2017: A Great Year for Office Leases
For the first time in decades, Manhattan is flush with new office space. And that means big leases were being signed left and right—more than any other year since the 1980s, according to Cushman & Wakefield (CWK) research director Richard Persichetti.
As of Dec. 8, 2017, big companies signed 20 leases of more than 250,000 square feet this year. That tops the last record year of jumbo lease signings, 2004, when corporate tenants inked 16 deals spanning 250,000 square feet or more. If the threshold is lowered to 100,000 square feet, the number of leases closed rises to 50.
“I think it has to do with the new supply,” Persichetti explained. “I think we’ve seen a lot of tenants make forward commitments for future buildings. The market has basically been operating with a strong pipeline of new construction, and a lot of these big corporate tenants are deciding where they want to be in the next five years.”
Overall leasing activity is also set to hit a record with New York City on track to lease 40 million square feet of office space by the end of the year.
The flood of new commercial construction in Hudson Yards and the Financial District has also helped keep office rents in check. From a citywide perspective, average asking rents have remained flat year-over-year, Persichetti said. But in Midtown and Midtown South, net effective rents have taken a dip as landlords offer more concessions to keep tenants in place.
And many large, institutional tenants like law firms and financial services companies are occupying smaller footprints than they used to because they need less space in an era when records are digitized and open-floor-plan offices are the norm. However, the likes of BlackRock and EY (formerly Ernst & Young) leased more space than they need at the moment because they want room to add more employees.
The two corporations, both of which are planning new offices at Hudson Yards, are among the tenants who signed the 10 largest leases of 2017. Here’s the full list, according to data from C&W:
Far and away the largest deal signed this year was one that flew completely under the radar. Global asset management firm AllianceBernstein renewed its 992,043 square feet of offices at 1345 Avenue of the Americas, according to public filings reviewed by C&W.
Next up is BlackRock. The world’s largest asset manager hammered out a deal in May to occupy 850,000 square feet across 15 floors of Related Companies and Oxford Properties’ yet-to-be-built 50 Hudson Yards tower. The company will pay $1.25 billion over 20 years for its space, where it will move 3,300 employees in 2023. But the firm, which manages $6 trillion in assets, is far from the only high-profile tenant in the Far West Side mega-development: 10 Hudson Yards, the first completed tower in project, is home to Coach, L’Oreal, SAP, Boston Consulting Group and VaynerMedia.
After a year of dithering over whether he would decamp Midtown for Lower Manhattan, Rupert Murdoch opted to keep his constellation of media companies at 1211 Avenue of the Americas in Rockefeller Center. In January, 21st Century Fox re-upped its 847,000-square-foot footprint in the 2-million-square-foot tower between West 47th and West 48th Streets. It replaced its existing lease, for 649,000 square feet, and expanded to 128,000 square feet, in a deal that will run through 2025. (Murdoch’s News Corp. also had a monster renewal in the same building—see No. 8—and if you were to count them together it would clock in at 1.2 million square feet.)
Last month, EY locked up 604,169 square feet of office space for its U.S. headquarters at Brookfield Property Partners’ One Manhattan West. The accounting giant will occupy the 6th through 22nd floors of the 67-story story office tower on a lease that runs through 2037.
1199 SEIU United Healthcare Workers East sealed a deal in July for 580,000 square feet at George Comfort & Sons’ 498 Seventh Avenue near Times Square. The union and its retirement fund will consolidate their respective offices at 310 West 43rd Street and 330 West 42nd Street into their new space on Seventh Avenue between West 36th and West 37th Streets.
Back in April, multinational banking company HSBC extended its lease at 452 Fifth Avenue, between West 39th and West 40th Streets near Bryant Park. The London-based conglomerate will remain in 548,000 square feet through 2025 at the 30-story building.
7. NewYork-Presbyterian Hospital
After leasing offices at RXR Realty’s 237 Park Avenue last year, NewYork-Presbyterian Hospital paid $251 million for a leasehold condominium interest in the 1.2 million-square-foot Midtown office tower in July. RXR created an office condo for the hospital because the institution receives special tax benefits by owning, rather than renting, its space.
8. News Corp.
Just as 21st Century Fox renewed its offices at 1211 Avenue of the Americas in January, News Corp. signed a new lease that extends into 2027 for 444,000 square feet in the same building. News Corp. property The New York Post has made its home in the Rockefeller Center tower since 1995. The Wall Street Journal, meanwhile, moved its offices there in 2009.
Another one of the big renewals of this year involved Royal Bank of Canada. The financial institution decided to stay put in 400,000 square feet at 200 Vesey Street, part of the Brookfield Place complex. The bank’s capital markets division will continue to occupy parts of the sixth and 25th floors, as well as the entire eighth through 12th and 14th floors, through 2032.
Spotify (SPOT) made quite a splash when it leased 378,000 square feet at the top of 4 World Trade Center in February. The music-streaming giant will occupy 378,000 square feet at the top of Silverstein Properties’ 72-story tower. It pledged to keep 800 jobs and add 1,000 more in the move to the World Trade Center. In exchange, the state promised the company an $11 million rent reduction over the course of its 15-year lease.