market research

February 2018

February 2018 New York Commercial Real Estate Market Report

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New York Office:
Strong office demand pushes vacancy rates down, while office rental rates remain flat. Companies are flocking to New Construction in Hudson Yards leasing 8.3 million square feet there and Manhattan West. Leaving behind about 7 million square feet.

New York Retail:
With retail rents down 18-20%, retailers have resumed signing leases and the market is beginning to tighten in prime neighborhoods.

New York Market Overview

  • Total Manhattan Class A Office vacancies decreased from 9.5 % vacant to 8.6 % vacant
  • Total New York City Office vacancy decreased from 8.5 % vacant to 8.0 % vacant
New York Office:

Manhattan’s office market saw average asking rents fall in 2017 for the first time in seven years, as landlords lowered prices and more expensive spaces left the market. Average asking rents declined slightly to $72.74 per square foot.

Lower Manhattan asking rents increased year-over-year (up 6.8% to $63 per square foot).

Hudson Yards/Manhattan West supplanted the Plaza District as Manhattan’s most expensive submarket, though its small size 7.74 million square feet compared to the Plaza District’s 55.3 million square feet, makes it much more sensitive to shifts in pricing.

The submarkets of Soho, Murray Hill, Hudson Square, U.N. Plaza and the Hudson Yards/ Manhattan West area also saw price increases.

Both Midtown and Midtown South saw average asking rents decline as Landlords had large blocks of space. 9 West 57th Street and 399 Park Avenue lowered asking rents, as they face competition.

Leasing activity was up 10.9% on the year to 37.05 million square feet, the second-highest total in 14 years. Net absorption was positive at 1.26 million square feet.

Fifth Avenue ranked as the second-most expensive street for offices in the country. Average rents in the area reached $116 per square foot, with the most expensive deals reaching as high as $185 per square foot.

The high-end office market is strong with a record 2.5 million square feet of Manhattan office space leased at rents of $100 a square foot or more last year. That is 25% more than the previous peak in 2015. While more than 100 leases were signed at $100+ per square foot. Hedge funds private equity funds and other financial firms accounted for 65% of the city’s priciest leases in 2017.

Manhattan office leasing activity reached 7.35 million square feet during the fourth quarter of 2017. Annual leasing activity to 28.43 million square feet, the highest total since 2014.

Midtown was the best performing submarket, posting its highest annual total in over a decade. In 2017, Midtown leasing activity totaled 17.97 million square feet. The gains were driven by activity in the 50,000 square feet or larger segment, which accounted for 41% of the area’s annual total.

Companies leased 8.3 million square feet in Hudson Yards and Manhattan West, leaving behind about 7 million square feet.

Fast-growing tech companies have driven office leasing over the past few years, but in 2017 it was Manhattan’s traditional tenants that returned to the driver’s seat. Financial services, insurance and real estate tenants, known by the acronym FIRE, completed 13 relocation or expansion deals over 100,000 square feet last year.

Total Manhattan Class A Office vacancies decreased from 9.5 % vacant to 8.6 % vacant

Retail

Average asking rents in Manhattan’s 16 retail corridors dropped by 18.4% year-on-year in 2017. Retail leasing velocity was robust most of the year, despite a pullback in the fourth quarter. The most active neighborhoods in terms of leased space were Soho, Midtown West and Herald Square.

Retail in Soho has been struggling greatly. 569,000 square feet of retail space was sitting vacant or about 16.3% of the total 3.5 million square feet of retail. Asking rents for ground-floor stores were between $588 and $828 a square foot. Soho was active with 227,000 square feet of retail leased.



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