May 2008: New York City Retail, Office and Industrial Market Report
Printer-friendly versionNew York City Market Overview:
| Last month, office vacancies increased in Midtown and Downtown due to the recent financial layoffs resulting in being given back, as either direct or sublease space. As a result, Landlords’ are starting to drop rents. The State Department of Labor has doubled the possible job cuts on Wall Street than the previous estimates. Predictions indicate that Wall Street will lay off 36,000 employees - one fifth of its entire work force, compared to the 20,000 that the city's Independent Budget Office predicted in March. The bleaker outlook will put a damper on the city's economy, and hurt Manhattan's commercial leasing market in the coming year. If all the layoffs occur, Manhattan will have up to 9 million square feet of office space, direct and sublease on the market. If that does, in fact, get reintroduced to the market, the vacancy rate would climb to about 9.7%, from its current level of 7.9%. The figure is above the 9% threshold where asking rents are beginning to fall. 4,000 people laid off by Merrill Lynch may not have a short-term impact on office leasing, but it is another shade over the financial-services sector. As much as half of Bear Stearns' 14,000 employees could be laid off by the firm’s new owner JP Morgan Chase. The number of job cuts is still yet to be determined. New York City's real estate market has been shaken by the collapse of Bear Stearns. Sales of Class A buildings dropped the hardest. The first quarter of 2008 showed an apparent drop off in building sales from the prior year, whereas some sectors of the market fared better than others. There was a drop-off of 95% in dollar value of Class A office building sales to $582 million in the first quarter of 2008, from $12.1 billion the previous year. This is compared to a mild drop of 62% for sales of all other offices, to $524 million in the first quarter of 2008, from $1.4 billion in the first quarter of 2007. Across all categories, building sales so far in 2008 fell 89% to $1.7 billion, from $15.5 billion in the first quarter of 2007. |
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In New York City, Foreclosures rose by 50% between 2006 and 2007 as a wave of sub-prime defaults is sweeping the U.S. Foreclosure filings went from 10,000 in 2006 to nearly 15,000 in 2007. Homes in Greenwich, Connecticut have also entered into foreclosure. 666 Fifth Avenue’s retail may be bought by the Carlyle Group, for $525 million. The sale would help Jared Kushner, the owner; repay short-term debt on the building. Residents of 5 Tudor City Place announced a lawsuit against the City Planning Commission to stop Sheldon Solow's $4 billion development of the former Con Edison site. The suit alleges that in approving Solow's plan, the City Council and Planning Commission ignored wishes of the local community board, which expressed fears that the project would cause noise and pollution during construction and overshadow Tudor City once it was built. Solow's plan calls for 3,000 apartments, 1 million square feet of commercial and 69,000 square feet of retail on First Avenue, between 35th and 41st streets. L&M Development Partners is teaming up with Goldman Sachs to launch a $100 million urban investment fund aimed at mixed-income housing and other projects in New York and other U.S. cities. |
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New Developments
Vornado Realty Trust was selected to redevelop and expand the West Side trade show facility between 51st and 54th streets on the West Side Highway. The New York City Economic Development Corporation chose Vornado and its subsidiary Merchandise Mart Properties to expand the facility. The project is to create 355,000 square feet of trade show and conference space.Broadway Partners, a New York-based real estate investor, bought several billion dollars worth of property in 2006 and 2007, at the height of the market, borrowing short-term debt that comes due in 2009. The company is considering selling some properties and refinancing others, in an effort to raise $200 million and buy some of its debt back at a discount before it is due in May 2009.
Plans for a new PATH station near the World Trade Center could be abandoned, and the $1.9 billion in federal funding for the project redirected, as Governor Paterson names a new executive director of the Port Authority. If the station is canceled, the federal money could be used to help finance the planned renovation of Penn Station.
The Kingsbridge Armory, once the world's largest military drill hall, is going to be turned over to a private corporation for a $310 million makeover into a massive retail center. This is intended to jumpstart the North Bronx economy.
Related Companies, Manhattan-based, won the project for the historic armory. Under Related's plan, the 575,000-square-foot site will become home to a department store, up to 35 smaller shops, a number of restaurants and a movie multiplex.
The Bloomberg administration's revised rezoning plan for Coney Island's seaside area keeps condos and time-share hotels out of the amusement area. The new plan also prevents high-rises from being built along the boardwalk of a planned amusement park and allows the district's biggest property owner, developer Joe Sitt, to erect up to 900 hotel units along the Avenue behind the park. The hotels would have to be standard or theme park-related. Sitt would have to sell the city 230,000 square feet of his property for the planned park but would be allowed to build retail, enclosed amusements and hotels on the other 220,000 square feet.
Cleanup at the six-acre contaminated site of Public Place, along the Gowanus Canal, is in progress. The Hudson Companies plan to develop 774 apartments and a park at the site, with a possible growth by 500 units if a neighboring property owner joins in. The two-acre canal-side park would join a waterfront esplanade estimated to be 70 feet wide.
More than 5% of the city’s population is housed in the New York City Housing Authority’s 2,600 buildings which plan to go green and model the way for a larger citywide effort if Mayor Michael Bloomberg’s long-term sustainability agenda gets re-energized. Maintenance crews have already installed 147,000 compact fluorescent bulbs in 58 Brooklyn developments.
Port Authority Chairman, Anthony Coscia, says his authority should take over the stalled Moynihan-station project which should be considered an expansion of the transportation network rather than an office building. The MTA feels the station should be an independent project, as opposed to the city's efforts to package the Moynihan-station with a new Madison Square Garden and new office towers, which depends on whether Madison Square Garden is relocated.
The rezoning of Harlem's 125th Street commercial area appears headed towards approval, now that the City Council's influential land use subcommittee on zoning and franchises has voted to approve a modified plan. The City Planning Department plans to set aside for local retailers and lower the income caps for affordable housing. Critics say the rezoning will displace small businesses and that Harlem residents do not earn enough to buy the affordable housing.
As the ambitious plans to redevelop the West Side run into problems, some planners and officials are calling for changes to keep the area growing. Several planners say the expensive tree-lined boulevard planned for 10th and 11th Avenues (33rd Street to 42nd Street) should be scrapped. Others want zoning loosened to allow residential towers to be built on 11th Avenue.
Construction costs continue to rise, the increase is expected to slow down this year. After three years of a increasing at 12 %, costs are expected to rise only 7 to 9.5 % this year. This slowdown comes with a decrease in construction projects after the glut of building projects started before the credit crisis subsides. Competition between contractors is on the rise, with projects getting as many as eight bidders this year, while last year builders they were lucky to have two.
Hudson Yards' development is behind schedule. The MTA missed the deadline to officially designate Tishman Speyer as the developer. The MTA was to issue a designation letter to Tishman Speyer. Final negotiations on both sides are still ongoing and will be finished soon.
Mayor Michael Bloomberg's congestion pricing effort is dead along with the chance for a $354 million federal transportation grant. The MTA needs a big capital influx to expand services. The real estate industry, which already funds the MTA through taxes on mortgage recordings and sales, could be game for new revenue.
The seven former Equity office properties that Harry Macklowe bought for $7 billion last year have started hitting the market. The price tag for 850 Third Avenue and the Park Avenue Tower at 65 East 55th Street could be $1 billion to $1.2 billion. Deutsche Bank is offering financing for the properties to make sure the deals get done.
New York Office Leases:
- Total Manhattan Office Class A vacancies increased from 11.44 million RSF to 12.52 million RSF.
- Total Manhattan Office Market vacancies increased from 21.02 million RSF to 22.31 million RSF.
- Total Manhattan Office direct lease vacancy increased from 18.04 million RSF to 18.45 million RSF
- Manhattan Office Sublease vacancy increased from 2.98 million RSF to 3.87 million RSF.
- Total Manhattan Office Market vacancies increased from 21.02 million RSF to 22.31 million RSF.
- Total Midtown Office vacancy increased from 11.6 million RSF to 11.87 million RSF.
- Total Midtown South Office vacancy increased from 3.9 million RSF to 4.07 million RSF.
- Total Downtown Office vacancy increased from 5.52 million RSF to 6.37 million RSF.
- Total vacant Office Sublease Space in Midtown Manhattan increased from 1.88 million RSF to 1.97 million RSF.
- Total vacant Office Direct Space in Midtown Manhattan increased from 9.72 million RSF to 9.9 million RSF.
- Total vacant Office Direct Space in Midtown South Manhattan decreased from 3.6 million RSF to 3.78 million RSF.
- Midtown South Manhattan Sublease vacancies decreased from 0.295 million RSF to 0.289 million RSF.
- Total Downtown Manhattan Office Direct Lease Space increased from 4.72 million RSF to 4.76 million RSF.
- Total Downtown Manhattan Office Sublease Vacancies increased from 0.8 million RSF to 1.61 million RSF.
NYC Retail Leases:
- Total Available Manhattan Retail Space decreased from 1.12 million RSF to 1.09 million RSF.
- Midtown vacancy decreased from 0.25 million RSF to 0.23 million RSF.
- Midtown South Retail vacancies decreased from 0.76 million RSF to 0.72 million RSF.
- In Downtown, Retail vacancy increased from 0.11 million RSF to 0.13 million RSF.
New York Industrial Leases:
- Total Vacant Manhattan Industrial Space increased from 0.32 million RSF to 0.33 million RSF.
- Midtown vacancy stayed at 0.18 million RSF.
- Midtown South Industrial vacancies stayed at 0.15 million RSF.
Manhattan Office Rentals:
- Credit Suisse leases 257,837 RSF at One Madison Avenue.
- The Segal Company leases 156,000 RSF at 333 West 34th Street.
- General Motors leases 120,000 RSF at 153 East 53rd Street (Citigroup Center).
- Crain Communications leases 100,000 RSF at 711 Third Avenue.
- The American Language Communication Center leases 650,00 RSF at 229 West 36th Street.
- Kohn Pedersen Fox leases 65,000 RSF at 11 West 42nd Street.
- DirecTV leases 64,475 RSF at One Rockefeller Plaza.
- Credit Suisse leases 56,745 RSF at 315 Park Ave South.
- The School of Visual Arts leases 54,000 RSF at 335 West 16th Street.
- Solomon-Page Group leases 51,000 RSF at 260 Madison Avenue.
- PNC Bank of Pittsburgh leases 40,000 RSF at 340 Madison Avenue.
- Kobre & Kim leases 40,000 RSF at 800 Third Avenue.
- Turner Construction leases 30,000 RSF at 580 Gerard Avenue (The Bronx).
- SpeechCycle leases 28,000 RSF at 26 Broadway.
- The Rodgers & Hammerstein Organization leases 25,000 RSF at 229 West 28th Street.
- Humanscale Corp. leases 24,000 RSF at 11 East 26th Street.
- Allianz Global Investors leases 24,000 RSF at 51 West 52nd Street.
- William F. Ryan Community Health Center leases 23,178 RSF at 801 Amsterdam Avenue.
- The School of Visual Arts leases 20,000 RSF at 333 West 23rd Street.
- TheLadders.com leases 20,000 RSF at 205 Hudson Street.
- Easter Unlimited leases 16,264 RSF at 1115 Broadway.
- Teach for America leases 15,000 RSF at 519 Eighth Avenue.
- Paine & Partners leases 14,000 RSF at 461 Fifth Avenue.
- Kable Distribution Services leases 12,486 RSF at 14 Wall Street.
- Gaiam leases 12,000 RSF at 350 Madison Avenue.
- CooperKatz & Company leases 10,662 RSF at 205 Lexington Avenue.
- American Utex International leases 10,335 RSF at 463 Seventh Avenue.
- Enterprise Asset Management leases 10,022 RSF at 521 Fifth Avenue.
- United Legwear Co. leases 10,000 RSF at 48 West 38th Street.
- GEOS Language Institute leases 7,091 RSF at 1133 Broadway (St. James Building).
- Centro LLC leases 6,500 RSF at 22 West 21st Street.
- Algonquin Productions leases 6,390 RSF at 121 East 24th Street.
- Hotline leases 6,000 RSF at 231 West 39th Street.
- Converseon Inc. leases 6,000 RSF at 53 West 36th Street.
- BATS Trading Inc. leases 6,000 RSF at 14 Wall Street.
- BJD Inc. leases 6,000 RSF at 318 West 39th Street.
- The Nolan Glove Company leases 6,000 RSF at 22 West 38th Street.
- Exhale Enterprises leases 5,700 RSF at 250 West 57th Street.
- Deutsche Telekom leases 5,658 RSF at 14 Wall Street.
- Ridge Abstract Corp. leases 5,336 RSF at 53 West 36th Street.
- Rick Steiner Fell & Benowitz LLP leases 5,310 RSF at 90 Broad Street.
- Lacoste Home leases 5,200 RSF at 185 Madison Avenue.
- Elias Arts leases 5,000 RSF at 394 Broadway.
- EidosMedia leases 5,000 RSF at 14 Wall Street.
- Software Reproduction Technologies leases 5,000 RSF at 7-9 West 30th Street.
- Verum Management leases 4,995 RSF at 12 East 49th Street.
- World Gold Trust Services leases 4,948 RSF at 424 Madison Avenue.
- Houghton Mifflin Company leases 4,767 RSF at 1350 Sixth Avenue.
- 3PAR Inc. leases 4,749 RSF at One Whitehall Street.
- Bumble & Bumble Products leases 4,620 RSF at 160 East 56th Street.
- James Perse Enterprises leases 4,500 RSF at 231 West 39th Street.
- Harlem Veterans Center leases 4,000 RSF at 2279-2283 Third Avenue (The Bridges NYC).
New York Retail Leases:
- Jeff Sutton leases 40,000 SF at 599 Broadway.
- Zara leases 21,634 SF at 500 Fifth Avenue.
- Victoria Secret leases 20,000 SF at 133 East 58th Street.
- NYZ Outlet leases 18,000 SF at 378 Broadway.
- Associated Supermarket leases 13,209 SF at 801 Amsterdam Avenue.
- Duane Reade leases 9,458 SF at 71 West 23rd Street.
- Duane Reade leases 9,304 SF at 325 Columbus Avenue.
- Hugo Boss leases 9,000 SF at 555 Broadway.
- Duane Reade leases 8,000 SF at 560 West 125th Street.
- Kira Plastinina leases 7,947 RSF at 509 Fifth Avenue.
- Fig & Olive leases 7,000 SF at 10 East 52nd Street.
- Staples Copy & Print leases 6,600 SF at 330 Seventh Avenue.
- AT&T leases 5,000 SF at 3 Times Square.
- House & Home leases 4,000 SF at 345 West 42nd Street.
- Sleepy’s leases 4,000 SF at 753 Columbus Avenue.
- Wachovia Bank leases 3,500 SF at 2279-2283 Third Avenue (The Bridges NYC).
- Mundo Art leases 3,500 SF at 24 Spring Street.
- Haven leases 3,500 SF at 244 East 51st Street.
- AT&T leases 3,200 SF at 5120 Fifth Avenue.
- Play and Trade LLC leases 3,050 SF at 137 East 13th Street.
- Staples Copy & Print leases 2,800 SF at 42 Broadway.
- Nilesh Dawda leases 2,500 SF at 172 Orchard Street.
- Free People leases 2,100 SF at 1319 Third Avenue.
- Chop Creative Salad Company leases 2,030 SF at 1285 Sixth Avenue (UBS Building).
- Crumbs 42nd Street Inc. leases 2,014 SF at 110 West 40th Street
- Big Apple Style leases 1,850 SF at 485 Third Avenue.
- Spice leases 1,800 SF at 102 Second Avenue.
- SEAJ Pharmacy Corp. leases 1,656 SF at 765-7 Morris Park Avenue (The Bronx).
- AT&T leases 1,500 SF at 2066 Broadway.
- Tasti D-Lite leases 1,500 SF at 1841 Broadway.
- Yin Beauty Spa leases 1,300 SF at 103 West 86th Street.
- Elements Beauty Lounge leases 1,250 SF at 48 Third Avenue.
- Citi-Spaces Realty leases 1,200 SF at 174 Second Avenue.
New York City Buildings Sold:
- 650 Madison Avenue, a 27-story, 600,000 RSF office building, was sold to Ashkenazy Acquisition Corp. for $695 million.
- 1250 Broadway, a 39-story, 670,000 RSF office building, was sold to Murray Hill Properties for $310 million.
- 100 Fifth Avenue, a 19-story, 240,000 RSF office building, was sold to Rock New York (100-104 Fifth Avenue) LLC for $152 million.
- 100-104 Fifth Avenue, a 20-story, 270,000 RSF office building, was sold to Rock Investments for $150 million.
- 370 Canal Street, a 20-story hotel, 360 rooms total, was sold to Magna Hospitality Group for $83 million.
- 8 Gramercy Park South and 141 East 33rd Street, 2 mixed-use buildings, 180,000 RSF total, was sold to Stonehenge Partners for $83 million.
- 28-30 West 57th Street, a 34-story, 32,144 RSF office building, was sold to The LeFrak Organization for $56 million.
- 318 East 15th Street (Booth House), a 12-story, 112,898 RSF apartment building, 140 units total, was sold to Arun Bhatia Development for $56 million.
- 64 West 48th St, a 17-story, 130,000 RSF office building, was sold to Muss Development for $54 million.
- 38-40 and 42-50 Greene Street, three 5-story office buildings, 110,000 RSF total, was sold to Zar Property NY; Nassimi Realty for $50 million.
- Washington Heights portfolio, 7 mixed-use buildings, 323 residential units total, was sold to Perseus Management for $44 million.
- 505-513 West 43rd Street, Development site, was sold to Magna Hospitality Group for $42 million.
- 134 West 58th Street, a 15-story apartment building, was sold to Benedict Properties for $39 million.
- 777 Washington Street, a 4-story, 20,000 RSF mixed-use building, was sold for $34 million.
- 127-131 West 25th Street, a 12-story, 89,000 RSF mixed-use building, was sold to Real estate partnership for $32 million.
- 408-410 Broadway, a 5-story, 60,600 RSF commercial building, was sold to Vanick Properties for $29 million.
- 6-12 Water St, a 5-story, 21,000 RSF office building, was sold to McSam Hotel Group for $27 million.
- 431 West 33rd Street, Development site, was sold to McSam Hotel Group for $24 million.
- 3581 Broadway, Development site, was sold to Columbia University for $20 million.
- 176-182 West 82nd St, Four 5-story apartment buildings, 30,000 RSF total, was sold to Navistone Amsterdam LLC for $19 million.
- 15 Broad St (Downtown by Philippe Starck), Commercial condo, was sold for $18 million.
- 65-67 Greene Street, Two 5-story mixed-use buildings, was sold to a Manhattan investor for $15 million.
- 145-147 East 47th Street, 4-story, 8,980 RSF retail building, was sold to a Manhattan developer for $12 million.
- 111 Mercer Street, a 5-story, 11,332 RSF office building, was sold to Mercer 111 LLC for $12 million.
- 128 East 62nd Street, 6-story, 7,890 RSF apartment building, was sold for $6 million.
- 647-53 West 174th Street, 30,000 RSF apartment building, 40 units total, was sold for $6 million.
- 124-26 West 139th Street, 5-story apartment building, 30 units total, was sold for $3 million.
- 660 Park Avenue, a Commercial condo, was sold to Aerin Lauder Zinterhoffer for $3 million.
- 225-227 East 24th Street, a 5,000 RSF retail condo, was sold to a Manhattan architect for $2 million.
- 3857-3861 Third Avenue (The Bronx), a Development site, was sold to a Manhattan developer for $1 million.
Legend
RSF-Rentable Square FeetSF- Square Feet
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