between two dates measured as square footage. (i.e. a measure of the total square feet leased over a period of time taking into consideration office space vacated in the same area during the same period) Occupied space: Total supply minus available space Operating expense: The actual costs associated with operating a property, including maintenance, repairs, management, utilities, taxes and insurance Preleased space: Space that has been leased prior to construction completion date or Certificate of Occupancy date

32 Jones Lang LaSalle Office Outlook New York Q ppendix Proposed construction: uildings are proposed when permits are in place, site is being actively marketed but significant base building has not yet commenced. Proposed asking rents are not included in market calculations Shell space: The interior condition of the tenant's usable square footage when it is without improvements or finishes. Shell construction typically denotes the floor, windows, walls and roof of an enclosed premises and may include some HVC, electrical or plumbing improvements but not demising walls or interior space partitioning Sublease space: Leased space that is being actively marketed by the tenant under contract to another party Tenant at will: One who holds possession of premises by permission of the owner or landlord, but without agreement for a fixed term Tenant improvement allowance (TI): Improvements to land or buildings to meet the needs of tenants. May be new improvements or remodeling, and may be paid for by the landlord, the tenant, or shared Total supply: The entire area of an office building comprised of both usable space and an allocated portion of the common area Turn key project: project in which the developer is responsible for the total completion of a building (including interior design and construction) or demised premises to the customized requirements of a future owner or tenant Under construction: uildings are under construction when significant work is underway from ground up development (i.e. steel is going up) Under renovation / rehab: uildings are under renovation / rehab when significant base building renovation is underway Vacant space: Direct existing space being actively marketed for immediate occupancy as of the survey date, not including sublease space

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