NORTHEAST SNAPSHOT, JANUARY/FEBRUARY 2011
NEW YORK CITY OFFICE MARKET
The New York City office market has come a long way from where it was a year ago when vacancies were in double digits and rents were off 20 percent from cycle peaks. As far as we now are from the abyss, the office market will show significant further improvement as the New York City unemployment rate continues to fall, perhaps to the 8.5 percent range in the near future and its housing market continues to improve. In the meantime, we see a steadying market with rising rents and decreasing vacancy rates.
Murray Hill Properties owns, manages and leases about 6 million square feet in New York. We see demand rising as tenants gain confidence in the market and in their ability to act. Tenants and their brokers are searching for value. Although rents are improving and landlords are reducing concessions, tenants can certainly still find opportunity in the market.
Currently, Class A rents in Midtown range from the $50s to the upper $70s per square foot, excluding a few of the buildings that command $100+ per square foot rents, with the overall average in the upper $50s per square foot. Class A Midtown South rents range from the low $40s per square foot to the upper $50s, averaging in the upper $40s. In the Class A Downtown market, including the insurance and financial sectors, rents range from the $30s to the low $50s per square foot, with the average in the low $40s per square foot.
Currently, there is virtually no new development in Manhattan. Stalled development is helping the fundamentals in the office market. Vacancies are decreasing and should continue to trend downward. Midtown Manhattan has a vacancy rate of roughly 8.2 percent while the Downtown vacancy rate is approximately 11.5 percent — though this is a number that changes as the criteria and definition changes.
Of the few development projects that were stalled or underway, the 750,000-square foot Gem Tower by Extell Development on West 47th Street between Fifth and Sixth avenues will likely go forward without lender financing and should be completed by late 2012. The Port Authority’s One World Trade Center, with a total of 2.9 million square feet, should be completed by late 2013, as will Four World Trade Center, the 1.8 million square foot tower controlled by Silverstein Properties.
For investors, there is little office product available in Manhattan. There is an abundance of cash on the sidelines looking for opportunity. As illustrated by several recent sales with impressive sales prices, the market is getting stronger and values are moving up. (Square footages are approximate.)
• 1330 Ave. of the Americas at 54th St. (534,000 square feet) sold for $400 million
• 521 Fifth Avenue at 43rd Street. SL Green bought the remaining 49 percent of the building at $502 per square foot.
• 600 Lexington at 52nd Street (303,000 square feet) sold for $193 million
• 125 Park Avenue at 42nd Street (596,000 square feet) sold for $330 million
• 100 Fifth Avenue at 15th Street (305,000 square feet) sold for $94 million
• 510 Madison Avenue at 53rd Street (350,000 square feet) sold for $275 million
• 1412 Broadway at 39th Street (415,000 square feet) sold for $152.5 million
• 685 Third Avenue (560,000 square feet) sold for $190 million, delivered vacant
There are several large buildings that are now available or coming on line that will continue the trend of higher than expected sales prices.
—David Greene is President of Commercial Brokerage Services with New York City-based Murray Hill Properties/TCN Worldwide.
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