Monthly Market Update

Transcription

1 Monthly Market Update December 2015 New York City Office Outlook February 2016 M A N H A T T A N Class A Asking Rents M A N H A T T A N Class A Vacancy Rates $ Jan-14 Jan-15 Jan % Jan-14 Jan-15 Jan-16 $ % $60.00 $ % $ % $0.00 Manhattan Overall Midtown Midtown South Downtown 0.0% Manhattan Overall Midtown Midtown South Downtown MIDTOWN MIDTOWN SOUTH DOWNTOWN BROOKLYN The Midtown Trophy index, after a slight dip in December, is back above $100 per square foot. Leasing activity started the year strong with three leases of 100,000 square foot or greater signed in January. Asking rents remained flat in Midtown South as new construction and renovated product keep rents at record levels. Overall vacancy inched 0.1 percentage points higher, yet Midtown South remains one of the tightest markets across the country. Near-term supply will be kept in check as the construction of 2 World Trade Center will be pushed back. Although new sublease availabilities decreased overall asking rents, the pricing for direct available space increased. High-profile speculative construction projects were announced in the Downtown Brooklyn and Dumbo submarkets. Leasing activity decreased in the fourth quarter, though a few relocations from Manhattan were pending.

2 F e b r u a r y J L L L E A S I N G M A R K E T W R A P - UP MIDTOWN Leasing activity started the year strong as three leases of 100,000 square foot or greater were signed in January. Two of the three leases, however, were renewals potentially pointing to signs that large tenants are becoming more cautious in the nearterm. DLA Piper signed a renewal at 1251 Avenue of the Americas for approximately 200,000 square feet. The law firm will occupy roughly the same amount of space in the building, but will restack its offices on contiguous floors. The Omnicom Group renewed its 167,000-square-foot space at 220 East 42nd Street. In the only large relocation of the month in Midtown, ING Financial Holdings will relocate to 132,400 square feet at 1133 Avenue of the Americas, opening up a block of similar size at 1325 Avenue of the Americas. The space at 1133 Avenue of the Americas was previously occupied by the IRS. With the announcement of Intersection/Sidewalk Labs lease of 67,000 square feet at 10 Hudson Yards, the under-construction tower slated for completion later this year is almost fully committed. Intersection/Sidewalk Labs will relocate from 233 Broadway and 100 Park Avenue. The Midtown Trophy index, after a slight dip in December, is back above $100 per square foot after increasing 1.7 percent month-over-month to $ per square foot. Year-over-year, the Trophy index recorded 7.3 percent growth in average asking rent as the top-tier market continued to outperform the larger market. Midtown Class A rents increased more modestly by 0.4 percent in January (3.6 percent year-over-year) to $80.59 per square foot. Overall Midtown asking rents recorded similar rent growth, bringing the average to $73.90 per square foot. Midtown Class A vacancy rose to 10.7 percent from 10.4 percent in December as several small and mid-sized spaces were added to the market. The Class A vacancy rate, however, remains below the 11.4 percent recorded in January 2015 when a few large blocks added to the market impacted vacancy. The Midtown overall vacancy rate dipped slightly in January to 9.8 percent from 9.9 percent in December. T r o p h y i n d e x c o n t i n u e s t o o u t p e r f o r m t h e w i d e r m a r k e t Midtown Trophy 7.3% Midtown South Class A 4.5% Midtown Class A Manhattan Class A 3.6% 3.5% Downtown Class A 2.3% 0% 2% 4% 6% 8% Year-over-year asking rent growth

3 Relocation starting rent (p.s.f.) F e b r u a r y J L L L E A S I N G M A R K E T W R A P - UP MIDTOWN SOUTH Several notable leases were signed in the beginning of In the largest lease of the month, NY1 News renewed its lease at 75 Ninth Avenue, otherwise known as Chelsea Market, for 82,870 square feet. Dropbox signed a lease to relocate and increase its footprint to 31,270 square feet at 50 West 23rd Street and Quartz Media committed to sublease 25,644 square feet from Weight Watchers at 675 Avenue of the Americas. Additionally, Todd Street Productions signed a short-term renewal at Google s 111 Eighth Avenue for 17,052 square feet at above-market rents. Google has been making significant efforts to vacate the remaining tenants in the building to create expansion space for itself as the company, which recently surpassed Apple as the world s most valuable company, continues its rapid growth. Class A vacancy increased by 0.2 percentage points monthover-month with the addition of 161 Avenue of the Americas and 233 Spring Street to inventory, which are currently undergoing an extensive capital improvement program to combine the two buildings and add special amenities highly coveted by Midtown South tenants. The development site, being renamed One SoHo Square, increased vacancy in the Hudson Square Class A market from 4.9 percent at year-end 2015 to 10.4 percent. Overall vacancy inched 0.1 percentage points higher from the month prior to 6.4 percent, yet Midtown South remains one of the tightest markets across the country. Class A rents were relatively flat from last month averaging $78.41 per square foot as new construction and renovated product on the market push rents to record levels. Overall rents increased slightly to $68.06 from $67.86 per square foot. As rents remain at historic highs across the market, real estate professionals are beginning to speculate about a potential correction, as venture capital tightens and more tenants opt to relocate elsewhere in Manhattan and Brooklyn. S t a r t i n g r e n t g r o w t h slows i n $80 $70 $65.75 $68.86 $60 $50 $40 $30 $57.87 $49.35 $41.64 $ % 17.3% 13.6% 4.7%

4 % of Class A relocations by starting rent tranche F e b r u a r y J L L L E A S I N G M A R K E T W R A P - UP DOWNTOWN The announcement that News Corp. / Twenty-First Century Fox would not be relocating to 2 World Trade Center headlined the start of The media conglomerate will remain at its current locations at 1201 and 1185 Avenue of the Americas for the near term. Additionally, 2 World Trade Center will not commence construction until an anchor tenant makes a commitment, which likely pushes its delivery beyond This news should prove to be a net-positive for the World Trade Center complex until the turn of the decade, as 1, 3, and 4 World Trade Center had a combined 3.7 million square feet available, with 1.9 million square feet available for immediate occupancy, as of January. The overall Class A vacancy remained unchanged monthover-month at 12.0 percent, though its composition changed. A large-block sublease availability at 55 Water Street increased the Class A sublease availability to 2.0 percent from 1.7 percent, while the 74,439-square-foot renewal by American Express at 200 Vesey Street and smaller leases at 180 Maiden Lane and 250 Vesey Street lowered the direct vacancy rate. Class B vacancy increased by 61 basis points to 10.5 percent month-over-month; however, no large blocks (100,000+ square feet) were added to the market. A bump in sublease availabilities resulted in a $0.13 decrease in overall asking rents to $57.60 per square foot from December to January. Direct asking rents increased slightly to $59.39 per square foot due to seven instances of asking rent increases and only two instances of asking rent decreases month-over-month. The Class B sector continues to rise, with rents increasing $0.42 to $49.17 per square foot in January. < $39 $40-$49 $50-$59 $60-$69 $ % 80% 60% 40% 20% L e a s e s w i t h a s t a r t i n g r e n t b e l o w $ 39 p. s. f. h a v e g r a d u a l l y 0% d i s a p p e a r e d

5 N E W Y O R K O F F I C E O U T L O O K February 2016 SUBMARKET STATISTICS Midtown Inventory Class A Class B Overall Vacancy Rate Asking Rent (p.s.f.) Inventory Vacancy Rate Asking Rent (p.s.f.) Inventory Vacancy Rate Asking Rent (p.s.f.) Columbus Circle 17,370, % $ ,926, % $ ,296, % $67.35 Grand Central 39,504, % $ ,701, % $ ,205, % $64.80 Penn Plaza / Garment 18,095, % $ ,093, % $ ,189, % $60.89 Plaza District 85,911, % $ ,175, % $ ,086, % $86.93 Times Square 31,959, % $ ,262, % $ ,221, % $74.70 Total 192,840, % $ ,159, % $ ,999, % $73.90 Midtown South Chelsea 10,592, % $ ,825, % $ ,417, % $56.30 Gramercy Park 10,721, % $ ,260, % $ , % $72.48 Greenwich Village 1,915, % $ ,886, % $ ,801, % $65.40 Hudson Square 4,589, % $ ,057, % $ ,646, % $76.15 SoHo 964, % $ ,765, % $ ,730, % $75.05 Total 28,783, % $ ,795, % $ ,578, % $67.86 Downtown Financial District 14,246, % $ ,448, % $ ,695, % $52.79 Tribeca/City Hall 4,372, % $ ,348, % $ ,721, % $49.50 Water Street Corridor 20,942, % $ ,534, % $ ,475, % $50.77 World Trade Center 18,402, % $ % $ ,402, % $75.84 Total 57,963, % $ ,331, % $ ,294, % $57.47 Manhattan 279,587, % $ ,285, % $ ,872, % $69.07 CLOSED LEASING TRANSACTIONS Size (s.f.) Tenant Address Submarket Type 200,000 DLA Piper 1251 Avenue of the Americas Plaza District Renewal 167,000 Omnicom Group 220 East 42nd Street Grand Central Renewal 132,400 ING Financial Holdings 1133 Avenue of the Americas Plaza District New 82,870 NY1 News 75 Ninth Avenue Chelsea Renewal

6 About JLL JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 230 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in Its investment management business, LaSalle Investment Management, has $56.4 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit About JLL Research JLL s research team delivers intelligence, analysis, and insight through market-leading reports and services that illuminate today s commercial real estate dynamics and identify tomorrow s challenges and opportunities. Our 300 professional researchers track and analyze economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions. Midtown Manhattan 330 Madison Avenue New York, NY Leasing Peter Riguardi Capital Markets Jon Caplan Richard Baxter Research Tristan Ashby jll.com/newyork 2016 Jones Lang LaSalle, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made as to the accuracy thereof. Printing information: paper, inks, printing process, recycle directive.