Monthly Market Update December 2015 New York City Office Outlook August 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 $100.00 Jul-14 Jul-15 Jul-16 20.0% Jul-14 Jul-15 Jul-16 $80.00 15.0% $60.00 $40.00 10.0% $20.00 5.0% $0.00 Manhattan Overall Midtown Midtown South Downtown 0.0% Manhattan Overall Midtown Midtown South Downtown MIDTOWN MIDTOWN SOUTH DOWNTOWN Media and advertising tenants claimed the top three leases in Midtown in July. The Columbus Circle submarket recorded some of the largest changes monthover-month in Class A rent and vacancy. Midtown South availability was tight through July as demand remains strong in the market. Although TAMI companies represent the majority of leasing in Midtown South, two financial services firms committed to relocations from Midtown to Park Avenue South addresses. Downtown leasing activity picked up in July after a slow first half of the year. The education and healthcare sector has accounted for an increased portion of leasing activity year-to-date. BROOKLYN & LONG ISLAND CITY The Outer Boroughs Waterfront witnessed a jolt of leasing activity in the second quarter after a slow start to the year. The largest investment sale of the quarter was the $195.0 million purchase of 24-02 49th Avenue in Long Island City.
A u g u s t 2 0 1 6 J L L L E A S I N G M A R K E T W R A P - UP MIDTOWN Media and advertising tenants claimed the top three leases in Midtown in July. Bloomberg LP expanded by 204,442 square feet at 919 Third Avenue, bringing its footprint in the building to 450,000 square feet. Omnicom Group renewed 64,000 square feet at 220 East 42nd Street following its earlier renewal of 167,000 square feet in the building back in the first quarter of the year. JCDecaux signed a lease to relocate to 46,573 square feet at 350 Fifth Avenue, more than double its 19,000-square-foot office at 3 Park Avenue. The Columbus Circle submarket recorded some of the largest month-over-month changes in Class A rent and vacancy as two floors were returned to the market at One Columbus Circle. Time Warner Cable will vacate its space in the building in early 2017, opening high-end, Central Park view space that has never before impacted the market. As a result, the Columbus Circle Class A vacancy rate increased to 8.1 percent from 7.8 percent in June and the average Class A asking rent increased 4.2 percent month-over-month to $79.89 per square foot. The Midtown Class A average asking rent remained flat monthover-month, increasing less than one percent to $81.75 per square foot. Year-over-year, the Midtown Class A average asking rent recorded a modest 2.4 percent growth rate. The overall asking rent recorded similar month-over-month rent growth as Class A, but increased by a more typical annual average of 4.2 percent to $75.56 per square foot as Class B rents have pushed upward. Vacancy increased slightly during the month to 11.6 percent from 11.4 percent in Class A properties. Overall vacancy increased to 10.5 percent from 10.3 percent during the same time period. M i d t o w n C l a s s A r e n t c h a n g e h a s b e e n t h e g r e a t e s t w h e r e l a r g e b l o c k s u p p l y h a s s h i f t e d Grand Central 390 Madison Ave 11.6% Columbus Circle Midtown Total Times Square One Columbus Circle 1.4% 2.4% 9.6% Plaza District -0.5% Penn Plaza / Garment -4.2% Leasing at 10 Hudson Yards and 7 Bryant Park -6% -3% 0% 3% 6% 9% 12% 15% Year-over-year rent growth
Number of leases A u g u s t 2 0 1 6 J L L L E A S I N G M A R K E T W R A P - UP MIDTOWN SOUTH Midtown South availability was tight through July as demand remains strong in the market. Although TAMI companies represent the majority of leasing activity in Midtown South, two financial services firms committed to relocate from Midtown to new Park Avenue South addresses this month. Winton Capital Management signed the month s largest lease for the top two floors, totaling 34,844 square feet, at 315 Park Avenue South at above-market rents. Of note, the tenant will be relocating from 375 Park Avenue, one of Midtown s premier addresses. As a result of the aforementioned lease, year-to-date there have been five leases signed in excess of $100 per square foot, already exceeding last year s total of four such transactions. Additionally, Silicon Valley Bank will be moving from its current office at 505 Fifth Avenue into 19,269 square feet at 387 Park Avenue South in order to be closer to its technology-based clients. The average Class A asking rent increased 1.7 percent monthover-month to $83.07 per square foot when a high-priced 153,450-square-foot block was added at 315 Park Avenue South. Despite speculation of an impending peak in the market, overall rents continued to rise in Midtown South. Overall pricing increased from $70.43 per square foot last month to $71.32 per square foot as every submarket posted positive gains in rents. With the exception of Greenwich Village, which remained flat, vacancy increased in all Class A submarkets in Midtown South. Class A vacancy rose 0.5 percentage points from last month to 5.8 percent. Overall vacancy rose 0.2 percentage points to 6.9 percent. L e a s e s w i t h a s t a r t i n g r e n t o f $100 p. s. f. o r g r e a t e r s i g n e d y e a r - to-date h a v e a l r e a d y s u r p a s s e d a l l o f 2 0 1 5 4 5 2015 YTD 2016
A u g u s t 2 0 1 6 J L L L E A S I N G M A R K E T W R A P - UP DOWNTOWN Downtown leasing was relatively active in July after a slow first half of the year. The largest new lease of the year for the Downtown market took place in July and was signed by the New York City Department of Finance. The city agency signed on for 182,750 square feet at 375 Pearl Street. The lease will span the entire 26th through 30th floors once renovations are complete at the former Verizon Data Center, which is undergoing a large-scale upgrade that includes floor-to-ceiling windows on the upper floors of the building. 375 Pearl Street boasts close proximity to City Hall and other government buildings, making it an ideal location for the city agency. Other leases signed in the month of July include Weill Cornell Medical College taking 55,000 square feet at 156 William Street, as well as Wildcat Academy Charter School s lease for 23,050 square feet at 17 Battery Place South. The leases provide anecdotal evidence that the fast-growing education and healthcare sector, which traditionally had not been considered office using, is having a positive effect on the New York office market. Historically, the perception has been that Downtown Manhattan s office market lacked two advantages, retail options and connectivity. That is quickly changing as the area is benefitting from an expansive retail development pipeline, which represents roughly 1.2 million square feet of pending or recently completed projects. Perhaps more impressive are the infrastructure improvements that have connected the nearly 10-million-squarefoot office and retail complex at Brookfield Place with the Fulton Street Station via the Westfield World Trade Center shopping center. When Westfield World Trade Center opens in August 16, one of the final hallmark projects that signify the rejuvenation of the Downtown market will be delivered. The retail component of the World Trade Center Transportation Hub, which provides access to 11 New York City subway lines, PATH trains to New Jersey, four World Trade Center office towers, and Brookfield Place, will offer 115 stores spanning 350,000 square feet. This development, in addition to other notable retail completions including the 200,000-square-foot Brookfield Place (2015) and the 65,000-square-foot Fulton Center (2014), will accommodate what had been perceived to be an underserved area. E d u c a t i o n, h e a l t h c a r e a n d n o n p r o f i t l e a s i n g a c t i v i t y 126,471 July 154,757 1st half 2016 YTD J u l y l e a s i n g a c c o u n t e d f o r 45% o f y e a r - to-date a c t i v i t y
Millions of square feet A u g u s t 2 0 1 6 J L L L E A S I N G M A R K E T W R A P - UP BROOKLYN & LONG ISLAND CITY The Outer Boroughs Waterfront witnessed a jolt of leasing activity in the second quarter after a slow start to the year, highlighted by two major commitments at Tishman Speyer and Qatari Diar s newly announced One and Three Gotham Center in Long Island City. Bloomingdale s signed a lease for 550,000 square feet at Three Gotham Center and WeWork signed a lease for 250,000 square feet at One Gotham Center. The two-building, 1.1-million-square-foot office and retail project will be the first ground-up development in Long Island City since 2011, when the 662,000-square-foot Two Gotham Center was constructed by Tishman Speyer. The largest investment sale of the quarter was the $195.0 million purchase of 24-02 49th Avenue in Long Island City. Westbrook Partners in a joint venture with Innovo Property Group acquired the 640,000-square-foot warehouse property from a joint venture between Cammeby s and FBE Ltd. The property is reportedly leased to NYCHA at below-market rents, and highlights the sentiment that office-using demand is expected to grow in the area to the south of the Sunnyside Yards. The cluster of former industrial properties in that vicinity recorded $647.4 million of investment sales activity from July 2013 through June 2016, with additional transactions rumored to be in the market. Another creative tenant made a commitment to Long Island City when Madewell, a subsidiary of J. Crew, leased 59,680 square feet at 30-30 47th Avenue (The Factory). Other apparel retailers that have recently signed leases at The Factory include Macy s, Polo Ralph Lauren, and Gwynnie Bee. Also of note was the 320,000-square-foot renewal by the Fire Department of New York at 9 Metrotech Center in Downtown Brooklyn. 1.5 Long Island City Historical Office Deliveries 1.0 0.5 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 TBD Deliveries Anticipated Deliveries
N E W Y O R K O F F I C E O U T L O O K August 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 17,370,464 8.1% $79.89 7,926,002 4.2% $52.52 25,296,466 6.9% $74.64 Grand Central 39,504,012 14.4% $75.67 32,701,857 7.9% $55.14 72,205,869 11.5% $69.46 Penn Plaza / Garment 18,095,692 11.3% $70.53 28,093,536 9.4% $56.64 46,189,228 10.2% $62.72 Plaza District 85,911,374 11.4% $88.52 17,175,134 5.8% $63.04 103,086,508 10.4% $86.24 Times Square 31,959,230 10.9% $80.83 8,262,479 13.4% $60.79 40,221,709 11.4% $75.99 Total 192,840,772 11.6% $81.75 94,159,008 8.1% $57.38 286,999,780 10.5% $75.56 Midtown South Chelsea 10,592,111 2.4% $72.19 12,825,409 9.9% $60.35 23,417,520 6.5% $62.31 Gramercy Park 10,721,487 7.2% $80.12 11,260,821 6.6% $66.10 21,982.308 6.9% $73.39 Greenwich Village 1,915,423 1.9% $96.71 3,886,073 2.9% $66.68 5,801,496 2.5% $74.24 Hudson Square 4,589,421 11.9% $92.04 6,057,510 8.6% $66.38 10,646,931 10.0% $79.66 SoHo 964,765 5.1% $74.92 3,765,358 8.3% $75.49 4,730,123 7.6% $75.41 Total 28,783,207 5.8% $83.07 37,795,171 7.8% $64.53 66,578,378 6.9% $71.32 Downtown Financial District 14,246,623 11.1% $58.64 23,448,666 11.2% $49.69 37,695,289 11.2% $53.12 Tribeca / City Hall 4,372,411 0.2% $60.00 13,348,744 9.0% $49.59 17,721,155 6.9% $49.68 Water Street Corridor 20,942,226 11.9% $52.54 1,534,114 1.9% $45.78 22,475,340 11.2% $52.46 World Trade Center 18,402,964 13.7% $76.52 0 0.0% $0.00 18,402,964 13.7% $76.52 Total 57,963,224 11.4% $63.12 38,331,524 10.1% $49.63 96,294,748 10.9% $58.24 Manhattan 279,587,203 11.0% $77.73 170,285,703 8.5% $56.78 449,872,906 10.0% $71.06 CLOSED LEASING TRANSACTIONS Size (s.f.) Tenant Address Submarket Type 204,442 Bloomberg LP 919 Third Avenue Plaza District Expansion 182,750 New York City Department of Finance 375 Pearl Street Tribeca/City Hall New 64,111 Omnicom Group 220 E 42nd Street Grand Central Renewal 55,000 Weill Cornell Medical Collage 156 William Street Financial District New
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