market research

August 2019

August 2019 New York Commercial Real Estate Market Report

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Manhattan Office:
Manhattan office rents average continue to rise as more older office buildings come down and strong demand for coworking space does not let up.

Manhattan Retail:
Continued retail bankruptcies including Barneys puts pressure on rents. Forever 21 and other national retailers continue to face pressure from online sales and will likely reduce their physical footprints.

Manhattan Industrial.
Very limited supply puts upward pressure on the remaining industrial stock.

New York Market Overview

Manhattan leasing activity which includes both renewals and new leases totaled 20.26 million square feet.

The first half of 2019 saw 15% less activity than the second half of 2018, but this was still 12.2% above the five year average. Asking rents continued to rise to record highs, with an average of $77.82 across Manhattan and $84.51 in Midtown in large part to a boom in Downtown.

Office leasing in Midtown South was flat year-over-year with 7.02 million square feet in total volume. TAMI tenants were on top here with 54% of total activity from WarnerMedia’s 1.3 million-square-foot sale-leaseback deal at 30 Hudson Yards. WeWork’s 213,000-square-foot lease at 620 Sixth Avenue contributed to FIRE tenants’ 27% share. Leasing activity in Midtown South continued to climb with 750,000 square feet in leases, a 10% increase from last month. The availability rate dropped to 10.1%, and the average asking rent fell to $83.56 per square foot.

Midtown saw a modest year-over-year increase of 3.7% with 8.2 million square feet in leasing activity, half of which went to FIRE tenants.

Midtown office leasing slowed down, totaling 1.25 million square feet, a 32% decrease from the month before. The availability rate dropped to 10.6%, while the average asking rent fell from the previous month’s high, reaching $87.89.

Downtown was the submarket with the strongest growth thus far, jumping 70% year-over-year to 5.03 million square feet. FIRE tenants had the largest share here with 34%, including EmblemHealth’s 440,000-square-foot renewal at 55 Water Street and WeWork’s 200,000-square-foot new lease at 199 Water Street. Public sector tenants came in with a 22% share. The availability rate dipped to 13.2% and the average asking rent continued to climb, reaching $62.74 per square foot.

Financial services, insurance and real estate tenants led the way, accounting for 38% of all activity, and co-working companies took about a third of all FIRE space. Technology, advertising, media and information service tenants accounted for another 28%.

Co-working has remained bright in the overall office leasing market. Manhattan leasing activity rose 13% during the first half of the year to 20.26 million. Of that, the financial services, insurance and real estate sector accounted for the largest share of leases, 385 with one-third taken by co-working companies. Technology, advertising, media and information leases followed with 28%.

Retail:

The first half of 2019 was gruesome for traditional retailers. If the first few days of July are any indication, the second half of 2019 won’t be any rosier. Four of the S&P 500 index’s five worst performing stocks in the first half of 2019 are retail companies.

Industrial:

The warehouse sector has seen little supply, high demand and high prices, with available industrial and logistics real estate rising slightly for the first time in 34 quarters. Demand for warehouse and distribution reached an 18-year high in 2018. Large owners are optimistic that there will continue to be institutional investment in industrial real estate.

    The top 10 office lease deals totaled 1.2 million square feet, significantly fewer than last month’s, which totaled 1.7 million square feet.

  1. McCann Worldgroup renewed its 15-year lease for 450,000 square feet of space at 622 Third Avenue. The landlord is Cohen Brothers Realty.
  2. Justworks inked a lease for 275,000 square feet of space at 55 Water Street.The landlord is the Retirement Systems of Alabama.
  3. Flatiron Health expanded its lease by 122,068 square feet of space at One Soho Square. The landlord is Stellar Management.
  4. Altice signed a lease for 103,133 square feet of space at One Court Square. The landlord is Savanna.
  5. Greenhill & Co. signed a 15-year lease for 78,000 square feet of space at 1271 Sixth Avenue. The landlord is the Rockefeller Group.
  6. Juul Labs signed a lease for 54,000 square feet of space at One Soho Square. The landlord is Stellar Management.
  7. Vevo inked a five-year lease for 37,768 square feet of space at 151 West 42nd Street. The landlord is the Durst Organization.
  8. ASAPP renewed and expanded its 10-year lease for 36,960 square feet of space at 1 World Trade Center. The landlords are the Durst Organization and The Port Authority of New York and New Jersey.
  9. Olo inked a 10-year lease for 36,099 square feet of space at 1 World Trade Center. The landlords are the Durst Organization and The Port Authority of New York and New Jersey.
  10. Collins Building Services renewed and expanded its 10-year lease for 30,760 square feet of space at 24-01 44th Road. The landlord is United Nations Federal Credit Union.

Retail :

Large deals were inked by grocery stores, gyms, marketplaces and schools. The 10 biggest retail leases signed totaled 164,600 square feet, up 61,100 square feet from last month’s total of 103,500 square feet. The largest retail lease was in Centr–al Harlem.

  1. Food Bazaar signed a 20-year lease for 45,885 square feet of space at 201 East 125th Street, a new affordable residential project in Harlem. The landlords are Richman Group Development Corp., Bridges Development Group, Monadnock Development, Hope Community Development and El Barrio Operation Fightback.
  2. Equinox Fitness renewed its 20-year lease for 36,500 square feet of space at 14 Wall Street at an asking rent of $100 per square foot. The landlord is Alexander Rovt.
  3. ARDOR School for Passion-Based Learning inked a 35-year lease for 20,000 square feet of space at 29 Nassau Avenue. The building is a former Catholic convent. The landlord is Slovak Royal Catholic Church of the Holy Family. The school plans to open in the fall.
  4. Heartshare Human Services signed a 15-year lease for 19,000 square feet of space at 12242 Flatlands Avenue. The landlord is Hudson Companies.
  5. Lincoln Markets signed a 20-year lease for 12,656 square feet of space at 1134 Fulton Street. The landlord is Bruman Realty.
  6. Jennifer Furniture signed a lease for 7,200 square feet of space at 2494 Flatbush Avenue. The landlord is Ciardullo Real Estate Development.
  7. Broadway Market signed a lease for 7,000 square feet of space at 427 Broadway. The landlord is 427 Broadway LLC.
  8. Burke Rehabilitation signed a lease for 6,583 square feet of space at 1250 Waters Place. The landlord is James MacDonald of Simone Development.
  9. Norrøna outdoor brand signed a lease for 5,000 square feet of space at 67 Greene Street. The landlord is 67-65 Greene Street LLC.
  10. Foot Locker signed a 10-year lease for 4,727 square feet of space at 90 West 225th Street. The landlord is Washington Square Partners.
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