If you hadn’t already noticed, The Commercial Observer late last night added seven new columnists to its already formidable roster of real estate thought leaders.
Indeed, along with veteran prognosticators Robert Knakal, Sam Chandan, Richard Persichetti and Robert Sammons (back from a short hiatus), we’re now happy to welcome David Greene, Christopher Havens, Barry LePatner, Kenneth McCarthy, J.D. Parker, Joshua Siegelman and Scott Spector. Find web-exclusive columns along the right rail of our website every week.
From the outside, 222 Broadway fits the stereotype of the Downtown financial office tower.
But when Bank of America downsized, leaving roughly 250,000 square feet of space vacant, a series of tours guided by its new owner, L&L Holdings, quickly blasted that stereotype away.
Condé Nast committed to 80,000 square feet at the tower in early March. WeWork, which provides collaborative workspace for tech and media companies, was next in line.
Despite a fair share of new product hitting the Midtown South market in January, landlords continued to call the shots, seeking ever-growing rents in the city’s epicenter for tech and creative companies, the latest data from Cushman & Wakefield shows.
The data shows that total space increased year-over-year in January by 9.8 percent to more than 4.52 million square feet, yet average rents also increased by 10.7 percent to $50.61 per square foot.
The boost in available product was pronounced among Class A and Class B properties, with 41.03 and 47.1 percent increases, respectively.
“It is still a landlord’s market even though that space has come online,” said Ken McCarthy, C&W’s chief economist. “Anyone adding space to the market is asking higher rents.”
If one of the dominant stories in Midtown South this year is the flood of tech and media startups, then the lack of forward movement by large corporate tenants may be the story in Midtown.
Indeed, nary a single lease in excess of 250,000 square feet has closed this year, a conspicuous change from a year ago, when five such deals were inked, including a 1.6-million-square-foot whopper by TV network Viacom at 1515 Broadway.
Despite the dearth of big transactions, however, a wave of smaller ones kept Midtown active. After the jump, Ken McCarthy, senior economist at Cushman & Wakefield, reviews third-quarter leasing activity in Midtown and explains why the market and its 11 submarkets have performed the way they have.
Over the course of the next three years, lower Manhattan will experience a leasing anomaly: as new and more-efficient office space hits the market,
supply and rental rates are expected to escalate simultaneously.
For real estate analysts, who have estimated that vacancy rates could skyrocket to as high as 17.5 percent by 2015, the prospect of more product is exciting, if a bit unnerving.
As for right now, Ken McCarthy, a senior economist at Cushman & Wakefield, reviewed lower Manhattan’s third-quarter stats with The Commercial Observer and discussed which data points could affect the short-term health of the market that Silverstein Properties’ 1 World Trade Center and Brookfield Properties’ World Financial Center both call home.
With all the talk about Midtown South’s incredibly shrinking vacancy rate, it’s easy to conclude that deals by a swarm of new-media companies, social applications and tech startups are at the heart of the market’s heralded rebound. But a closer look at third quarter leasing activity suggests that companies with long histories, like Estée Lauder, should take equal billing. Ken McCarthy, senior economist at Cushman & Wakefield, reviewed Midtown South’s third-quarter activity and explained why the market and its five submarkets performed so well in the last quarter and in the past 12 months.
Late last year, when the education publishing company Scholastic offered up about 60,000 square feet of sublease space at the top of the Soho office building 568 Broadway, the firm quickly found it wouldn’t be difficult to fill.
Within weeks, a host of tenants were competing for it, including several tech firms, one of the most active sectors of the leasing market in Manhattan right now. Tumblr, foursquare and AppNexus, all well-known names in the industry, moved to the front of the pack.
On the face of it, such a decision would seem easy. Of the three, only AppNexus, a firm that specializes in online advertising and is backed by the software giant Microsoft, is known to be profitable. But in a tech boom in which riches don’t always flow from the most likely sources, the deal for the space took a different turn.
The competition soon boiled down not to AppNexus but to Tumblr and foursquare, two companies that have become top brands in the new internet boom and have raised tens of millions of dollars in venture capital between them, but have yet to find income-producing platforms for their services.
» When word began to trickle down last week that a confluence of lingering domestic and international worries were behind a sluggish third quarter of office leasing, few analysts were surprised. Indeed, amid questions surrounding the international debt crises, this country’s upcoming presidential elections and a fog of property tax and regulatory issues, rather than making big moves, many of the city’s largest corporate tenants have chosen to do nothing at all. But in Times Square South, Midtown’s third-largest submarket, tech startups and creative professionals continued to flock to the area’s high-ceilinged, big-windowed stock of office buildings, making it one of the few neighborhoods to show third-quarter improvement. Ken McCarthy, senior economist at Cushman & Wakefield, reviewed the neighborhood’s third-quarter activity with The Commercial Observer and explained why Times Square South did so well.
There was a time when it seemed certain 11 Times Square would command some of the highest rents in city.
The building, which was developed by a venture between SJP Properties and its equity partner Prudential, was finished in 2010. As one of the newest buildings in Midtown, it is widely considered state-of-the-art, with many of the bells and whistles that tenants are supposed to be willing to pay a premium for, such as towering ceiling heights, LEED-certified efficient systems, a floor-to-ceiling glass façade that offers prodigious light and few structural columns to impede the efficiency of its spaces.
Entering the market at a tough juncture during the recession, SJP Properties nonetheless appeared to take a hard line on rents, and rightfully so: the building cost more than $1 billion to develop. According to several sources familiar with the property and its leasing history, the landlord held fast to projections it had set before the downturn—rents in the $80s per square foot and beyond.
2012 Owners Magazine
As a pair of 26-foot steel beams were hoisted high above Manhattan on April 30, the crowd below spoke of resilience, hope and remembrance.
One World Trade Center had just hit a height of 1,271 feet, making it the city’s tallest building. Port Authority Executive Director Pat Foye said in a press conference that the building will “anchor Lower Manhattan and its rebirth for many generations to come.”
But tourists and tristate residents aren’t the only ones noticing the change in the city skyline. A number of commercial property owners are looking to the tower and other developments as a hopeful bellwether for the future, despite what most analysts still describe as a stagnant market.
The numbers speak for themselves. Real estate brokers leased 12.9 million square feet through July 31, 2012, a 28 percent drop from the 17.9 million square feet inked during the same period in 2011, according to a CBRE report. Vacancy sat at 7.5 percent, no change from a year earlier.
The Silverstein Properties marketing center on the seventh floor of 7 World Trade Center has the air of a sacred vault. After entering past the sliding glass doors, visitors are greeted by a hallway lined with pictures documenting the World Trade Center’s sometimes contentious, sometimes momentous journey from somber graveyard to gleaming new development featuring state-of-the-art office space and retail.
Pictures depicting union construction workers at a 2010 protest and Larry Silverstein unveiling Jeff Koons’s balloon flower monument outside 7 World Trade Center compete for space with five LCD televisions broadcasting Silverstein promotional videos.
But the most effective marketing in the entire suite may be the building itself.
For those who saw signs of improvement in the market earlier this month, look again. While not necessarily worse than the previous reporting period, second-quarter office leasing was propped up primarily by a pair of big renewal deals inked for Viacom and Morgan & Stanley. A closer look at the numbers, meanwhile, seem to suggest that leasing in nearly every asset class is down, down, down—not least of all in Midtown, where Class A office leasing plummeted by 50 percent. With the help of Cushman & Wakefield’s first-quarter statistics, and the firm’s lead researcher Ken McCarthy, The Commercial Observer took a look at Manhattan’s three primary office markets and read between the lines to figure out what it all means. After the jump, an annotated guide to office leasing activity in the second quarter.
Leasing activity in the first half of 2012 was, by all accounts, a shadow of last year.
About 11.1 million square feet was leased, substantially down from the 17.6 million square feet leased during the first six months of 2011, according to data collected by the real estate services firm Cushman & Wakefield.
Manhattan Market Report
Jobs have come back since the layoffs of the recession in Manhattan but the office market hasn’t been able to recapture the rise in employment according to data released this morning by the real estate services company Cushman & Wakefield.
Though employment now exceeds even the last economic peak in 2007 in the city, vacancy Read More
The end of the second quarter is coming, ushering a key moment of reflection and analysis of leasing performance among the city’s real estate industry.
As with the end of the first quarter, dealmaking continues to be down from last year.
Ken McCarthy, an economist at Cushman & Wakefield who helps lead the company’s influential Read More