POSTINGS

Manhattan Office Market, Third Quarter 2013

T

he summer doldrums didn’t hit Manhattan during the third quarter, as leasing activity continued to tick upward
in much of the market. Downtown Manhattan was the strongest performer of the city’s three major submarkets
during that period, buoyed by healthy leasing in Class B stock and spillover from Midtown South. Tech continues
to be a major driver in all sectors of the market, as growing industry diversification is making up for lack of growth
in the financial services sector. “Overall, Manhattan had a pretty good quarter, and that’s despite the fact it is the
summer months and the third quarter is not high volume historically,” summarized Don Noland, managing director
of research at Cushman & Wakefield. With the help of Mr. Noland and Jim Delmonte, director of research, The
Commercial Observer sheds some light on the third-quarter office market.
MANHATTAN OFFICE MARKET - THIRD QUARTER 2013

24%

$37: With rents for Class B space in

MANHATTAN OFFICE MARKET
Class A Statistical Summary
Number of
Buildings

Inventory

Total
Available
Space

Midtown

324

182,927,081

22,181,044

Midtown South

29

15,601,758

1,212,918

Submarket

Downtown
Totals

Midtown South approaching an average
of $60 per square foot, tenants are
searching out value elsewhere, including
Downtown, where Class B rental rates
Y-o-Y
Direct
average $37
per squareSublease
foot. “Tech Direct
% Change
Available
Available
Vacancy
tenants
typically
Class B, so Rate

Space look atSpace
some of the overspill from Midtown
9.9%
17,642,375 to look
4,538,669
South is starting
downtown,” 9.6%
92.8%
981,248
231,670
6.3%
Mr. Delmonte
said. MANHATTAN

Sublease
Vacancy
Rate
2.5%

1.5%
OFFICE
1.3%

: Year over year, leasing is up
more than 24 percent in Class A, putting
the market on track to outperform 2012 in
leasing activity—and, as a consequence,
renewals are down. “Renewals overall were
Total
Direct
Total
down
a little bitY-o-Y
from previous
quarters,Sublease
Vacancy
% Pt. Change
Wtd. Avg.
Wtd. Avg.
Wtd. Avg.
which
when
Rate tends to happen

Rentalthere
Rate is Rental Rate
Rental Rate
positive activity in the leasing market,” Mr.
12.1% said. “What
1.0% we have$74.77
$72.99
Noland
seen is that$61.04
7.8% are executing
3.4%
$81.73
$50.70
tenants
longer-term
leases.
MARKET
- THIRD
QUARTER
2013 $74.55

580,840

: The absorption rate in the Downtown
market is attributable to a number of larger transactions
that took place during the third quarter, including
220,000 square feet leased to New York City’s Third
Health
and 2013
Quarter
Hospitals Corporation at 55 Water Street. “Downtown
Year-to-Date
Y-o-Y
Year-to-Date
Year-to-Date
wasY-o-Y
the best performer
of the
three major
markets with
% Change
Leasing
% Change
Direct Absorption
Total Absorption
healthy
in Class B and←larger transactions
taking Rate
← leasing Activity
Rate
place,” Mr. Noland said, adding that many tenants priced
1.7%Midtown9,142,794
29.7% to take(194,918)
out of
South are looking
advantage of(1,111,852)
12.3%value downtown.
692,956
38.9%
13,388
56,511
better

47

47,750,122

6,180,149

43.1%

5,540,319

639,830

11.6%

12.9%

3.8%

$51.65

$33.51

$50.71

12.2%

2,115,979

1.7%

(2,297,550)

(2,391,679)

400

246,278,961

29,574,111

17.7%

24,163,942

5,410,169

9.8%

2.2%

12.0%

1.6%

$69.75

$57.34

$68.40

2.0%

11,951,729

24.1%

(2,479,080)

(3,447,020)

Y-o-Y
% Change

Direct
Available
Space

Sublease
Available
Space

Direct
Vacancy
Rate

Sublease
Vacancy
Rate

Total
Vacancy
Rate

Y-o-Y
% Pt. Change

Direct
Wtd. Avg.
Rental Rate

Sublease
Wtd. Avg.
Rental Rate

Total
Wtd. Avg.
Rental Rate

Y-o-Y
% Change

Year-to-Date
Leasing
Activity

Y-o-Y
% Change

Year-to-Date
Direct Absorption
Rate

Year-to-Date
Total Absorption
Rate

7.1%
9.9%

(253,294)
(194,918)

(382,653)
(1,111,852)

MANHATTAN OFFICE MARKET
Class B
A Statistical Summary

Submarket

Third Quarter 2013

Number of
Buildings

Inventory

Total
Available
Space

43,931,134
182,927,081

4,665,247
22,181,044

Midtown

326
324

4,199,705
17,642,375

465,542
4,538,669

9.6%

1.1%
2.5%

0.8%
1.0%

$49.93
$74.77

$46.00
$61.04

$49.77
$72.99

9.6%
1.7%

1,848,158
9,142,794

-10.1%
29.7%

Midtown South

188
29

29,530,966
15,601,758

2,674,351
1,212,918

36.7%
92.8%

2,369,735
981,248

304,616
231,670

8.0%
6.3%

1.0%
1.5%

9.1%
7.8%

2.4%
3.4%

$59.65
$81.73

$54.69
$50.70

$59.39
$74.55

20.0%
12.3%

1,260,266
692,956

-27.0%
38.9%

(782,120)
13,388

(666,526)
56,511

Downtown

56
47

27,183,015
47,750,122

2,168,747
6,180,149

-27.4%
43.1%

1,807,091
5,540,319

361,656
639,830

6.6%
11.6%

1.3%

8.0%
12.9%

-2.8%
3.8%

$37.00
$51.65

$26.00
$33.51

$36.24
$50.71

4.7%
12.2%

1,686,366
2,115,979

44.7%
1.7%

732,747
(2,297,550)

580,840
(2,391,679)

570
400

100,645,115
246,278,961

9,508,345
29,574,111

2.2%
17.7%

8,376,531
24,163,942

1,131,814
5,410,169

8.3%
9.8%

1.1%
2.2%

9.4%
12.0%

0.3%
1.6%

$49.89
$69.75

$41.95
$57.34

$49.39
$68.40

15.4%
2.0%

4,794,790
11,951,729

-3.1%
24.1%

(302,667)
(2,479,080)

(468,339)
(3,447,020)

Total
Available
Space

Y-o-Y
% Change

Direct
Available
Space

Sublease
Available
Space

Direct
Vacancy
Rate

Sublease
Vacancy
Rate

Total
Vacancy
Rate

Y-o-Y
% Pt. Change

Direct
Wtd. Avg.
Rental Rate

Sublease
Wtd. Avg.
Rental Rate

Total
Wtd. Avg.
Rental Rate

Y-o-Y
% Change

Year-to-Date
Leasing
Activity

Y-o-Y
% Change

Year-to-Date
Direct Absorption
Rate

Totals

10.6%
12.1%

MANHATTAN OFFICE MARKET
Class C
B Statistical Summary

Submarket

Number of
Buildings

Inventory

Third Quarter 2013
Year-to-Date
Total Absorption
Rate

Midtown

150
326

15,815,466
43,931,134

752,437
4,665,247

-6.5%
7.1%

596,226
4,199,705

156,211
465,542

3.8%
9.6%

1.0%
1.1%

4.8%
10.6%

-0.3%
0.8%

$39.71
$49.93

$28.08
$46.00

$39.01
$49.77

4.2%
9.6%

423,373
1,848,158

-29.2%
-10.1%

74,135
(253,294)

(29,065)
(382,653)

Midtown South

214
188

20,156,303
29,530,966

1,092,517
2,674,351

-35.3%
36.7%

895,908
2,369,735

196,609
304,616

4.4%
8.0%

1.0%

5.4%
9.1%

-2.5%
2.4%

$46.18
$59.65

$47.69
$54.69

$46.29
$59.39

5.3%
20.0%

790,180
1,260,266

-11.4%
-27.0%

2,054
(782,120)

(106,933)
(666,526)

Downtown
Totals

72
56

9,923,197
27,183,015

861,094
2,168,747

35.4%
-27.4%

836,085
1,807,091

25,009
361,656

8.4%
6.6%

0.3%
1.3%

8.7%
8.0%

2.5%
-2.8%

$35.10
$37.00

$38.50
$26.00

$35.11
$36.24

10.4%
4.7%

467,168
1,686,366

-35.9%
44.7%

9,442
732,747

15,476
580,840

436
570

45,894,966
100,645,115

2,706,048
9,508,345

-13.5%
2.2%

2,328,219
8,376,531

377,829
1,131,814

5.1%
8.3%

0.8%
1.1%

5.9%
9.4%

-0.7%
0.3%

$40.54
$49.89

$38.97
$41.95

$40.71
$49.39

2.2%
15.4%

1,680,721
4,794,790

-24.2%
-3.1%

85,631
(302,667)

(120,522)
(468,339)

Y-o-Y
% Change

Direct
Available
Space

Sublease
Available
Space

Direct
Vacancy
Rate

Sublease
Vacancy
Rate

Total
Vacancy
Rate

Y-o-Y
% Pt. Change

Direct
Wtd. Avg.
Rental Rate

Sublease
Wtd. Avg.
Rental Rate

Total
Wtd. Avg.
Rental Rate

Y-o-Y
% Change

Year-to-Date
Leasing
Activity

Y-o-Y
% Change

Year-to-Date
Direct Absorption
Rate

Year-to-Date
Total Absorption
Rate
(1,523,570)
(29,065)

MANHATTAN OFFICE MARKET
Overall
Class C Statistical Summary

Submarket

Third Quarter 2013

Number of
Buildings

Inventory

Total
Available
Space

Midtown

800
150

242,673,681
15,815,466

27,598,728
752,437

8.9%
-6.5%

22,438,306
596,226

5,160,422
156,211

9.2%
3.8%

2.1%
1.0%

11.4%
4.8%

0.9%
-0.3%

$69.53
$39.71

$59.69
$28.08

$68.41
$39.01

3.0%
4.2%

11,414,325
423,373

17.6%
-29.2%

(374,077)
74,135

Midtown South

431
214

65,289,027
20,156,303

4,979,786
1,092,517

16.5%
-35.3%

4,246,891
895,908

732,895
196,609

6.5%
4.4%

1.1%
1.0%

7.6%
5.4%

1.1%
-2.5%

$61.26
$46.18

$51.57
$47.69

$60.34
$46.29

22.8%
5.3%

2,743,402
790,180

-12.0%
-11.4%

(766,678)
2,054

(716,948)
(106,933)

Downtown

175
72

84,856,334
9,923,197

9,209,990
861,094

16.0%
35.4%

8,183,495
836,085

1,026,495
25,009

9.6%
8.4%

1.2%
0.3%

10.9%
8.7%

1.5%
2.5%

$46.79
$35.10

$31.31
$38.50

$46.00
$35.11

15.5%
10.4%

4,269,513
467,168

7.4%
-35.9%

(1,555,361)
9,442

(1,795,363)
15,476

1406
436

392,819,042
45,894,966

41,788,504
2,706,048

11.3%
-13.5%

34,868,692
2,328,219

6,919,812
377,829

8.9%
5.1%

1.8%
0.8%

10.6%
5.9%

1.1%
-0.7%

$63.19
$40.54

$54.62
$38.97

$62.51
$40.71

6.3%
2.2%

18,427,240
1,680,721

9.7%
-24.2%

(2,696,116)
85,631

(4,035,881)
(120,522)

Y-o-Y
% Change

Direct
Available
Space

Sublease
Wtd. Avg.
Rental Rate

Total
Wtd. Avg.
to-date
Rental
Rate

Totals

MANHATTAN OFFICE MARKET
Overall Statistical Summary

7.6%

Submarket
Midtown
Midtown South
Downtown
Totals

Total
: Though the vacancy
rate
Available
Number of
in Midtown
South
is up more
than 1
Space
Buildings
Inventory

Third Quarter 2013

percent year over year, New York’s
800 submarket
242,673,681
27,598,728
8.9%
hottest
continues
to have
431
65,289,027
4,979,786
the lowest
vacancy
rate in the
nation. 16.5%
175
84,856,334
9,209,990
16.0%
“It’s such a vibrant market right now,
and 1406
rents are 392,819,042
still rising, and
you’re still 11.3%
41,788,504
seeing a lot of activity,” Mr. Noland said.
“I think for the foreseeable future that
will continue to continue to be true.”

22,438,306
4,246,891
8,183,495
34,868,692

22 | OCTOBER 8, 2013  | COMMERCIAL OBSERVER
NOTE: Only space that can be occupied within six months from the end of the current month is included in statistics.
Source: Cushman and Wakefield Research Services

10.6%

Sublease
Direct
: The Vacancy
overall
Available
vacancy
rate in Manhattan
Space
Rate

did tick up 1.1 percent year
9.2%
over 5,160,422
year to 10.6 percent,
732,895
6.5%
influenced
by the large
1,026,495
9.6%
blocks of space being put
on the
markets, including
6,919,812
8.9%
Barclays’ space at 200 Park
Avenue and 133,000 square
feet at 601 West 26th Street.

Sublease
Vacancy
Rate
2.1%
1.1%
1.2%
1.8%

$60.34

Total
Y-o-Y
:
Vacancy
% Pt. Change
Rate Midtown South

Direct
Rents
in
Wtd. Avg.
continue
Rental Rate

to push higher, up
0.9% year over
$69.53
percent
1.1%
$61.26
year overall
to $60.34
10.9%
1.5%
$46.79
per square foot. “The
South market
10.6%Midtown 1.1%
$63.19
continues to tighten, and
rents continue to be very
high,” Mr. Noland noted.
11.4%22.8
7.6%

$59.69
$51.57
$31.31
$54.62

18,427,240

Y-o-Y
Year-to-Date
Y-o-Y
: Overall
year- % Change
% Change
Leasing
leasing←activity inActivity
Manhattan ←

of nearly 18.5 million square feet is
$68.41
3.0%increasing
11,414,325
indicative
of the
power of 17.6%
$60.34
22.8%
2,743,402
the
technology
sector. “We’ve
seen the-12.0%
$46.00
15.5%
4,269,513
7.4%
financial services industry really be slow
in$62.51
terms of expansion
and
growth in the
6.3%
18,427,240
9.7%
marketplace, but tech has been driving
a lot of what has been happening in
Manhattan,” Mr. Noland said.

Year-to-Date
Direct Absorption
Rate

Year-to-Date
Total Absorption
Rate

(374,077)

(1,523,570)

(766,678)

(716,948)

(1,555,361)

(1,795,363)

(2,696,116)

(4,035,881)

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