market research

December 2017

December 2017 New York Commercial Real Estate Market Report

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Manhattan Office.

Office leasing demand is strong with net positive absorption in Downtown and Midtown. Office rental concession rise as landlords compete with fancier build-outs rather than cutting asking rents. Midtown South saw vacancies rise both direct and sublease.

Manhattan Retail.

With more than 200 stores vacant, landlords have been and continue to cut rental prices to attract new tenants. Retail rents are down 34% from the peak in 2014.

New York Market Overview

  • Total Manhattan Class A Office vacancies decreased from 9.3 % vacant to 8.9 % vacant
  • Total New York City Office vacancy decreased from 8.6 % vacant to 8.2 % vacant
New York Office:

Manhattan office asking rents saw their biggest monthly decline in three years, as prominent Plaza District landlords lowered pricing on some of the city’s ritziest trophy towers. Average asking rents dropped 1.2% to $72.03. That was the biggest monthly drop since May 2014.

Asking rents for Midtown trophy office towers still have not climbed back to their pre-recession peak, but tenant-improvement work letters are nearly triple what they were in 2008. Midtown asking rents for prime Manhattan towers are $107 per square foot.

Total Manhattan Class A Office vacancies decreased from 9.3 % vacant to 8.9 % vacant
New York Retail:

Manhattan’s retail rents are at their lowest point in 17 years. Soho rents have plummeted by more than a third since 2015. The steepest drop was on Bleecker Street between Seventh Avenue and Hudson Street, which saw a 25% drop in average asking rent to $351 per square foot. Soho saw asking rents 34% lower than the peak now at $644 per foot. On Madison Avenue between 57th and 72nd Streets, asking rents are now 27% lower than the peak at $1,348. In Herald Square, asking rents have dropped 15% since last fall to $633 per foot.

Fifth Avenue average asking rents are $3,900 per square foot. Asking rents on Broadway in the Flatiron were $384 per foot. In Times Square, asking rents are $2,100 per foot.

Retail landlords are increasingly turning to short-term leases to test the market and give stores a chance to try out locations. Lease agreements that last two to three years, rather than the traditional five- to 10-year longer-term leases, allow retailers to test how much they can afford at a location.

The number of vacant ground-floor stores in Manhattan has swelled from 99 to 200. Average asking rents along the borough’s prime corridors are down 30% from peak in the fourth quarter of 2014 from $1,020 a square foot to this year’s $711.

New York Sales:
Since the end of the summer, there has been a pickup in sales activity in Midtown. The prices being achieved now are just as high or higher than in the last 12 to 24 months. Global investors still have need for well-located Manhattan offices.
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