Manhattan renewal activity totaled 3.4 MSF, boosting total leasing to a first .... Spotify's 378,819-SF lease at Four Wo
MARKETBEAT
Manhattan Office Q1 2017
Economy
MANHATTAN OFFICE
The New York City economy continued to record healthy job growth in the first quarter of 2017; as of February, payroll employment was 7,300 jobs higher than at the end of 2016. Office-using employment increased by 3,200 jobs, led by growth in the financial services sector, which climbed by 4,700 jobs. Employment in the TAMI (technology, advertising, media and information services) sector slowed with only 1,900 jobs created in the first two months of the year. Throughout this cycle, job growth in New York City continually outpaced the nation as a whole, but for the first time in nine years, the city is tracking at approximately the same growth rate as the rest of the country to start 2017.
Economic Indicators Q1 16
Q1 17
New York City Employment
4.3M
4.4M
New York City Unemployment
5.2%
4.3%
U.S. Unemployment
4.9%
4.8%
12-Month Forecast
*Average of first two months of Q1 2017
Market Indicators (Overall, All Classes) Q1 16 Vacancy
9.0%
9.4%
-805,770
876,284
Under Construction (SF)
12.0M
12.6M
Average Asking Rent*
$72.40
$73.37
Net Absorption (SF)
12-Month Forecast
Q1 17
Market Overview
$50 Q1 2017
The Manhattan office market was highlighted by positive absorption and strong leasing activity in the first quarter of 2017. New leasing activity totaled 7.6 million square feet (MSF), 16.0% higher compared to this time last year. Downtown accounted for the largest spike in activity and captured three of the five largest Manhattan new leases of the quarter. Manhattan renewal activity totaled 3.4 MSF, boosting total leasing to a first quarter 17-year high of 11.0 MSF. Despite the robust level of activity, Manhattan’s overall vacancy ticked up by 20 basis points (BPS) to 9.4% during the quarter, triggered by a 27.8% increase in available sublease space, the bulk of which occurred in Midtown South. Manhattan posted 876,284 square feet (SF) of positive absorption in the first quarter of 2017, a result of above-average Midtown and Downtown leasing offsetting an increase in available space.
2016 Q1 2017
Midtown leasing increased by 2.9% from this time last year to nearly 4.3 MSF, largely due to five new and expansion leases exceeding 100,000 SF. Continuing the positive momentum of 2016, Grand Central posted 923,290 SF of leasing activity, a 29.4% uptick from the first quarter of 2016. Tommy Hilfiger’s 196,792-SF lease at 285 Madison Avenue was Midtown’s largest new lease of the quarter, followed by the New York Times’ 158,856-SF sublease at 1271 Avenue of the Americas. Midtown renewal activity reached a first quarter all-time high of 2.8 MSF, accounting for 82.3% of Manhattan’s renewals. The overall vacancy rate increased by 40 BPS during the quarter to 10.0%, marking the first time since November 2014 that Midtown registered a double-digit vacancy. The increase was primarily due to three large blocks of space added to the market—a 370,691-SF space at 75 Rockefeller
*Rental rates reflect gross asking $psf/year
Overall Net Absorption/Overall Asking Rent 4-QTR TRAILING AVERAGE 8,000,000
$75
6,000,000
$70
4,000,000
$65
2,000,000 $60
0
$55
-2,000,000 -4,000,000
2011
2012
2013
2014
Net Absorption, SF
2015
2016
Asking Rent, $ PSF
Overall Vacancy 12% 10% 8%
Historical Average = 9.5%
6% 4% 2% 2011
2012
2013
2014
2015
cushmanwakefield.com I 1
MARKETBEAT
Manhattan Office Q1 2017
Tommy Hilfiger’s 254,516-SF sublease block that entered statistics at 601 West 26th Street drove Midtown South’s overall vacancy rate up 110 BPS during the quarter to 7.7% and bumped Chelsea’s overall vacancy rate to 8.2%, the highest quarterly vacancy posted since year-end 2009. Leasing activity in Midtown South fell by 5.1% from this time last year, largely attributed to a decline in leasing transactions above 50,000 SF. The largest lease of the quarter was Live Nation’s 99,588-SF transaction at 430 West 15th Street. A reduction in leasing, combined with a sharp increase in available sublease space, resulted in 485,488 SF of negative absorption. Overall asking rents increased by 0.9% during the quarter, primarily due to the completion of 413 West 14th Street, which boosted Midtown South’s asking rents to a new record high of $71.48 PSF. Downtown new leasing soared by 96.8% from this time last year to 2.0 MSF, nearly reaching the 2.1 MSF leased through the first half of 2016. The increase in Downtown activity is mainly attributed to four new leases exceeding 100,000 SF, which accounted for 51.5% of Downtown’s first quarter activity. The largest new transaction was Spotify’s 378,819-SF lease at Four World Trade Center, followed by the New York State Attorney General’s office lease for 342,484 SF at 28 Liberty Street. Strong leasing velocity lowered Downtown’s overall vacancy 100 BPS during the quarter to 9.2% and pushed Class A vacancy 150 BPS lower to 10.6%. World Trade Center’s vacancy fell 280 BPS over the past three months to 11.3%, representing the lowest quarterly vacancy rate in 10 quarters. Vigorous Downtown leasing led to 1.1 MSF of positive absorption, the highest level achieved since the fourth quarter of 2014 when absorption registered 1.8 MSF. Downtown asking rents fell 1.3% during the quarter to $58.54 PSF, partially due to the leasing of higher-priced space along with asking rent reductions at 200 Liberty Street.
Available Sublease Space MANHATTAN’S SUBLEASE SPACE IN Q1 2017 IS AT A 10-QUARTER HIGH 8.0
SF in Millions
7.0 6.0 MSF
6.0 5.0 4.0 3.0 2.0
2012
2013
2014
2015
2016
Q1 2017
Manhattan New vs. Renewal Leasing Activity 2017 HAS THE HIGHEST LEVEL OF FIRST QUARTER RENEWAL ACTIVITY ON RECORD
12.0 10.0
SF in Millions
Plaza, 221,850 SF at 777 Third Avenue and 203,900 SF at 399 Park Avenue. Despite the increase in vacancy, Midtown registered 248,589 SF of positive absorption as strong leasing compensated for the increase in available space. Although Midtown overall asking rents increased a nominal 0.4% during the quarter to $78.73 per square foot (PSF), Midtown’s Class A direct asking rents climbed 2.1% to $88.93. The increase was mostly driven the by higher-priced space that entered the market during the quarter at the recently renovated 75 Rockefeller Plaza.
8.0
1.1 7.7
1.3 6.7
6.0
3.3 1.1 5.9
4.0
0.7 5.4
5.0
7.6
5.7
9.4 2.4
2.5
1.8 7.0
5.8
5.6
Q1 12
Q1 13
1.6
2.7 7.6 6.6
3.1
2.0 0.0
2.2
3.4
1.3
2.3
Q1 04
Q1 05
Q1 06
Q1 07
Q1 08
Q1 09
Renewal
Q1 10
Q1 11
Q1 14
Q1 15
Q1 16
Q1 17
New Lease
Outlook • Nearly 6.0 MSF of leases under negotiation are likely to close over the next three quarters • Steady leasing combined with a limited supply of new construction completions is projected to put vacancy at equilibrium by the end of 2017 • Sublease space—as a percentage of the total available supply—is currently at a 10-quarter high and will likely remain above average throughout the year cushmanwakefield.com I 2
MARKETBEAT
Manhattan Office Q1 2017 SUBLET VACANT (SF)
DIRECT VACANT (SF)
OVERALL VACANCY RATE
CURRENT QTR YTD OVERALL YTD LEASING OVERALL NET NET ABSORPTION ACTIVITY ABSORPTION (SF) (SF) (SF)
UNDER CNSTR (SF)
OVERALL AVERAGE OVERALL ASKING RENT AVERAGE ASKING (ALL CLASSES)* RENT (CLASS A)*
SUBMARKET
INVENTORY (SF)
East Side/UN
21,551,123
400,492
1,283,166
7.8%
-436,589
-436,589
157,717
0
$72.99
Grand Central
42,759,706
530,729
4,272,691
11.2%
138,075
138,075
923,290
2,358,396
$70.55
$73.31
Madison/Fifth
24,645,391
190,996
2,602,213
11.3%
-54,048
-54,048
367,132
0
$100.59
$107.83
Murray Hill
14,232,299
290,973
730,542
7.2%
9,358
9,358
193,481
0
$59.89
$62.68
Park Avenue
21,842,808
712,426
2,002,343
12.4%
-360,987
-360,987
249,730
728,700
$90.47
$90.47
Penn Station
16,095,431
255,660
1,489,251
10.8%
-134,036
-134,036
195,129
6,203,770
$70.81
$77.83
Sixth Avenue/Rock Center
41,461,063
859,287
3,617,616
10.8%
507,335
507,335
905,404
0
$88.19
$89.22
Times Square South
30,209,473
462,516
2,202,620
8.8%
199,652
199,652
699,372
0
$60.21
$75.33
West Side
30,644,801
225,415
2,221,699
8.0%
379,829
379,829
568,867
241,064
$75.20
$80.40
243,442,095
3,928,494
20,422,141
10.0%
248,589
248,589
4,260,122
9,531,930
$78.73
$84.64
15,313,313
514,912
738,594
8.2%
-181,452
-181,452
296,206
378,036
$64.29
$85.22
4,882,853
54,572
122,280
3.6%
-22,752
-22,752
42,624
0
$73.93
$115.00
Hudson Square/West Village
11,054,152
258,514
946,175
10.9%
-57,980
-57,980
212,746
145,741
$79.89
$92.66
Madison/Union Square
32,057,725
435,065
1,691,321
6.6%
-72,791
-72,791
702,784
0
$68.80
$81.83
MIDTOWN TOTALS Chelsea Greenwich/NoHo
SoHo MIDTOWN SOUTH TOTALS City Hall
$74.15
3,940,710
32,886
399,342
11.0%
-150,513
-150,513
60,728
60,915
$74.76
N/A
67,248,753
1,295,949
3,897,712
7.7%
-485,488
-485,488
1,315,088
584,692
$71.48
$88.06
7,690,533
16,443
652,975
8.7%
-35,254
-35,254
50,893
0
$50.05
$49.73
Financial East
34,276,501
413,069
2,516,163
8.5%
355,307
355,307
674,280
0
$56.18
$58.89
Financial West
5,986,809
75,780
840,499
15.3%
-125,355
-125,355
45,711
0
$53.12
$56.16
13,106,300
75,244
972,817
8.0%
122,531
122,531
238,076
0
$57.82
$62.95
5,109,526
15,570
46,423
1.2%
111,734
111,734
121,047
0
$69.43
$70.30
World Trade
22,331,586
197,051
2,321,254
11.3%
684,220
684,220
912,610
2,491,861
$65.25
$66.05
DOWNTOWN TOTALS
88,501,255
793,157
7,350,131
9.2%
1,113,183
1,113,183
2,042,617
2,491,861
$58.54
$61.28
MANHATTAN TOTALS
399,192,103
6,017,600
31,669,984
9.4%
876,284
876,284
7,617,827
12,608,483
$73.37
$79.59
Insurance TriBeCa
*Rental rates reflect gross asking $psf/year
Key Lease Transactions Q1 2017 PROPERTY
SF
TENANT
TRANSACTION TYPE
SUBMARKET
1345 Avenue of the Americas
992,043
Alliance Bernstein
Renewal*
Sixth Avenue/Rock Center
1211 Avenue of the Americas
793,687
21st Century Fox
Renewal/Expansion*
Sixth Avenue/Rock Center
1211 Avenue of the Americas
444,000
NewsCorp
Renewal*
Sixth Avenue/Rock Center
SF
SELLER / BUYER
PRICE / $PSF
SUBMARKET
1,600,000
Paramount Group / GIC Real Estate
$1.0B / $643
Financial East
*Renewal portion not included in leasing statistics
Key Sales Transactions Q1 2017 PROPERTY 60 Wall Street 250 West 54th Street
163,000
Ascot Brokerage / Zar Property Group
$83M / $510
West Side
42 West 14th Street
151,540
Samson Associates / The New School
$153M / $1,010
Greenwich/NoHo
BUILDING OFFICE RSF
OWNER/DEVELOPER
MAJOR TENANT
SUBMARKET
79,518
Highgate Holdings, Inc. / Rockpoint Group / Meilman Family
Argo Group
Chelsea
Completed Construction Q1 2017 PROPERTY 413 West 14th Street
cushmanwakefield.com I 3
MARKETBEAT
Manhattan Office Q1 2017
OFFICE SUBMARKETS MANHATTAN
WEST SIDE
FIFTH/ MADISON
PARK AVENUE
SIXTH AVENUE/ROCK CENTER
For more information, contact: Richard Persichetti Regional Research Director Tri-State and Northeast Tel: +1 212 954 0917
[email protected]
909 Third
EAST SIDE/UN
Lori Albert
Queens Research Director Tel: +1 212 841 7876
[email protected]
GRAND CENTRAL TIMES SQUARE SOUTH 25W 3615W 36 13
MURRAY HILL
MIDTOWN
PENN STATION
MIDTOWN SOUTH
305 Fifth
MIDTOWN MIDTOWN SOUTH
Cushman & Wakefield 1290 Avenue of the Americas New York, NY 10104 cushmanwakefield.com
253
223 E 26 238 E 26
MADISON SQUARE/ UNION SQUARE
CHELSEA
230 W 17
GREENWICH VILLAGE/NOHO
HUDSON SQUARE/ WEST VILLAGE
SOHO
MIDTOWN SOUTH DOWNTOWN
TRIBECA CITY HALL
MIDTOWN SOUTH DOWNTOWN
WORLD TRADE/ WORLD FINANCIAL INSURANCE
New Jersey FINANCIAL WEST
FINANCIAL EAST
About Cushman & Wakefield Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 43,000 employees in more than 60 countries help investors and occupiers optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter. Copyright © 2017 Cushman & Wakefield. All rights reserved. The information contained within Brooklyn this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.
cushmanwakefield.com I 4