Manhattan Commercial Real Estate Market Indicators Q1 2012

1. Manhattan
Commercial
Real Estate
Market
Indicators
Q1 2012
CBRE | Page 0

2. Manhattan Real Estate Market Overview
•Midtown Q1 2012 was the second slowest Q1 in 18 years. Leasing velocity
was down 39% to just 2.67 million sq. ft. Why is this happening?
•A big factor is that financial institutions continue to shed space. During Q1
2012 financial firms put 761,835 sq, ft. of sublet space on the market. This
represented 33% of the total 2,291,444 sq. ft. sublease space put on the
market. UBS, Nomura, Societe Generale and Citi were primary contributors.
•Another big factor effecting all markets is a shift in space standards. Basically
companies are fitting more bodies into less space. Instead of 200-250 sq. ft.
per person, standards have shrunk to about half that size ,as open plans and
“benching” become more the norm.
•A trend we are seeing is more companies are renewing. In the past 6 months
69% of all leases signed over 100,000 sq. ft. were renewals. This compares to
only 44% for the first 6 months of 2011.
•Midtown South, the darling of Manhattan’s 3 submarkets, still boasts the
tightest availability at 9.5% and sublet space at approximately 1.7%. With a
6% vacancy rate, MTS had the lowest vacancy rate of any U.S. business
district for Q1.
•Average asking rents in Midtown South were stable at $48.79 per sq. ft. but
up over $6.00 from prior year levels. Properties keep re pricing upward as
demand continues to outstrip supply. Midtown South has traditionally priced at
a discount to Midtown. With average asking rents in the Flatiron area at
$55.62, rents are only $1.13 lower than in Grand Central.
 Downtown recorded a 36% increase in Q1 leasing activity over last year with
March posting a big increase over the five-year monthly average by 47% to
470,000 sq, ft. Conde Nast represented the largest transaction taking an
additional 138,773 sq. ft. of space at One World Trade Center.
 Average asking rents Downtown rose modestly to $40.00 per sq. ft. from
$39.33, for the same period last year. We expect to see more firms looking
Downtown as pricing in Midtown South continues to appreciate.
•With the lingering uncertainty around the 2012 Presidential elections and
poor job numbers we expect continued sluggishness in some of the leasing
markets, particularly in Midtown. Deals are taking longer to get done. People
are hesitant to spend capital. Stay tuned…..
©2010 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis’ Corporate Communications Department or CB Richard Ellis’ research and econometric forecasting
unit, CB Richard Ellis-Econometric Advisors. Information herein has been obtained from sources believed 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 independently confirm its accuracy and completeness. Any
projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.
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3. Midtown Market Snapshot
2012 2011 2011-2012
YTD YTD NOV DEC JAN FEB MAR Comments
Leasing (MSF) 2.67 4.36 1.24 1.60 0.90 0.83 0.95 Leasing volume below average
Absorption (MSF) (2.09) (0.68) 0.47 0.71 (0.98) (0.61) (0.50) Overall negative absorption
Availability Rate 11.9% 12.3% 11.6% 11.3% 11.4% 11.7% 11.9% Trending up
Sublet Availability Rate 2.9% 2.6% 2.6% 2.6% 2.6% 2.7% 2.9% Trending up
# of Large Blocks 37 36 29 30 33 35 37 Trending up
(>100K rsf)
Average Asking Rent $63.52 $58.14 $61.77 $62.43 $63.65 $63.52 $63.52 No change in average asking
rents
HOT TOPICS THERE WERE 6 BIG BLOCKS OF CONTIGUOUS SPACE
• Leasing year-to-date is down 39% from 2011. > 250,000 Sq. Ft.
• March leasing activity was up over January and February, but 19% below the five-year monthly average − 11 Times Square (2) 612,285 rsf
of 1.18 million sq. ft. − 229 West 43rd Street 479,568 rsf
• New availabilities added to the market offset leasing again in March, resulting in a third consecutive − 685 Third Avenue 474,675 rsf
month of negative net absorption and bringing year-to-date absorption to negative 2.09 million sq. ft.
− 55 West 46th Street 292,500 rsf
• The overall and sublease availability rates edged up 0.2 points in March, to 11.9% and 2.9% − 205 East 42 nd Street 289,116 rsf
respectively.
• The average asking rent was unchanged in March, ending the first quarter at $63.52 per sq. ft. − 350 Fifth Avenue 278,697 rsf
LARGE NEW SPACE AVAILABILITIES::
– 274,000 sq. ft. of sublease at 150 East 42nd Street
– 153,000 sq. ft. of direct space at 919 Third Avenue*
– 82,000 sq. ft. of sublease space at 1185 Avenue of the Americas
– 68,000 sq. ft. of sublease space at 277 Park Avenue
* This space was already on the market, but fell within 12 months of tenant possession in March and
therefore was added to statistics.
©2010 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis’ Corporate Communications Department or CB Richard Ellis’ research
and econometric forecasting unit, CB Richard Ellis-Econometric Advisors. Information herein has been obtained from sources believed 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 independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and
cannot be reproduced without prior written permission of CB Richard Ellis .
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4. Midtown South Market Snapshot
2012 2011 2011-2012
YTD YTD NOV DEC JAN FEB MAR Comments
Leasing (MSF) 0.99 1.12 0.62 0.49 0.34 0.34 0.32 Healthy velocity
Absorption (MSF) (0.80) 0.32 (0.01) 0.50 (0.87) 0.32 (0.24) Negative absorption
Availability Rate 9.5% 11.5% 9.5% 8.8% 9.6% 9.1% 9.5% Slight uptick in availability
Sublet Availability 1.7% 1.8% 1.3% 1.0% 1.3% 1.5% 1.7% Slight uptick in sublet availability
Rate
# of Large Blocks 11 12 10 9 12 11 11 Stable big block spaces
(>100K rsf)
Average Asking Rent $48.79 $42.72 $45.19 $45.34 $47.89 $48.80 $48.79 New supply continues to be priced
higher
HOT TOPICS THERE WERE 2 BIG BLOCKS OF CONTIGUOUS
SPACE > 250,000 Sq. Ft.
• March leasing activity was on par with the five-year monthly average of 320,00 sq. ft. bringing the
−550 Washington Street 694,485 rsf
year-to-date leasing to just under 1 million sq. ft., slightly behind last year’s level.
• Several sizeable new availabilities were brought to market by sublessors and landlords alike, resulting −101 Avenue of the Americas 413,688 rsf
in negative net absorption for the month.
• Availability rose 0.4 points to 11.7% while sublet availability rose 0.2 points to 1.7% - still incredibly
tight. The delta between direct and sublet pricing continues to narrow and was approximately
90%, or $3.83 at quarter end ($49.22 direct vs. $45.39 sublet).
• Average asking rents were stable at $48.79. The Flatiron area continues to be the priciest with
average asking rents of $55.62, followed next by Union Square at $50.20. Tenants are looking
towards Chelsea ($43.45) and Hudson Square/Tribeca $44.66) for better values.
LARGE NEW SPACE AVAILABILITIES :
– 104,000 sq. ft. of sublease space at 1 Park Avenue
– 98,000 sq. ft. of direct space at 110 Fifth Avenue
– 43,000 sq. ft. of sublease space at 150 Fifth Avenue
– 39,00 sq. ft. of direct space at 2 Park Avenue
– 24,000 sq. ft. of direct space at 7 Penn Plaza
©2010 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis’ Corporate Communications Department or CB Richard Ellis’
research and econometric forecasting unit, CB Richard Ellis-Econometric Advisors. Information herein has been obtained from sources believed 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 independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB
Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.
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5. Downtown Market Snapshot
2012 2011 2011-2012
YTD YTD NOV DEC JAN FEB MAR Comments
Leasing (MSF) 0.99 0.73 0.27 0.44 0.20 0.32 0.47 Fluctuating velocity
Absorption (MSF) (0.11) 0.26 (0.58) (0.20) (0.23) 0.10 0.02 slight positive absorption
Availability Rate 10.5% 13.2% 10.3% 10.5% 10.6% 10.5% 10.5% Stable availability but big spike
to occur Q4
Sublet Availability Rate 1.8% 1.8% 1.5% 1.7% 1.6% 1.6% 1.8% Slight uptick in sublet
availabiltiy
# of Large Blocks (>100K 12 12 9 11 12 11 12 Relatively stable big blocks
rsf)
Average Asking Rent $40.00 $39.33 $39.27 $39.30 $39.83 $39.65 $40.00 Slight uptick in average asking
rents
HOT TOPICS THERE WERE 2 BIG BLOCKS OF CONTIGUOUS
• Downtown recorded its strongest leasing month this year. March saw 470,000 sq. ft. of leasing activity, a 47% SPACE
increase over the five-year monthly average of 320,000 sq. ft. >250,000 Sq. Ft.
• Year-to-date leasing was up 36% over 2011 levels to 990,000 sq. ft. − 85 Broad Street, 651,514 rsf
• This month’s leasing activity offset new availabilities brought to market, resulting in essentially break-even − 1 NY Plaza, 551,825 rsf
absorption of positive 20,000 sq. ft. for March , even though year-to-date remains negative.
• Overall availability was stable at 10.5% while sublease availability rose 0.2 points to 1.8%, reflecting the sizable
new sublease offerings that came on the market in March.
• Average asking rent rose to $40.00 per sq. ft. in March, its highest level since August 2009.
LARGE NEW SPACE AVAILABILITIES:
− 148,000 sq. ft. of sublease space at 40 Wall Street
− 85,000 sq. ft. of sublease space at 25 Broadway
− 32,000 sq. ft. of direct space at 65 Broadway
− 19,000 sq. ft. of sublease space at 120 Broadway
©2010 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis’ Corporate Communications Department or CB Richard Ellis’ research and econometric forecasting
unit, CB Richard Ellis-Econometric Advisors. Information herein has been obtained from sources believed 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 independently confirm its accuracy and completeness. Any
projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.
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6. “Feet on the Street”
Top Lease Transactions for the month ended March 2012:
Midtown
March:
 Bank of America renewed 360,000 sq. ft. at 114 W 47th Street
 Memorial Sloan-Kettering Cancer Society inked a 100,678 sq. ft. deal at 650 Madison Ave.
 ASA Institute renewed 56,906 sq. ft. at 2 Herald Square
 Right Management closed a 47,815 sq. ft. transaction at 99 Park Ave.
 Council of the European Union completed a deal for 45,397 sq. ft. at 666 Third Ave.
February:
 Information Builders renewed 225,045 sq. ft. at 2 Penn Plaza
 Bank of Tokyo-Mitsubishi Trust Company renewed and expanded 42,800 sq. ft. at 1251 Avenue of the
Americas
 Café Mom took 35,000 sq. ft. at 417 Fifth Avenue
 Jazz at Lincoln Center inked 34,634 sq. ft. at 3 Columbus Circle
 UBS Financial Services renewed 34,132 sq. ft. at 1285 Avenue of the Americas
 January:
 Omnicom Group renewed 107,308 sq. ft. at 488 Madison Avenue
 Liz Claiborne renewed 67,213 sq. ft. at 1440 Broadway
 Ion Trading closed a deal for 57,179 sq. ft. at 1345 Avenue of the Americas
 Siemens Corporation renewed 42,599 sq. ft. at 498 Seventh Avenue
 Grais & Ellsworth inked 41,500 sq. ft. at 1211 Avenue of the Americas
©2010 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis’ Corporate Communications Department or CB Richard Ellis’ research and econometric forecasting unit,
CB Richard Ellis-Econometrit herein has been obtained from sources believed 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 independently confirm its accuracy and completeness. Any projections, opinions,
assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.
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7. “Feet on the Street”
Top Lease Transactions for the month ended March 2012:
Midtown South
March:
 Estee Lauder took 66,000 sq. ft. at 28 W 23rd Street
 Cooney/Waters Group inked a deal for 22,000 sq. f. at 111 Fifth Avenue
 Institute of Electrical & Electrical Engineers renewed 22,000 sq. ft. at 3 Park Avenue
 TechSpace renewed and expanded 20,000 sq. ft. at 95 University Place
 Sailthru took 17,775 sq. ft. at 10 Hudson Square
February:
 General Services Administration renewed 51,011 sq. ft. at 315 Hudson Street
 Pearson renewed and expanded 42,347 sq. ft. at 330 Hudson Street
 Frenkel & Co. renewed 39,005 sq. ft. at 350 Hudson Street
 Stream57 took 23,896 sq. ft. at 21 Penn Plaza
 Fab.com inked a deal for 23,500 sq. ft. at 95 Morton Street
January:
 Take-Two Interactive Software renewed 69,005 sq. ft. at 622 Broadway
 McGarryBowen renewed and expanded 47,144 sq. ft. at 601 W 26th Street
 Israel Berger took 22,500 sq. ft. at 360 Park Avenue South
 Eurasia Group inked a deal for 22,476 sq. ft. at 149 Fifth Avenue
 Knewton took 16,244 sq. ft. at 100 Fifth Avenue
©2010 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis’ Corporate Communications Department or CB Richard Ellis’ research and econometric forecasting unit,
CB Richard Ellis-Econometric Advisors. Information herein has been obtained from sources believed 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 independently confirm its accuracy and completeness. Any
projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.
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8. “Feet on the Street”
Top Lease Transactions for the month ended March 2012:
Downtown
March:
 Conde Nast expanded by 138,773 sq. ft. at One World Trade Center
 London Fischer took 39,900 sq. ft. at 59 Maiden Lane
 Omnicom Group renewed 39,347 sq. ft. at 195 Broadway
 Research Foundation of SUNY inked a deal for 23,750 sq. ft. at 61 Broadway
 Janney Montgomery Scott took 17,882 sq. ft. of space at 1 Whitehall Street
February:
 Investment Technology Group took 132,092 sq. ft. at 1 Liberty Plaza
 Lehman Brothers Inc. Trustee renewed 19,647 sq. ft. at 100 Wall Street
 Lactalis took 16,400 sq. ft. at 77 Water Street
 LCH.Clearnet inked a deal for 14,486 sq. ft. at 17 State Street
 Simon-Kucher & Partners took 14,486 sq. ft. of space at 17 State Street
January:
 New York life Insurance Company inked deal for 38,259 sq. ft. at 120 Broadway
 National Futures Association renewed 21,902 sq. ft. at 120 Broadway
 AXA Reinsurance took 18,702 sq. ft. at 48 Wall Street
 The Situs Companies took 13,650 sq. ft. at 48 Wall Street
 Public Health Solutions inked a deal for 8,250 sq. ft. at 61 Broadway
©2010 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis’ Corporate Communications Department or CB Richard Ellis’ research and econometric forecasting unit,
CB Richard Ellis-Econometric Advisors. Information herein has been obtained from sources believed 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 independently confirm its accuracy and completeness. Any
projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.
CBRE | Page 7