March 2008: Manhattan Retail, Office and Industrial Market Report

New York City Market Overview:

The Manhattan office market showed signs of a slowdown in the fourth quarter of 2007, as a streak of four straight quarters of positive absorption ended with 734,662 square feet of going back on the market.

New Developments

The amount of leased in the fourth quarter of 2007 was 34.5 % lower than the amount of leased in the fourth quarter of 2006. Average asking rents fell by 45 cents to $61.46 per square foot in the fourth quarter, down from $61.91 per square foot in the third quarter.

In 2007, the office market in Downtown Manhattan had a lower overall vacancy rate than the Midtown market for the first time since 2001. The year-end report showed that Downtown had a 7.6 percent vacancy rate last year, compared to a 7.7 percent rate in Midtown. Downtown saw 412,108 square feet of office leasing activity in the fourth quarter of 2007, which include two major relocations from Midtown: Omnicom's 180,000-square-foot lease at 195 Broadway and American Lawyer Media's move to 120 Broadway.

SJP 11 Times Square at Eighth Avenue and 42nd Street has 1.1 million square feet to rent. The Port Authority's One World Trade Center, (the Freedom Tower) has around 1.6 million remaining (2 government agencies are taking about 1 million square feet in the 2.6 million-foot Freedom Tower). In addition, Larry Silverstein will start on WTC Tower 4, which will add another 2.3 million square feet for delivery in 2011. The Port Authority and the city plan to take about two-thirds of it for their own office use.

Boston Properties' 1 million square-foot office Eighth Avenue tower between 54th and 55th streets, aka 250 West 55th Street. Law firm Gibson, Dunn & Crutcher has signed a lease for 220,000 square feet, while another law firm is expected to take between 500,000 and 600,000 square feet.

March 2008 Manhattan Office Market Vacancies

Total Manhattan Class A Office vacancies decreased from 5.8 % vacant to 5.3 % vacant.
Total Manhattan Office vacancy decreased from 5.7 % vacant to 5.4 % vacant.

March 2008 New York Retail Market Vacancies

Total Available Manhattan Retail Space increased from 1.05 million RSF to 1.07 million RSF.

Brookfield announced that it is out of the running to develop Hudson Yards. The developer will still be active in the neighborhood. Just east of the West Side Rail Yards, Brookfield will build two large office towers.

Related Companies and the Hudson Companies released renderings for two proposals for the polluted Public Place site along the Gowanus Canal in Carroll Gardens where they will build more than 700 units of housing and retail and parkland.

Toll Brothers has revealed plans for its big development along the Gowanus Canal: 577 residential units are planned, including 130 affordable units, along with 2,000 square feet of community space, 2,000 square feet of retail and a waterfront esplanade. The buildings will be four to 12 stories and the tallest structure will be 125 feet.

Developer Shaya Boymelgreen put the four-acre Gowanus Village site back on the market asking $27 million. Luxe waterfront condos have been planned, which has 470 feet of Gowanus Canal frontage.

Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. haven't dodged the credit crisis. The new source of potential losses: so-called variable interest entities that allow financial firms to keep assets such as subprime-mortgage securities off their balance sheets. VIEs may contribute to another $88 billion in losses for banks caused by the collapse of the housing market. Goldman, which hasn't had any of the industry's $163 billion in writedowns, said last month it may incur as much as $11.1 billion of losses from the instruments.

Willets Point a controversial site in Queens could be the home of a new convention center. The public review process is to begin for Willets Point, and the city's ambitious plans call for a convention center with up to 400,000 square feet. Plans also call for 5,500 housing units, 1.8 million square feet of retail and 500,000 square feet of office space.

Moynihan Station may topple before it gets off the drawing board. Funding has fallen $1 billion short of its $2.3 billion projected cost. Amtrak has yet to give the go-ahead for the plan or okay the name change.

Hudson Yards and the Moynihan Station are in danger of dying from uncertain funding, risky financing and lack of coordination. Despite billions spent by the city, state and developers on studies, land acquisition and architects, no one has figured out who or how it will be paid for. The Hudson Yards: the city's name for a planned new district west of 10th Avenue, complete with office and residential towers, parks and its own subway stop on an expanded No. 7 line. The 33-acre district, much of it over the rail yards, was rezoned in 2005, and the five developers picked by the city are to submit revised proposals in a second round of bids. Expanding the No. 7 line is crucial to the success of the new neighborhood, but the project already has been scaled back to cut costs. The city puts the cost of the expansion at a low $2.1 billion - a figure it set in 2003 and hasn't adjusted for todays skyrocketing construction costs. The MTA considers the proposed Second Avenue subway line a greater priority and has refused to pick up the tab. A $1.1 billion tunneling contract has been awarded, but to save an estimated $450 million, the city abandoned plans to put a station at 41st Street and 10th Avenue. The line will run from 34th Street and 11th Avenue without a stop - a decision that "puts at risk several million square feet of potential commercial and residential development" in the Hudson Yards. If builders lose interest, New Yorkers could be saddled with billions in debt. The city is funding the project from the sale of $2 billion in bonds. Interest from the bonds is payable from city appropriations; the principal will be met by revenue from payments in lieu of taxes by developers.

GM Building Sale. Cayre, founder of Midtown Equities, is in talks with developer, Harry Macklowe, in a deal that would allow Macklowe to retain a management and minority partner position in the General Motors Building. Cayre, a co-owner of the Sears Tower, and his Middle Eastern backers have the upper hand because they will buy out Macklowe's creditors. Macklowe needs to sell the Fifth Avenue building for more than $3 billion. He is past due on short-term loans that he took out on the seven office buildings he bought last year for $6.8 billion. Cayre would buy out Fortress, the holder of a Macklowe's $1.4 billion bridge loan.

John Catsimatidis decided not to proceed with a Downtown Brooklyn project on Myrtle Avenue where he was going to build a 660-unit tower rise. John Catsmatidis citied the credit crunch and a lack of financing for the affordable housing component. Other builders are examining their options as financing becomes harder to get. Investors have shown less interest in buying low-income housing tax credits.

Mayor Michael Bloomberg has threatened to foreclose on 24,593 New York City properties if the owners don't pay their share of the $470 million in unpaid property taxes and water bills. Property owners will be notified that they have 90 days to pay off the debt, ranging from $1,000 to millions of dollars. The commercial and residential properties are scattered throughout the five boroughs. The city sent out similar warnings in 2006, though only 6,640 property owners were notified at that time.

The Department of City Planning proposed the creation of a "special purpose district" ranging from 124th to 126th streets, between Broadway and Second Avenue. It would create 1.8 million square feet of office, retail and hotel space, and 2,500 new residential units, including 500 units of affordable housing. The proposal has won approval from two community boards, but was voted down by another. The city must complete its review by March 10. The new rezoning will bring both new mixed-use development and cultural institutions. After three years, the state selected the Danforth Development Partners to redevelop the Victoria Theater, which will house the Jazz Museum, the Classical Theatre of Harlem and the Harlem Arts Alliance in addition to a hotel and condominiums.

Vornado Realty Trust and MacFarlane Partners took over plans for th Harlem Park project on 125th Street and Park Avenue where they have unveiled plans that would offer 540,000 square feet of Class A office and 90,000 square feet of retail. Major League Baseball and Inner City Broadcasting, a radio network, were negotiating with Vornado for space. Vornado is pushing for the city to lift its proposed height requirement. If the project gets built, it would be the first major office building on 125th Street in about 40 years.

Joseph Rose, the former director of City Planning in the Giuliani administration, is planning a hotel of more than one million square feet at 260 12th Avenue, a block south of the Hudson River Park. Rose's Georgetown Company is planning a 66-story, 828-foot hotel on the site.

Developer Durst is planning to build a $200 million-plus private school (the Nations Academy) at 623 West 57th Street, a block from the Hudson River. The Durst Organization, which has a long-term lease on the block, will build the 240,000 square foot school.

The cost of the New York Yankees new stadium may reach $1.3 billion, up from an earlier estimate of $930 million. Another $135 million will be needed for bringing in concessions. The team will pay the extra costs. The city and state are paying for new parks, new garages and a new Metro-North station. The Yankees say they rejected offers of at least $50 million a year for naming rights. Much of the interior steel structure is complete.

The 2nd U.S. Circuit Court of Appeals has allowed the $4 billion Atlantic Yards project to go forward. Opponents have endured a series of legal setbacks recently. A lawsuit last month that challenged the state's environmental review of the project was rejected. The plaintiffs are said to ask the U.S. Supreme Court to hear the case.

New York Office Leases:

Total Manhattan Office Class A vacancies increased from 11.36 million RSF to 11.52 million RSF.
Total Manhattan Office Market vacancies increased from 20.94 million RSF to 21.4 million RSF.
Total Manhattan Office Direct Lease vacancy increased from 17.92 million RSF to 18.22 million RSF.
Manhattan Office Sublease vacancy increased from 3.01 million RSF to 3.18 million RSF.
Total Manhattan Office Market vacancies increased from 20.94 million RSF to 21.4 million RSF.
Total Midtown South Office vacancy decreased from 4.15 million RSF to 4.04 million RSF.
Total Midtown Office vacancy increased from 11.57 million RSF to 11.66 million RSF.
Total Downtown Office vacancy increased from 5.22 million RSF to 5.7 million RSF.
Total Vacant Office Sublease Space in Midtown Manhattan increased from 1.93 million RSF to 2.06 million RSF.
Total Vacant Office Direct Space in Midtown Manhattan decreased from 9.64 million RSF to 9.6 million RSF.
Total Vacant Office Direct Space in Midtown South Manhattan decreased from 3.85 million RSF to 3.75 million RSF.
Midtown South Manhattan Sublease vacancies decreased from 0.3 million RSF to 0.28 million RSF.
Total Downtown Manhattan Office Direct Lease Space increased from 4.44 million RSF to 4.86 million RSF.
Total Downtown Manhattan Office Sublease Vacancies increased from 0.79 million RSF to 0.84 million RSF.

NYC Retail Leases:

Total Available Manhattan Retail Space increased from 1.05 million RSF to 1.07 million RSF.
Midtown South Retail vacancies decreased from 0.73 million RSF to 0.72 million RSF.
Midtown vacancy increased increased from 0.23 million RSF to 0.25 million RSF.
In Downtown, Retail vacancy rose from 0.09 million RSF to 0.1 million RSF.

New York Industrial Leases:

Total Vacant Manhattan Industrial Space increased from 0.22 million RSF to 0.33 million RSF.
Midtown South Industrial vacancies increased from 0.12 million RSF to 0.15 million RSF.
Midtown vacancy increased increased from 0.1 million RSF to 0.18 million RSF.

Manhattan Office Rentals:

Ogilvy & Mather leases 564,800 RSF at 636 11th Avenue.
The international advertising, public relations and marketing agency inked a lease for the entire 11-story building. The property will serve as the company's new worldwide headquarters.
NYS Office of General Services leases 500,000 RSF at 25 Beaver Street.
Four state agencies under the OGS umbrella signed a 10-year lease renewal. The agencies involved are the Division of Housing and Community Renewal, the Office of Court Administration, the Department of Insurance and the Lottery Department. The reported asking rent was $45 per square foot.
MMS USA Holdings leases 350,000 RSF at 1675 Broadway.
The marketing company signed a 10-year lease renewal.
Gibson, Dunn & Crutcher leases 200,000 RSF at 250 West 55th Street.
The law firm signed a lease. It is the first tenant to sign for space at the planned tower.
Centerline Capital Group leases 99,552 RSF at 1095 Sixth Avenue.
The real estate finance and investment firm inked a lease for floors three through five in a move from 625 Madison Avenue. The reported asking rent was $125 per square foot. The tower is now 90 percent leased.
Arnell Group leases 40,000 RSF at 7 World Trade Center.
The advertising firm signed a lease for the entire 37th floor. The reported asking rent was about $70 per square foot. The tower now has 11 full-floor spaces available for rent.
Verizon leases 37,092 RSF at 90 John Street.
The mobile communications giant inked a lease.
NYU Medical Center leases 36,400 RSF at 14 Wall Street.
The hospital center signed a lease for the entire 10th floor.
The CementWorks leases 35,682 RSF at 162 Fifth Avenue.
The advertising agency signed a sublease. The firm is expanding its Manhattan presence by adding to its 20,000-square-foot space at 641 Sixth Avenue.
CUNY John Jay College leases 31,000 RSF at 619 West 54th Street.
The school signed a lease for administrative office space. Asking rents at the property are reportedly in the low $50s per square foot.
Alvarez & Marsal Holdings leases 29,960 RSF at 125 Park Avenue.
The global professional services firm signed a sublease.
Funaro & Co. leases 20,008 RSF at 350 Fifth Avenue (Empire State Building).
The Italian financial advisory firm inked a lease for the 41st floor. The reported asking rent was $60 per square foot.
Eileen Fisher leases 19,000 RSF at 111 Fifth Avenue.
The clothing designer signed an expansion lease.
Polo Ralph Lauren leases 13,756 RSF at 525 Seventh Avenue.
The fashion giant signed a lease renewal.
Worth Global Style Network Limited leases 13,300 RSF at 130 Fifth Avenue.
The online research and news service for the fashion industry signed a 10-year lease. The firm is relocating from 110 Fifth Avenue, where it has been subletting space. The company plans to move into its new space in the spring. The building is now 100 percent occupied.
Red Line Films leases 8,465 RSF at 304 Hudson Street.
The television and film production company inked a 10-year lease for space on the sixth floor.
Margola Import Corporation leases 7,019 RSF at 48 West 37th Street.
The accessories distributor signed a lease renewal. The reported asking rent was $100 per square foot.
P/A Associates LLC leases 6,228 RSF at 250 West 57th Street.
The real estate development firm signed a lease for part of the 11th floor. The space was created through a consolidation of seven separate office units.
Alexander Antonelli Architect PLLC leases 5,557 RSF at 48 West 37th Street.
The designer of Manhattan residences signed a lease renewal. The reported asking rent was $40 per square foot.
Sarkissian Mason leases 5,000 RSF at 135 West 26th Street.
The design marketing firm signed a five-year expansion lease.
Nazmiyal Inc. leases 5,000 RSF at 31 East 32nd Street.
The antique rug dealer inked a five-year lease for full-floor space. The reported asking rent was $35 per square foot.
J. Song International leases 4,800 RSF at 499 Seventh Avenue (Fashion Tower).
The fashion company signed a five-year lease renewal.
Thistle and Bee leases 4,800 RSF at 499 Seventh Avenue (Fashion Tower).
The producer and purveyor of sterling silver for jewelry companies signed a five-year lease renewal. The company is relocating to the 4th floor from the 17th floor, where it has occupied a 3,300-square-foot space.
HG Resources Inc. leases 3,700 RSF at 499 Seventh Avenue (Fashion Tower).
The women's coats distributor inked a five-year lease for showroom and office space. The company is relocating from 525 Seventh Avenue.
Vintage Real Estate Services Ltd. leases 3,416 RSF at 450 Seventh Avenue (Nelson Tower).
The Lovett Company LLC
FedEx Kinkos Office and Print Services Inc. leases 3,366 RSF at 463 Seventh Avenue.
The shipping and office services provider signed a five-year lease renewal. The reported asking rent was $100 per square foot.
Kaboose Inc. leases 3,250 RSF at 119 Fifth Avenue.
The online media company signed a four-year sublease. The reported asking rent was $45 per square foot.
Capstone Holdings Group LLC leases 3,115 RSF at 44 Wall Street.
The asset management and proprietary trading firm inked a lease for part of the 20th floor.

New York Retail Leases:

Lucky Strike Entertainment leases 40,000 sf at One River Place.
The upscale bowling alley and lounge signed a lease. It plans to be open for business in the fall of 2008. The retail space occupies the ground floor of the Costas Kondylis-designed, 40-story, 921-unit rental apartment tower, which was completed in 2000.
Polo Ralph Lauren leases 11,000 sf at 1055 Madison Avenue.
The apparel retailer signed a lease. The store is temporarily relocating from 888 Madison Avenue, which is undergoing a renovation. The two-story, 10,000-square-foot building will be demolished to make way for a new structure of just under 20,000 square f
Levi's leases 9,700 sf at 1501 Broadway.
The apparel retailer signed a lease. The space includes a 6,500-square-foot ground-floor space and a 3,200-square-foot lower level. The reported asking rent for the ground-floor space alone was $650 per square foot. The company plans to open the new store
The Palm leases 9,000 sf at 200 Chambers Street.
The steakhouse signed a lease to open its fourth and largest Manhattan location. The reported asking rent was $150 per square foot.
ABC Variety Store leases 9000 sf at 37-15 82nd Street.
The general merchandiser signed a 13-year sublease. The store is relocating from a location on the same block.
Duane Reade leases 9,000 sf at 130 Williams Street.
The drug store inked a 20-year lease for another location.
Duane Reade leases 6,800 sf at 1350 First Avenue.
The drug store inked a 20-year lease for another location.
Duane Reade leases 5,700 sf at 611 Sixth Avenue.
The drug store inked a 20-year lease for another location.
Ridgewood Savings Bank leases 3,000 sf at 1602 Avenue Y.
The bank inked a lease.
Starbucks leases 2,000 sf at 2394 Broadway.
The coffee chain inked a 10-year lease for another location.
Melville House Publishing leases 1983 sf at 145 Plymouth St (Dumbo)
The publishing house signed a lease for space to be used for book readings and a radio show broadcast.
True Religion Apparel Inc. leases 1,850 sf at 10 Columbus Circle (The Shops at Columbus Circle).
The clothing retailer signed a lease. The store is slated for a spring 2008 opening.
Hip N Humble Home leases 1,710 sf at 132 West 24th Street.
The import furniture company signed a 10-year lease.
Camille's Sidewalk Cafe leases 1,700 sf at 142 East 43rd Street.
The cafe signed a 10-year lease.
Debut leases 1,100 sf at 298 Mulberry Street.
The apparel retailer inked a lease.
Orchard House Cafe leases 1,000 sf at 1064 First Avenue.
The coffee house signed a 10-year lease.
G&G Hair Extensions and Accessories leases 1,000 sf at 4861 Broadway.
The hair extensions studio signed a lease.
Goodlife Fitness Center leases 800 sf at 309 East 60th Street.
The day spa signed a lease.
Joe the Art of Coffee leases 476 sf at 420 Lexington Avenue (Graybar Building).
The coffee shop signed a 10-year lease for 336 square feet of ground-level space and 140 square feet of mezzanine space. The reported asking rent was $250 per square foot for the ground-floor space and $50 per square foot for the mezzanine space.
Carmen's Closet Corp. leases 400 sf at 4869 Broadway.
The women's clothing boutique signed a lease.
AT&T leases 200 sf at 200 Vesey Street.
The mobile phone company signed a one-year lease for a kiosk.
FedEx-Kinko's leases at 300 West 57th Street (Hearst Tower).
The mail services and photo copy center signed a lease.

New York City Buildings Sold:

100 William Street a 21-story 400000 RSF office building was sold to Mitsui Fudosan America Inc. for $180 million.
The property sold for $180 million. The seller purchased the building, together with Cargill Financial Services, for $45 million in 1999.The property is currently more than 90 percent leased.
28 East 10th Street (Devonshire House) a 131-unit apartment building was sold to Sterling American Properties subsidiary for $110 million.
The Emery Roth-designed property sold for $110 million. The seller was a family that owned the building since the 1940s.
415 West 51st Street a Development site was sold to Tessler Development for $84 million.
The two-building hospital site sold for $84.7 million. The buyer plans to renovate the property for residential use.
700 Broadway a 100000 RSF office building was sold to Jared Kushner for $80 million.
The former headquarters of the National Audubon Society sold for $80 million. The seller purchased the building in 2006 for $53 million. The Society is relocating its offices to 225 Varick Street.
396 Broadway a 10-story 61219 RSF office building was sold to a Spanish real estate fund for $40 million.
The property went into contract for $40 million, or $653 per square foot. The buyers can build a 100-room hotel at the site.
305 East 61st Street (Cirkers Hayes Storage Warehouse) a 10-story 65000 RSF warehouse was sold to The Chelsea Development Group for $28 million.
The property sold for $28 million.
35 West 36th Street a 12-story 78000 RSF office building was sold to Hidrock Realty; Assurant Inc. for $28 million.
The commercial property sold to the joint venture for $28 million. The buyers plan to upgrade and renovate the building.
Manhattan portfolio 4 apartment buildings 75 units total was sold for $24 million.
The portfolio sold for $11.1 million, or $142 per square foot. The price represents a capitalization rate of 4.9 percent and a gross rent multiple of 12.9. The properties are located at 201, 203-205, 217 and 233 West 111th Street. The buildings combine
264 Water Street an 8-story 41278 sf apartment building was sold to a Manhattan investor for $22 million.
The elevator loft building sold for $22 million, or $533 per square foot. The price represents a capitalization rate of 3.8 percent and a gross rent multiple of 17.2. The property consists of 27 luxury apartments ranging in size from 910 to 1,860 square f
167-177 Lafayette Street a 6-story 35287 RSF mixed-use building was sold to Eretz Group for $21 million.
The property sold for $21 million. The new owners plan to gut the century-old building, which has about 5,500 square feet of retail on the bottom floors. Rents are likely to fetch $50 or more per square foot after the renovations are completed.
554-558 West 181st Street a Two 5-story apartment building was sold to a Local investor for $17 million.
The contiguous walk-up properties sold for $17.25 million. The buildings combine for 38 apartments and seven stores. The buyer plans to upgrade the apartments.
230 East 44th Street a 14-story 135315 RSF mixed-use building was sold for $16 million.
The leasehold position sold for $16.2 million, or $120 per square foot. The property consists of 164 multifamily units and four commercial units. It also includes a 100-plus car garage. The price represents a gross rent multiple of seven.
470 Broadway a 7,000 RSF retail building was sold to Thor Equities for $15 million.
The commercial property sold for $15.5 million. The retail space will likely be occupied by a designer apparel store.
352 Riverside Drive a 5-story 9,083 sf townhouse was sold to Helen LaKelly Hunt for $15 million.
The property sold for $15 million. The townhouse, designed in 1899 by architect Robert D. Kohn, has original details such as a wide baronial staircase and eight fireplaces.
62-64 East 34th Street a 5-story 17,180 sf apartment building was sold for $13 million.
The elevator building sold for $13.5 million, or $786 per square foot. The price represents a capitalization rate of 3.2 percent and a gross rent multiple of 22.1. The property consists of two stores on the ground floor, office space on the second floor, and rent-stabilized apartments and eight free-market apartments on the upper floors.
506-10 West 181st Street a 4-story 26,264 RSF mixed-use building was sold to MICL LLC for $11 million.
The freestanding garage building sold for $11.5 million. The sale occurred on the final day of the buyer's 1031 exchange period.
Manhattan portfolio 4 apartment buildings 78,331 sf total was sold to a Queen's investor for $11 million.
The portfolio sold for $11.1 million, or $142 per square foot. The price represents a capitalization rate of 4.9 percent and a gross rent multiple of 12.9. The properties are located at 201, 203-205, 217 and 233 West 111th Street. The buildings combine for 87 units, including eight studios, 29 one-bedrooms, 24 two-bedrooms and 26 three-bedrooms.
601 East 82nd Street a 20-story 296940 RSF mixed-use building was sold to Simon Elias for $11 million.
The property sold for $11 million.
516 East 14th Street a 1-story 10330 RSF retail building was sold to East 14th Lighthouse LLC for $10 million.
The commercial property sold for $10.5 million. It is zoned for four stories and 41,612 buildable square feet. The buyer already owns neighboring properties at 512, 510 and 504 East 14th Street.
44-46 East End Avenue a 5-story 16320 sf apartment building was sold to a Foreign investor for $10 million.
The elevator property sold for $10.25 million. The building contains 30 apartments and will remain as an investment rental property.
152 East 55th Street a 6-story 15348 RSF office building was sold to Carvi Properties for $9 million.
The property sold for $9.3 million.
548 West 48th Street a 2-story 6250 RSF commercial building was sold to Sam Chang for $6 million.
The building currently housing a Pace Auto Parts Inc. sold for $6.6 million.
677 Madison Avenue a 5-story 12200 sf apartment building was sold to Vornado 677 Madison LLC.
The walk-up property sold at an undisclosed price.