LEE NYCleeassociatesnyc.com/wp-content/uploads/2018/10/3Q-2018... · 2018-10-03 · 3 MANHATTAN TREND TRACKER 3RD QUARTER 2018 LEE & ASSOCIATES NYC OFFICE METRICS Market Inventory

LEE NYCNEW YORK OFFICE3Q2018

THE OFFICE MARKET REPORT

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CITY HALL| INSURANCE DISTRICT

CITY HALL| INSURANCE DISTRICT

WORLDTRADECENTER

WORLDTRADECENTER

FINANCIALDISTRICT

FINANCIALDISTRICT

ROCKEFELLERCENTER

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PENN STATION | GARMENT DISTRICT

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MURRAY HILLMURRAY HILL

GRAMERCY | FLATIRONGRAMERCY | FLATIRON

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MIDTOWN

MIDTOWN SOUTH

DOWNTOWN

2 LEE & ASSOCIATES NYCMANHATTAN TREND TRACKER 3RD QUARTER 2018

SUBMARKETS


OFFICE METRICS

MarketInventoryMeasured

(SF)

UnderConstruction

(SF)

NetAbsorption(SF) | (YTD)

LeasingVolume

(SF) | (YTD)

DirectAsking Rent

SubletAsking Rent

OverallAsking Rent

Midtown 224,664,049 2,818,704 11.8% ↑ 7.7% ↓ 1,906,039 11,341,345 $82.06 $64.08 $79.53

Grand Central 72,008,497 1,732,955 10.8% ↓ 7.9% ↓ 1,384,718 3,761,617 $76.40 $61.35 $74.79

Midtown East 25,675,290 290,505 13.0% ↑ 6.6% ↑ (130,144) 1,519,133 $78.58 $59.01 $76.30

Midtown West 20,963,179 90,000 8.1% ↓ 4.8% ↓ (272) 520,542 $76.82 $63.01 $73.15

Plaza District 38,449,692 705,244 14.8% ↑ 11.5% ↑ 322,417 1,776,713 $112.87 $82.69 $110.66

Rockefeller 29,048,420 - 7.9% ↑ 5.1% ↓ 378,909 1,693,914 $83.23 $72.00 $82.60

Times Square 38,518,971 - 15.0% ↑ 7.5% ↓ (49,589) 2,069,426 $73.14 $58.77 $66.76

Midtown South 155,362,963 13,479,812 9.9% ↓ 6.1% − 1,990,851 9,749,326 $75.48 $60.23 $68.70

Chelsea 19,920,413 263,835 9.5% ↓ 6.3% ↓ 689,530 935,569 $65.32 $50.28 $60.39

Gramercy & Flatiron 31,527,675 73,323 7.6% ↓ 3.6% ↑ 245,150 2,373,702 $71.49 $65.19 $69.59

Hudson Square & Tribeca 21,756,443 193,484 15.5% ↓ 8.7% ↑ 183,141 869,653 $85.47 $69.76 $82.50

Murray Hill 13,388,866 - 9.8% ↓ 6.7% ↑ (29,816) 620,862 $61.67 $55.24 $58.70

Penn Station & Garment 55,927,026 12,639,885 9.4% ↓ 6.2% ↓ 764,546 3,783,508 $59.33 $49.01 $56.36

SoHo & NoHo 12,842,540 309,285 8.9% ↓ 5.8% ↓ 138,300 1,166,032 $73.97 $60.45 $71.43

Downtown 107,510,856 19,412 13.1% − 10.0% ↓ 2,084,406 3,741,167 $62.91 $45.34 $61.29

City Hall & Insurance District 26,493,657 19,412 8.5% − 3.0% ↓ 491,525 379,033 $55.41 $44.25 $53.02

Financial District 43,487,310 - 13.4% ↑ 9.6% − 115,467 1,508,701 $61.43 $48.34 $58.76

World Trade Center 37,529,889 - 16.1% ↓ 15.4% ↓ 1,477,414 1,853,433 $63.51 $49.57 $63.14

Manhattan 487,537,868 16,317,928 11.5% ↓ 7.7% ↓ 5,981,296 24,831,838 $73.42 $62.31 $71.27

Third Quarter | 2018 | New York Office Market

New York Office MetricsAvailability

RateVacancy

Rate

Arrows are indicative of quarterly changes.

↓DIRECT AVAILABILITY


Manhattan direct asking rents in the third quarter averaged out to $73.42, down $0.63 from the second quarter and $0.82 from a year ago. Leasing volume continues to be strong with approximately 25 million square feet leased year-to-date, causing a decrease in both the available and vacant supply of office space below 65th Street. The availability rate decreased slightly by 10 basis points to 11.5% (also the five-year average in Manhattan) from 11.6% over the quarter. With net absorption positive for the third consecutive quarter, vacancy is at the lowest it's been since 2009, when it was averaging 7.2%. Although still distant from reaching such an annual average, the third quarter finished with a vacancy of 7.7%, and we forecast this to continue to remain the same or decrease end-of-year.

Nine of the twelve submarkets saw an availability rate decrease, with all six submarkets comprising Midtown South (with a quarterly decrease of 90 basis points from 10.8% to 9.9%). Large blocks of space were signed by coworking giants WeWork and Spaces spread across the Penn Station-Garment, Grand Central, Gramercy-Flatiron, Midtown West, Murray Hill, Chelsea, Times Square and Midtown East submarkets. Approximately five to six million square feet need to be leased in the next three months, to sustain the current availability rate of 11.5% or have it slightly decrease. The expected delivery of 55 Hudson Yards by Related Companies and 441 Ninth Avenue by Cove Property Group in the fourth quarter is expected to add approximately 850,000 square feet onto the market. There is currently 16.3 million square feet of office construction below 65th Street; with 46 buildings in some planning or construction phase, we're looking at 29.1 million square feet of future availability.

TAMI giant GroupM Worldwide signed a 513,098 square foot deal at Silverstein Properties recently delivered 3 World Trade Center, taking an additional nine floors. The media company initially signed a lease in early 2016 for approximately 170,000 square feet, which increases their footprint to 684,593 square feet and bringing the occupancy rate at the class A property to 43%. Additionally, Silicon Valley's LinkedIn Corporation renewed and expanded their operations of approximately 313,000 square feet at the Empire State Building (350 Fifth Avenue). FIRE tenants such as Evercore Partners and Bessemer Trust Company led Midtown in two of the top three largest leases signed. Investment banking company, Evercore Partners signed a 10-year renewal and expansion on 282,673 square feet at Park Avenue Plaza (55 East 52nd Street), making it the largest lease signing by a FIRE tenant and the largest lease signing in the Plaza District, in the third quarter. Bessemer Trust Company signed a 15-year new lease at Rockefeller's 1271 Avenue of the Americas for 239,000 square feet across seven floors, with a starting base rent in the low $100s.

Nearby at 666 Fifth Avenue, Brookfield Asset Management purchased a 99-year leasehold on a 1.45 million square foot office condominium from Kushner Companies for approximately $1.3 billion or $887 per square foot at a 4.9% capitilization rate. Brookfield paid up the entire lease through the 99 year term. Additionally in the office investment sales market, Normandy Real Estate Partners in joint venture with L&L Holding and JPMorgan Chase (on behalf of CalSTRS), are in the process of closing on the Terminal Stores (224 Twelfth Avenue) building for $900 million or $853 per square foot.

↓AVAILABILITY

↓VACANCY

↓ASKING RENTS

↑SUBLET ASKING RENTS

↑SUBLET AVAILABILITY

10.0%

10.5%

11.0%

11.5%

12.0%

12.5%

$76.00 $78.00 $80.00 $82.00 $84.00 $86.00 $88.00

15Q

215

Q3

15Q

416

Q1

16Q

216

Q3

16Q

417

Q1

17Q

217

Q3

17Q

418

Q1

18Q

218

Q3

Midtown Asking Rent and Availability

Asking Rent Availability Rate 5Y Rate Avg.

0.0%2.0%4.0%6.0%8.0%10.0%12.0%

$60.00

$65.00

$70.00

$75.00

$80.00

15Q

215

Q3

15Q

416

Q1

16Q

216

Q3

16Q

417

Q1

17Q

217

Q3

17Q

418

Q1

18Q

218

Q3

Midtown South Asking Rent and Availability


0.0%

5.0%

10.0%

15.0%

$58.00 $59.00 $60.00 $61.00 $62.00 $63.00 $64.00

15Q

215

Q3

15Q

416

Q1

16Q

216

Q3

16Q

417

Q1

17Q

217

Q3

17Q

418

Q1

18Q

218

Q3

Downtown Asking Rent and Availability


10.0%

10.5%

11.0%

11.5%

12.0%

$68.00

$70.00

$72.00

$74.00

$76.00

$78.00

15Q

215

Q3

15Q

416

Q1

16Q

216

Q3

16Q

417

Q1

17Q

217

Q3

17Q

418

Q1

18Q

218

Q3

Manhattan Asking Rent and Availability Rate



ANALYSIS

Starting Base Rents

Midtown Grand Central Midtown East Midtown West Plaza District Rockefeller Times Square2018 Q3 $76.15 $67.90 $68.39 $74.17 $98.91 $77.80 $59.322018 Q2 $76.77 $73.22 $71.00 $74.33 $95.71 $77.60 $67.462017 Q3 $72.26 $67.17 $63.36 $75.28 $81.14 $76.25 $66.73

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

Midtown Starting Base Rents

MidtownSouth Chelsea Gramercy-

FlatironHudson Sq.-

Tribeca Murray Hill Penn Station-Garment SoHo-NoHo

2018 Q3 $64.10 $54.86 $70.60 $62.60 $57.93 $58.56 $67.172018 Q2 $63.94 $61.84 $69.18 $73.13 $55.75 $57.17 $71.212017 Q3 $57.98 $57.77 $62.19 $70.30 $54.30 $54.88 $64.36

$0.00$10.00$20.00$30.00$40.00$50.00$60.00$70.00$80.00

Midtown South Starting Base Rents

Downtown City Hall-Insurance Dist. Financial District World Trade Center2018 Q3 $54.00 $52.13 $55.09 $53.362018 Q2 $57.38 $58.06 $54.98 $58.892017 Q3 $51.31 $53.43 $48.93 $54.25

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

Downtown Starting Base Rents

STARTING BASE RENTS


FREE RENTS


Free Months

0

2

4

6

8

10

12MONTHS

Midtown Free Rent Average

2018 Q3 2018 Q2 2017 Q3

0

2

4

6

8

10

Downtown City Hall-Insurance Dist. Financial District World Trade Center

MONTHS

Downtown Free Rent Average

2018 Q3 2018 Q2 2017 Q3

02468

1012M

ONTHS

Midtown South Free Rent Average

2018 Q3 2018 Q2 2017 Q3


MIDTOWN

• Availability continues to remain high and is on par to reach 12% • Net absorption positively increased 174% quarter-to-quarter• Two of the top three largest deals signed by banking tenants • Leasing volume continues to stay strong• Vacancy lowest in five years • Asking rents grew at approximately 2% over the quarter.• Bessemer Trust fills out the top of 1271 Avenue of the Americas • Financial advisory giant with plans to relocate to Park Avenue Plaza

Pfizer Evercore Partners Inc.219 East 42nd Street 55 East 52nd Street350,000 SF 282,673 SFFloors: 1 - 10 Floors: 20-21, 23, 35-38, 42-44New 5 Year Lease New 15 Year Lease

Top Notable Signed Leases

↑/Q ↓/Y ↑/Q ↑/Y ↓/Q ↓/Y ↑/Q ↑/Y ↓/Q ↑/Y ↑/Q ↑/Y

4,616,336

Midtown

Asking Rents Availability Vacancy Net Absorption Leasing Activity Sublet Availability$82.06 11.8% 7.7% 1,433,681 3,408,938

$83.35 Average

$76.00

$78.00

$80.00

$82.00

$84.00

$86.00

$88.00

15Q

215

Q3

15Q

416

Q1

16Q

216

Q3

16Q

417

Q1

17Q

217

Q3

17Q

418

Q1

18Q

218

Q3

Midtown Asking Rent Trend

Asking Rent Trend Average

-

2,000

4,000

6,000

8,000

Thou

sand

s

Leasing Activity Trend

Leasing Activity 5Y Avg. 10Y Avg.

8.4% Average

7.0%

7.5%

8.0%

8.5%

9.0%

13Q

414

Q1

14Q

214

Q3

14Q

415

Q1

15Q

215

Q3

15Q

416

Q1

16Q

216

Q3

16Q

417

Q1

17Q

217

Q3

17Q

418

Q1

18Q

218

Q3

Vacancy Trend

Vacancy Rate 5Y Avg.

11.6% Average

10.0%

10.5%

11.0%

11.5%

12.0%

12.5%13

Q4

14Q

114

Q2

14Q

314

Q4

15Q

115

Q2

15Q

315

Q4

16Q

116

Q2

16Q

316

Q4

17Q

117

Q2

17Q

317

Q4

18Q

118

Q2

18Q

3

Availability Trend

Availability Rate 5Y Avg.

2,132

917 807 661 795

0

500

1,000

1,500

2,000

2,500

1 - 3Mos.

4 - 6Mos.

7 - 9Mos.

10 - 12Mos.

13 - 15Mos.

Thou

sand

s (SF

)

Potential Available Direct Space Delivery Forecast

(1,500)

(1,000)

(500)

0

500

1,000

1,500

2,000

Thou

sand

s

Net Absorption Five Year Trend

MIDTOWN SOUTH

• All six Midtown South submarkets availability decreases • Vacancy remained stagnant at 6.1% & continues to be lowest in years• Availability rate finally drops below 10%, where it's been at since 2016 • Midtown South asking rents have increased 12.4% year-over-year• Construction activity continues in five of the six submarkets (Murray Hill) • WeWork & Spaces continued to grow their presence across the market• TAMI industry continues leasing demand with LinkedIn renewing & expanding at Empire State Building

LinkedIn Corporation WeWork Companies, Inc.350 Fifth Avenue 21 Penn Plaza312,947 SF 229,009 SFRenewal & Expansion 20 Year New Lease


↓/Q ↑/Y ↓/Q ↓/Y ↔/Q ↓/Y ↓/Q ↓/Y ↓/Q ↓/Y ↓/Q ↓/Y

3,646,487

Midtown South

Asking Rents Availability Vacancy Net Absorption Leasing Activity Sublet Availability$75.48 9.9% 6.1% 367,932 2,747,322

$69.44 Average

$60.00

$65.00

$70.00

$75.00

$80.00

15Q

215

Q3

15Q

416

Q1

16Q

216

Q3

16Q

417

Q1

17Q

217

Q3

17Q

418

Q1

18Q

218

Q3

Midtown South Asking Rent Trend


-

2,000

4,000

6,000

8,000

Thou

sand

s



6.5% Average

5.0%5.5%6.0%6.5%7.0%7.5%8.0%

13Q

414

Q1

14Q

214

Q3

14Q

415

Q1

15Q

215

Q3

15Q

416

Q1

16Q

216

Q3

16Q

417

Q1

17Q

217

Q3

17Q

418

Q1

18Q

218

Q3

Vacancy Trend


9.7% Average

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%13

Q4

14Q

114

Q2

14Q

314

Q4

15Q

115

Q2

15Q

315

Q4

16Q

116

Q2

16Q

316

Q4

17Q

117

Q2

17Q

317

Q4

18Q

118

Q2

18Q

3

Availability Trend


2,301

570 838

257 172

0

500

1,000

1,500

2,000

2,500

1 - 3Mos.

4 - 6Mos.

7 - 9Mos.

10 - 12Mos.

13 - 15Mos.

Thou

sand

s (SF

)


(1,500)

(1,000)

(500)

0

500

1,000

1,500

Thou

sand

s



• Largest lease of the quarter at 3 WTC with GroupM Worldwide for 513,098 SF • City Hall & Insurance District vacancy (3%) lowest of all NY submarkets• Positive net absorption for four consecutive quarters • Vacancy increased 5.3% Y/Y due to available supply in WTC area• Asking rents have been decreasing for two consecutive quarters • Availability would have been back at 2015 rates, if not for leasing at 3 WTC• WeWork talks fall apart for 200,000 SF space at 1 WTC • The London Stock Exchange relocates to 28 Liberty Street

GroupM Worldwide School Construction Authority3 World Trade Center 110 William Street513,098 SF 85,000 SFFloors: 11-12, 14-16, 28-31 Floors: 14-16New Lease 15 Year New Lease


↓/Q ↓/Y ↔/Q ↑/Y ↓/Q ↑/Y ↓/Q ↑/Y ↓/Q ↓/Y ↑/Q ↑/Y

2,396,943

Downtown

Asking Rents Availability Vacancy Net Absorption Leasing Activity Sublet Availability$62.91 13.1% 10.0% 565,180 900,791

$62.44 Average

$58.00

$59.00

$60.00

$61.00

$62.00

$63.00

$64.00

15Q

215

Q3

15Q

416

Q1

16Q

216

Q3

16Q

417

Q1

17Q

217

Q3

17Q

418

Q1

18Q

218

Q3

Downtown Asking Rent Trend


-

1,000

2,000

3,000

4,000

Thou

sand

s



10.6% Average

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

13Q

414

Q1

14Q

214

Q3

14Q

415

Q1

15Q

215

Q3

15Q

416

Q1

16Q

216

Q3

16Q

417

Q1

17Q

217

Q3

17Q

418

Q1

18Q

218

Q3

Vacancy Trend


13.3% Average

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%13

Q4

14Q

114

Q2

14Q

314

Q4

15Q

115

Q2

15Q

315

Q4

16Q

116

Q2

16Q

316

Q4

17Q

117

Q2

17Q

317

Q4

18Q

118

Q2

18Q

3

Availability Trend


1,528

81 98 379 399

0

500

1,000

1,500

2,000

1 - 3Mos.

4 - 6Mos.

7 - 9Mos.

10 - 12Mos.

13 - 15Mos.

Thou

sand

s (SF

)


(2,000)

(1,000)

0

1,000

2,000

3,000

4,000

Thou

sand

s



DOWNTOWN

Tenant Submarket Office Class $ SF Floors Type Years• Group M Worldwide World Trade Center 3 World Trade Center A Pvt. 513,098 11-12, 14-16, 28-31 New Pvt.• Pfizer Inc. Grand Central 219 East 42nd Street A Pvt. 350,000 1-10 New 5• LinkedIn Corporation Penn Station-Garment 350 Fifth Avenue A Pvt. 312,947 Pvt. Ren. & Exp. Pvt.• Evercore Partners Inc. Plaza District 55 East 52nd Street A Pvt. 282,673 20-21, 23, 35-38, 42-44 Ren. & Exp. 10• Bessemer Trust Company Rockefeller 1271 Avenue of the Americas A $100s 239,000 42-48 New 15• WeWork Companies, Inc. Penn Station-Garment 21 Penn Plaza B $80s 229,009 4-6, 9-10, 12, 14-17 New 20• Spell Inc. Hudson Sq. | Tribeca 2 Gansevoort Street C Pvt. 181,550 Pvt. New Pvt.• Convene Grand Central 530 Fifth Avenue A Pvt. 116,055 7-10 New 5• Spaces (IWG) Grand Central 405 Lexington Avenue A $60s 109,364 7-9 New 15• Spaces (IWG) Gramercy | Flatiron 287 Park Avenue South B $70s 101,256 2-9 New 15• ICBC (Ind. & Com. Bank of China) Times Square 1185 Avenue of the Americas A $70s 98,594 16-18, 42 New Pvt.• Spaces (IWG) Midtown West 787 Eleventh Avenue B Pvt. 97,442 6-7 New Pvt.• WeWork Companies, Inc. Gramercy | Flatiron 35 East 21st Street B Pvt. 97,000 1-10 New 12• KBRA Holdings, Inc. (Kroll Bond) Midtown East 805 Third Avenue A $50s 95,200 26-29 Sublease 8• Carlyle Group, The (GMS Finance) Grand Central 1 Vanderbilt Avenue A $100s 94,365 36-38 New 15• Duff & Phelps Plaza District 55 East 52nd Street A $80s 90,975 15-17 New 16• Golub Grand Central 200 Park Avenue A $80s 89,000 24-25 New 10• School Construction Authority City Hall | Insurance 110 William Street A $50s 85,000 14-16 New 15• WeWork Companies, Inc. Murray Hill 450-460 Park Avenue South B $60s 83,250 2-3, 6, 8, 10-12 New 15• WeWork Companies, Inc. Chelsea 511 West 25th Street B $70s 80,463 2-9 New 15• WeWork Companies, Inc. Times Square 1619 Broadway B Pvt. 76,144 5-7, 10-11 New 15• London Stock Exchange PLC Financial District 28 Liberty Street A $70s 74,822 57-58 New 15• Signature Bank Penn Station-Garment 1400 Broadway B $60s 71,788 6-7 New 16• WeWork Companies, Inc. Midtown East 880 Third Avenue A $50s 69,659 5-6, 9-13 New 15• Broadcast Music, Inc. World Trade Center 7 World Trade Center A $80s 61,390 30-31 New 16• King & Spalding Times Square 1185 Avenue of the Americas A $60s 58,728 36-37 New 7.5• Perkins Coie LLP Times Square 1155 Avenue of the Americas A $80s 57,971 20-23 New 15

$ (Price reflects the base rent)


Notable Third Quarter Leases

Leases confirmed to have been signed in prior quarters but recently announced are not included in this list. For office comp reports and comprehensive consultation on market knowledge and analytics, or more information on any of these transactions; please consult a Lee & Associates NYC broker.

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Squa

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eet L

ease

d

2018 Year-to-Date Leasing Volume


LEASES

50 Hudson Yards 66 Hudson Boulevard 2 World Trade Center 30 Hudson Yards 270 Park Avenue2,900,000 SF 2,850,000 SF 2,800,000 SF 2,600,000 SF 2,500,000 SF ProposedConstruction Begins 2019 Delivering 2022 Q4 Construction Begins 2019 Delivering 2019 Q2 Under DemolitionRelated Companies Tishman Speyer Silverstein Properties Related Companies JPMorgan ChaseHudson Yards Hudson Yards World Trade Center Hudson Yards Grand Central

One | Two Manhattan West 3 Hudson Boulevard One Vanderbilt 55 Hudson Yards 511 West 35th Street2,216,609 SF | 1,950,140 SF 1,900,000 SF 1,732,955 SF 1,556,136 SF 950,000 SFDelivering 2019 Q4 | 2023 Construction Begins 2019 Delivering 2020 Q3 Delivering 2018 Q4 Construction Begins 2019Brookfield Properties Moinian Group SL Green Realty Corp. Related Companies Spitzer EnterprisesHudson Yards Hudson Yards Grand Central Hudson Yards Hudson Yards

550 Madison Avenue 390 Ninth Ave (Farley Bldg) 425 Park Avenue 441 Ninth Avenue 57 Eleventh Avenue (SuperPier)850,000 SF 767,000 SF 705,244 SF 700,000 SF 263,835 SFFull Renovation for 2019 Delivering 2020 Q2 Delivering 2019 Q1 Delivery end of 2018 Delivering 2019 Q1Olayan America Vornado & Related L&L Holding Company Cove Property Group RXR Realty | PANYNJPlaza District Penn Station Plaza District Penn Station Chelsea


Construction PipelineFeaturing the top fifteen projects either under construction, fully renovating and proposed.

46 Buildings in the Pipeline

16.3M SF Currently

Under Construction

10 Buildings Proposed

29.1M SF of Future

Availability

CONSTRUCTION


Henry AbramovResearch Director [email protected]

Carly FarkasResearch Associate [email protected]

James [email protected]

Lee & Associates NYC845 Third Avenue, Fourth FloorNew York, NY 10022 | 212.776.1200www.leeassociatesnyc.com

With offices

across the nation, the

Lee & Associates® group

of independently owned

and operated companies

is the largest provider of

regional commercial real estate

services in the United States and

the fourth-largest full-service

commercial real estate

organization overall.

Documents

LEE NYCleeassociatesnyc.com/wp-content/uploads/2018/10/3Q-2018... · 2018-10-03 · 3 MANHATTAN TREND TRACKER 3RD QUARTER 2018 LEE & ASSOCIATES NYC OFFICE METRICS Market Inventory