December
2003: Manhattan Office, Retail
and Industrial Space Update
Rental Market Overview:
The
Midtown, Midtown South and Downtown
markets were relatively flat with
minor tightening, as prices remained
stable. However, landlord concessions
towards work and construction
are being gradually reduced. As
the economy continues to improve,
“Shadow Space” (space
vacated by corporations but not
listed for rent as doing so would
require them under the tax laws
to recognize the loss in the current
year) is being reduced as corporations
with possible near-term expansions
in mind are withdrawing the shadow
space from the market. Moreover,
the amount of sublease space constantly
goes down over time as leases
have a finite term. However, sublease
space continues to compete with
direct space, especially Downtown.
For example, Wachovia Securities,
which acquired Prudential last
winter, put 480,000 square feet
at 199 Water Street on the sublease
market - and plans to shed much
more. By 2005 Wachovia plans to
put up for sublease between half
and all of its 1.3 million square
feet at 1 New York Plaza.
Even though a number of large
leases have been signed of late,
there still remains a considerable
amount of recently built space
that has yet to be leased -
+ 850,000 square feet at Boston
Properties' Times Square Tower,
left in the lurch by the collapse
of the original anchor tenant
Arthur Andersen. So far, leases
have been signed for about 300,000
of the tower's 1.1 million feet.
|
| +
700,000 square
feet at Macklowe Properties'
340 Madison Ave. |
| +
180,000 square feet at Vornado's
Bloomberg L.P. headquarters
tower at Lexington and 59th. |
| +
140,000 square feet in the
new glass curtain-wall addition
on top of Vornado's 640
Fifth Ave. |
|
Also, more commercial space will
be added to the market over the
next few years as several projects
currently under construction are
finished and planned projects
are undertaken.
|
Currently under construction:
|
| +
7
World Trade Center, a 1.7
million square foot building.
|
| +
The Hearst Tower, an 856,000
square foot office tower
at 959 Eighth Avenue. |
|
Planned commercial buildings:
|
| +
The New York Times Headquarters,
a 52-story 1.54 million
square foot building on
Eighth Avenue opposite the
Port Authority. |
| +
InterActive
Corp’s construction
of a new headquarters in
the Chelsea district.
|
| +
Construction
on the 165,000 square foot
building, designed by Frank
Gehry, is scheduled to begin
by early 2004 and is expected
to be fully completed by
the end of 2006.
|
| +
The
East River Plaza in East
Harlem should be under construction
by next year. Developers
are currently targeting
tenants like Home Depot,
Target and the Gap.
|
| +
Pfizer has a deal pending
with Fisher Bros., SheldonSolow
and Morgan Stanley to build
a 2 million square foot
skyscraper at 708 First
Avenue. |
The building sales market remains
robust with no sign of letting
up in the short term. Sale prices
for Class A office towers are
at record highs for a number of
reasons. Interest rates are low
so buildings are trading slightly
above the bond rates and prices
of alternate uses such as Residential
or hotel conversions are high.
Also, sales prices are high to
reflect the low cost of capital
abroad which further increases
the amount foreign buyers are
willing to pay. German pension
funds have been major recent investors
due to their low cost of capital.
Most of the buildings recently
sold had long term leases, were
potential residential conversions
or were users who were going to
occupy the space themselves. Some
recent transactions include-
|
Office
Sales:
|
| +
1185 Avenue of the Americas,
a 42-story, 1.1 million
square foot Class A office
tower is under contract
with Reckson for $321 million
or $303 a foot. The building
is subject to a ground lease
with 40 years remaining
and a set to fair market
rent at the end of 2005. |
+
The El Ad Group recently
bought 655-671 Sixth Avenue
for $37 million.
|
|
Hotel
Sales:
|
+
The Gorham Hotel at 136 W. 55th
St. was sold to Richard Born's
BD Hotels for $23 million.
|
Downtown
Residential Conversion Sales:
|
| +
20 Exchange Place and 67
Wall Street were bought
by Metro Loft Management
for possible conversion
from office to luxury residential. |
| +
20 Exchange Place and 67
Wall Street were bought
by Metro Loft Management
for possible conversion
from office to luxury residential. |
| +
100 Maiden Lane was sold
for $57 million and will
be converted to residential
when the current owners,
Cadwalader Wickersham &
Taft move into the World
Financial Center. |
|
Summary:
|
|
As the market continues to tighten,
low rents and concessions are
bound to diminish further. Therefore,
this is an excellent time to draw-up
and finalize long term plans before
prices escalate and landlord concessions
disappear altogether.
|
MARKET
HIGHLIGHTS |
OFFICE: |
| +
Total Class A vacancies
increased slightly from
27.03 million RSF to 27.17
million RSF, while Total
Market vacancies decreased
slightly from 48.00 million
RSF to 47.65 million RSF. |
| +
Total Direct Lease availability
declined from 37.08 million
RSF to 36.86 million RSF,
while Total Sublease vacancies
continued their two year
declined falling to a new
low of 10.79 million RSF
from 10.92 million RSF.
|
| +
Midtown
and Midtown South availability
decreased from 27.22 million
RSF to 26.92 million RSF
and from 9.28 million to
8.95 million RSF respectively,
while Total Downtown Vacancy
rates rose from 11.50 million
RSF to 11.78 million RSF.
|
| +
Total
Vacant space in Midtown
decreased as the decline
Total Direct Lease space
availability from 20.55
million RSF to 20.08 million
RSF outweighed the slight
rise in Total Sublease availability
from 6.67 million RSF to
6.84 million RSF.
|
| +
Midtown
South Direct Lease availability
fell 7.17 million RSF and
7.09 million RSF, while
Sublease vacancies declined
from 2.11 million RSF to
1.87 million RSF.
|
| +
Total
Downtown vacancies rose
as the increase in Direct
Lease space from 9.36 million
RSF to 9.69 million RSF
outweighed the fall in Sublease
availability from 2.14 million
RSF to 2.08 million RSF.
|
|
RETAIL: |
| +
Total
Retail availability declined
from 0.48 million RSF and
0.45 million RSF as all
three market segments saw
decreased vacancy rates. |
| +
Midtown
availability increased from
0.18 million RSF to 0.17
million RSF. |
| +
Midtown
South availability increased
from 0.25 million RSF to
0.24 million RSF. |
| +
Total
Downtown Vacancy rates increased
from 0.05 million RSF to
0.04 million RSF. |
INDUSTRIAL: |
| +
Total
Industrial Vacant space
decreased from 1.07 million
RSF to 1.06 million RSF
due to a decline in Total
vacancies in Midtown South
from 0.39 million RSF to
0.38 million RSF. |
+
Vacancies
rates in Midtown and Downtown
remained unchanged.
|
| |
CLASS
A (In Millions of Rentable Square Feet)
|
| |
Vacant Space |
Available now and in the next two years
|
| |
Direct |
Sublease |
Total |
% Vacant |
% Monthly Change |
Direct |
Sublease |
Total |
% Vacant |
% Monthly Change |
| Midtown |
12.82
|
5.67
|
18.49
|
10.30% |
-1.03% |
22.89
|
9.29
|
32.18
|
16.71% |
-2.00% |
| Midtown
South |
0.58
|
0.25
|
0.84
|
8.60% |
-1.32% |
1.22
|
0.46 |
1.68 |
15.86% |
0.83% |
| Downtown
|
6.30
|
1.54
|
7.84 |
13.70% |
4.41% |
11.15
|
2.93
|
14.08 |
22.13% |
7.88% |
| Total |
19.71
|
7.47
|
27.17 |
11.00% |
0.53% |
35.26 |
12.68
|
47.94
|
17.97%
|
1.00% |
|
| |
TOTAL
MARKET (In Millions of Rentable Square
Feet)
|
| |
Vacant Space |
Available now and in the next two years
|
| |
Direct |
Sublease |
Total |
% Vacant |
% Monthly Change |
Direct |
Sublease |
Total |
% Vacant |
% Monthly Change |
| Midtown |
20.08
|
6.84
|
26.92 |
11.20%
|
-1.13% |
31.06
|
11.00
|
42.06 |
16.51% |
-1.74% |
| Midtown
South |
7.09
|
1.87
|
8.95
|
14.70% |
-3.63% |
8.93
|
2.46
|
11.39
|
18.00% |
-2.14% |
| Downtown
|
9.69
|
2.08
|
11.78 |
14.70% |
2.37% |
14.95
|
3.65
|
18.60 |
21.39% |
4.61% |
| Total |
36.86 |
10.79
|
47.65 |
12.50%
|
-0.74% |
54.94
|
17.12
|
72.06
|
17.79% |
-0.17%
|
|
| |
| |
TOTAL
MARKET (In Millions of Rentable Square
Feet)
|
| |
Vacant Space |
|
Available now and in the next two years |
| |
Direct |
Sublease |
Total |
% Vacant |
|
Direct |
Sublease |
Total |
% Vacant |
| Midtown |
0.17
|
0.00 |
0.17 |
18.50% |
|
0.26 |
0.05 |
0.31 |
28.91% |
| Midtown
South |
0.21 |
0.04 |
0.24 |
28.90% |
|
0.41 |
0.05 |
0.46 |
43.40% |
| Downtown
|
0.04 |
0.00 |
0.04 |
15.80% |
|
0.05 |
0.00 |
0.05 |
20.75% |
| Total |
0.41 |
0.04 |
0.45 |
22.60% |
|
0.72 |
0.09 |
0.82 |
34.52% |
|
| |
| |
TOTAL
MARKET (In Millions of Rentable Square
Feet)
|
| |
Vacant Space |
|
Available now and in the next two years |
| |
Direct |
Sublease |
Total |
% Vacant |
|
Direct |
Sublease |
Total |
% Vacant |
| Midtown |
0.65 |
0.03 |
0.68 |
32.10%
|
|
0.98 |
0.03 |
1.01 |
41.30% |
| Midtown
South |
0.34 |
0.04 |
0.38 |
14.50% |
|
0.46 |
0.04 |
0.50 |
18.27% |
| Downtown
|
0.00 |
0.00 |
0.00 |
N/A
|
|
0.01 |
0.00 |
0.01 |
N/A
|
| Total |
0.99
|
0.07 |
1.06 |
22.30% |
|
1.45 |
0.07 |
1.52 |
29.20% |
|
|
|
| Total
Class A vacancies increased slightly from
27.03 million RSF to 27.17 million RSF,
while Total Market vacancies decreased
slightly from 48.00 million RSF to 47.65
million RSF. |
|
|
|
| Total
Market Vacancies fell as both Total Direct
and Sublease Lease availability declined
from 37.08 million RSF to 36.86 million
RSF and from 10.92 million RSF to 10.79
million RSF respectively. |
|
|
|
| Total
Direct Lease availability declined from
37.08 million RSF to 36.86 million RSF,
while Total Sublease vacancies continued
their two year declined falling to a new
low of 10.79 million RSF from 10.92 million
RSF. |
|
|
|
Total
Market vacancy fell as Midtown and Midtown
South availability decreased from 27.22
million RSF to 26.92 million RSF and from
9.28 million to 8.95 million RSF respectively.
Total Downtown Vacancy rates rose from
11.50 million RSF to 11.78 million RSF.
|
|
|
|
| Total
Vacant space in Midtown decreased as the
decline Total Direct Lease space availability
from 20.55 million RSF to 20.08 million
RSF outweighed the slight rise in Total
Sublease availability from 6.67 million
RSF to 6.84 million RSF. |
|
|
|
Midtown
South Direct Lease availability fell 7.17
million RSF and 7.09 million RSF, while
Sublease vacancies declined from 2.11
million RSF to 1.87 million RSF.
|
|
|
|
Total
Downtown vacancies rose as the increase
in Direct Lease space from 9.36 million
RSF to 9.69 million RSF outweighed the
fall in Sublease availability from 2.14
million RSF to 2.08 million RSF.
|
|
|
|
| Total
Retail availability declined from 0.48
million RSF and 0.45 million RSF as all
three market segments saw decreased vacancy
rates. In Midtown and Midtown South availability
increased from 0.18 million RSF to 0.17
million RSF and from 0.25 million RSF
to 0.24 million RSF respectively. Total
Downtown Vacancy rates increased from
0.05 million RSF to 0.04 million RSF.
|
|
|
|
| Total
Industrial Vacant space decreased from
1.07 million RSF to 1.06 million RSF due
to a decline in Total vacancies in Midtown
South from 0.39 million RSF to 0.38 million
RSF. Vacancies rates in Midtown and Downtown
remained unchanged. |
|
