New York City office
and retail Market Research

September 2016

September 2016 New York Commercial Real Estate Market Report

  • Page 1

Manhattan Office: New office construction and quiet leasing environment bodes well for tenants as they get more rental concessions....

Manhattan Retail: World Trade Center finally opens, although more than 40 out of 100 retailers have yet to open or occupy their stores...

New York Market Overview

  • Total Manhattan Class A Office vacancies increased from 8.8 % vacant to 9.1 % vacant
  • Total New York City Office vacancy increased from 8.1 % vacant to 8.2 % vacant

Manhattan Office

New commercial leasing plummeted during the second quarter of this year, one of several signs that the city should brace for an increasingly sluggish economy. Leasing activity dropped 15.6% from the same time last year, with only 7 million square feet rented. This is the second consecutive decrease in leasing activity, following the first quarter’s 6% year-over-year drop. This quarter, most leasing activity occurred in Midtown with 4.4 million square feet where median rent was $79.18 per square foot, followed by Midtown South with 1.5 million square feet where rent averaged $76.45 per square foot.

Midtown Manhattan has a lot of empty office space. Since 2011, Midtown tenants have vacated 5 million square feet more than they rented. There are 86 contiguous blocks of Midtown office space larger than 100,000 square feet either on the market now or set to become available within the next few years, that is up 72% from 2007’s 50 blocks. The district’s 10.5% availability rate has remained relatively steady. Roughly 12 million square feet of new construction is set to come online in Manhattan in the next five years, much of it Downtown and on the Far West Side. About 3.8 million of that is already leased up largely from tenants expected to depart from Midtown which is bound by 65th Street to the north and around 30th Street to the south, from river to river.

Total Manhattan Class A Office vacancies increased from 8.8 % vacant to 9.1 % vacant
Durst Organization has the most space (2 million square feet) available in Midtown. Rockefeller Group with 1.9 million square feet; SL Green Realty with 1.8 million; L&L Holding Company with 1.3 million; and the Related Companies with 1.2 million. Mega tenants like Time Warner, Skadden, Arps, Meagher & Flom and GroupM have or plan to leave. For landlords with large blocks of available space, the reality is that it has become more difficult to find tenants to lease them. Demand has slowed. Durst will also have about 540,000 square feet to fill at 1155 Avenue of the Americas when law firm White & Case moves up the street to the Rockefeller Group’s 1221 Avenue of the Americas.

The Midtown office submarket has 234 million square feet, followed by Downtown with about 86 million and Midtown South with 73 million. At least 10 large blocks are set to become available on Park Avenue, one of the priciest office markets in the city.

Buildings that rent north of $100 per foot, have limited demand, and there is a lot more supply coming on. Concession packages are going up.

The New York metropolitan area’s office-using job growth slowed dramatically over the past 12 months, adding to concerns over a potential supply glut in the office market. Most new jobs were added in sectors that do not primarily use offices, such as healthcare, retail or education. Between July 2015 and July 2016, only 19,000 (1.4 percent growth) such jobs were added, compared to 49,000 and 46,000 in the two prior years.

The slowdown in job growth comes as developers are adding millions of square feet to New York’s Class-A office supply through developments such as Hudson Yards, Manhattan West, the World Trade Center and One Vanderbilt. Skeptics have long worried that the new supply is exceeding demand. Meanwhile, employment in finance and insurance still has not recovered from the 2008 crisis and continues to be a drag on the office market’s disappointing revenues among New York’s public companies, less than a quarter recorded revenue growth of 5% or more which creates pressure to cut costs. The other is cyclical. Seven years into the recovery, job growth should be expected to slow down.

Manhattan Retail

The World Trade Center’s new retail complex officially opened. Out of roughly 100 shops expected to occupy the $1.4 billion center, more than 40 did not open. H&M’s planned 25,000-square-foot store had remained closed, as did Victoria’s Secret’s space, a Duane Reade, Breads Bakery and Choza Taqueria among others. Many of the stores that have yet to open are near the PATH station and below 3 World Trade Center. The delayed openings could create a financial headache for Westfield, which in 2001 signed a 99-year ground lease for the site and in 2013 paid $800 million for the port authority’s 50-percent stake in the project.
  • Page 1
  • Green Acres Is the Place for Macerich
  • Billionaire Shows How Small Buildings in NYC Can Mean Big Money
  • Optimal Spaces in the News - New York's Pix11 / Wpix-Tv
  • Fighting rubber ruler measurements
  • Manhattan's Low-Rent Dining in Hiding
  • The NY Fed Is Buying Its Own Building