Midtown South Manhattan Office, Q3 217 TAMI-sector resurgence drives improved quarterly leasing Leasing Activity 1.14 MSF Net Absorption.9 MSF Availability Rate 1.8% Vacancy Rate 6.9% Average Asking Rent $71.9 PSF *Arrows indicate change from previous quarter. MARKET OVERVIEW Large deals continued to prove elusive in Q3 217, keeping leasing activity for the quarter at 1.14 million sq. ft., 8.8% below its five-year historical average. Transactions below 25, sq. ft. remained the driving force for deals completed in Q3 217, making up 59% of all leasing activity. The average asking rent saw no change on a quarter-over-quarter basis, but is up 4% from a year ago. The availability rate rose a marginal 1 basis points (bps) to 1.8%, although it stands substantially higher than its late 215 cyclical low, largely due to new product. Although the market has seen activity from a wide variety of tenants year-to-date, TAMI tenants regained their status as the market s driving force this quarter. TAMI leasing activity more than doubled quarter-over-quarter, accounting for 48% of all Q3 217 activity. Figure 1: Top Lease Transactions Size (Sq. Ft.) Tenant Address 98,59 (RE) Group Nine Media 568 Broadway 59,355 (E) Google 85 Tenth Avenue 59,14 Justworks 61 West 26th Street 56,894 (R) RadicalMedia 435 Hudson Street 53,731 (E) Squarespace 225 Varick Street Renewal (R), Expansion (E), Renewal and Expansion (RE) Q3 217 CBRE Research 217 CBRE, Inc. 1
LEASING ACTIVITY Figure 2: Leasing Activity Historical MSF 7. 6. 5. 4. 3. 2. 1.. Q1-Q3 21 211 212 213 214 215 216 217 Q4 Figure 3: Leasing Activity By Submarket s Sq. Ft. 35 5Y Quarterly Avg. Q3 217 3 25 2 15 1 5 Figure 4: Net Absorption Historical MSF 2.5 2. 1.5 1..5. (.5) (1.) (1.5) (2.) 21 211 212 213 214 215 216 YTD 217 Q3 217 CBRE Research 217 CBRE, Inc. 2
NET ABSORPTION Figure 5: Quarterly Net Absorption By Submarket s Sq. Ft. 3 25 2 15 1 5 (5) (1) (15) (2) Figure 6: Sublease and Direct Availability Rate Historical % 14 Direct Sublease 12 1 3.1 8 6 4 7.7 2 21 211 212 213 214 215 216 217 AVAILABILITY Figure 7: Availability Rate By Submarket % 16 14 12 1 8 6 4 2 Q3 216 Q3 217 Midtown South Q3 217 CBRE Research 217 CBRE, Inc. 3
Figure 8: Average Asking Rent Historical $ per Sq. Ft. Overall 8 7 6 5 Sublease $71.9 $58.15 4 3 29 21 211 212 213 214 215 216 217 Figure 9: Average Asking Rents By Submarket $ per Sq. Ft. 1 Q3 216 Q3 217 Midtown South 8 6 4 2 Figure 1: Concession Values Rent Abatement and T.I. Allowance* $ per Sq. Ft. 9 25, SF+ Average 8 7 6 5 4 4 6 8 1 12 14 Months *This study examines all direct new leases larger than 25, RSF with a term length of at least 1 years (omits renewals and expansions). Q3 217 CBRE Research 217 CBRE, Inc. 4
AVERAGE ASKING RENT % 12 1 98 96 94 92 9 88 86 Figure 11: Taking Rent Index Historical 93.3 TAKING RENT INDEX Q3 217 CBRE Research 217 CBRE, Inc. 5
INVENTORY AT A GLANCE DEFINITIONS Availability Space that is being actively marketed and is available for tenant build-out within 12 months. Includes space available for sublease as well as space in buildings under construction. Asking Rent Weighted average asking rent. Concession Values The combination of rent abatement and T.I. allowance. The graph is for new leases for raw space of 1, sq. ft. or greater consummated over the past 3 months Leasing Activity Total amount of sq. ft. leased within a specified period of time, including pre-leasing and purchases of space for occupancy, excluding renewals. Leasing Velocity Total amount of sq. ft. leased within a specified period of time, including pre-leasing and purchases of space for occupancy, including renewals. Net Absorption The change in the amount of committed sq. ft. within a specified period of time, as measured by the change in available sq. ft. Rent Abatement The time between lease commencement and rent commencement. Taking Rent Actual, initial base rent in a lease agreement. Taking Rent Index Initial taking rents as a percentage of asking rents. This graph represents a 6-month rolling weighted average (for size and month). T.I. Tenant Improvements. Vacancy Unoccupied space available for lease. SURVEY CRITERIA CBRE s market report analyzes fully modernized office buildings that total 5,+ sq. ft. in Midtown South, including owner-occupied buildings (except those owned and occupied by a government or government agency). New construction must be available for tenant build-out within 12 months. CBRE assembles all information through telephone canvassing and listings received from owners, tenants and members of the commercial real estate brokerage community. CONTACTS Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.