New York City office
and retail Market Research

June 2017

June 2017 New York Commercial Real Estate Market Report

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Manhattan Office: Manhattan office direct vacancies declined in all sub-markets. Manhattan office sublease increased as more firms shed extra office space. Overall, the market is stable but landlords are continuing to increase concessions while trying to hold firm on pricing. ...

Manhattan Retail: National retail closures continue to take their toll on the New York retail landscape putting additional pressure on landlords to lower pricing or increase incentives. This trend is likely to continue...

New York Market Overview

  • Total Manhattan Class A Office vacancies decreased from 9.6 % vacant to 9.0 % vacant
  • Total New York City Office vacancy decreased from 8.6 % vacant to 8.2 % vacant
The commercial real estate market is getting murky as low interest rates are to blame for asset inflation and impending oversupply issues.

The city’s investment-sales market limped listlessly through the first few months of 2017, with dollar volume falling by more than 50% from the same time last year. The first quarter of 2017 saw 846 properties trade hands for a total dollar volume of $7.06 billion. That was a drop of 33% from the 1,258 properties sold the same time a year ago, and a 55% decline from the $15.52 billion worth of deals inked in the first quarter of 2016.

Office: Office leasing activity was down in all Manhattan submarkets relative to the five-year monthly averages. Downtown Manhattan saw the most relative growth in office leasing activity of 257,000 square feet leased which was 78% better than last year, but still 40% below the five-year monthly leasing average of 427,000-square-feet. By comparison, leasing activity in Midtown and Midtown South was down 7 and 8% year-over-year, respectively.

Manhattan’s office landlords were offering increased concessions , up 3.3% from a year earlier. As more new office buildings come online and tenants continue to increase employee density , landlords are increasingly offering additional free rent and build out allowances.

Total Manhattan Class A Office vacancies decreased from 9.6 % vacant to 9.0 % vacant
In Midtown net average rent increased 3.6% in 2016 to $68.80 per square foot, but the effective rent after concessions, fees, and taxes, increased less than 1%. The effective rent for tenants was $81.50 and $43.20 for landlords.

Lower Manhattan saw 1.8 million square feet of office space leased in the first quarter of 2017. TAMI tenants now make up 26% of the market, compared to 19% in 2016.

Retail: Availability rates across Manhattan saw a 25% increase during the first quarter of 2017. The average asking rent in the borough declined 2.7%, to $850 per square foot from $874 per square foot during the same time last year. Asking rents fell in 12 of the 16 corridors, with Fifth Avenue between 42nd and 49th streets showing the largest drop at just over 17%. From cutting their rents to offering generous concessions, retail landlords are doing what they can to fill vacancies in their buildings, some of which are encumbered by hundreds of millions of dollars in debt.

Retail rents are down in most shopping corridors in Manhattan.

Net effective retail rents in Manhattan have fallen 20 to 30% from their 2014 peak. The estimate accounts for concessions, which have been on the rise across Manhattan as landlords try to keep face rents up.
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