Pr Web: Manhattan Office Leasing Market on the Up and Up


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After the strong closing of 2013, the first quarter of 2014 carried some more good news to the world of office leasing in Manhattan. The three Manhattan submarkets all saw leases signed with the highest rents since 2008, and the overall average effective rent for Manhattan increased $2.61 to $54.94 PSF. In each of the past four years, average effective rents in Q2 were higher than the average effective rents for Q1. If this seasonality stays true, coupled with the upward momentum of office leasing activity in Manhattan, we expect to hear more good news in the months to come.

Midtown: Boats Against the Current

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Despite the fact that the most expensive lease in the quarter was inked for above $200 PSF, the average class A effective rent lingered in the mid-$60s PSF in the first quarter of 2014. Similarly, class B effective rent dropped slightly to an average of $45.80 PSF for the quarter. From the year over year perspective, effective rent in Midtown is still on the rise with an 8.1% growth comparing to same period last year. In the meantime, the average concession package value dropped to 7.7% of the deal value, which is on the low-end within a 2-year timeframe.
Continuing the positive signal from last quarter, new leases comprised 64.7% of the total leased square footage in Q1 2014. Notable transactions in this quarter include Baron Capital’s renewal and expansion in the GM Building, and Mount Sinai Health System’s massive 450K SQFT lease at 150 East 42nd Street.

Midtown South: A Delicate New Height

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Midtown South had a spectacular start in 2014 with the recordbreaking deal by Claren Asset Management at 51 Astor Place and other high-rent deals. The average class A effective rent passed $70 PSF and the overall average effective rent in Midtown South soared $4.22 to $54.67 PSF. The market kept on tightening as the supply dwindled with Sony’s 525K SQFT lease at 11 Madison Avenue and WeWork’s Chelsea space absorption of 115K SQFT new at 115 West 18th Street. New leases kept driving a vibrant office leasing activity in this quarter, although renewals comprised more than half of the leased square footage as a result of Credit Suisse’s renewal/relocation lease.

As the average rent set a new record again this quarter, the average concession package value also climbed to 8.4% of total lease value. The last time the concession package value reached over 8% was the fourth quarter of 2012, after which, the effective rent of the following quarter dropped 4%.

Downtown: WTC Market Slowed Down

After the robust ending of last year, Downtown’s trophy leasing market kept a lower profile this quarter. Overall average effective rent dropped $3.57 to $36.46 PSF, virtually the same level as in Q3 2013. This volatility is directly correlated with the volume of class A activity in the WTC submarket, which is still expected to shine with the upcoming completion of the World Trade Center towers. The main activity driver this quarter was the class B sector with an eighth consecutive quarter of positive growth in average effective rent.

Keeping the same rate of increase for a second quarter in a row, the average concession package value averaged approximately 10%, similar to the same period of last year. New leases comprised 85.6% of the leased spaces in this quarter and value-seeking firms relocating from Midtown and Midtown South played a big part of it. One of the biggest beneficiaries of this relocation wave this quarter is Brookfield Office Property, which rented out more than 280K SQFT in One New York Plaza to tenants such as Nature America and Revlon, who relocated from the Grand Central submarket.