Stat of the Week: 31.9 Percent
2017: The Year of the Financial Services Tenant!
For an expansion cycle that has been dominated by the TAMI (tech, advertising, media and information services) sector, 2017 was clearly the year for financial services to achieve its new year’s resolution. New York City financial companies had a strong year in 2017 with 16,400 jobs created through October, bringing the industry to its highest level since June 2001. Last year, the financial services sector was the top Manhattan leasing sector and completed 149 lease transactions of 10,000 square feet or greater.
Total leasing volume (new leases and renewals) exceeded 8.3 million square feet and the financial sector accounted for 31.9 percent of the market’s demand. Of the 8.3 million square feet of activity, there were 114 new leases totaling nearly 5 million square feet and 35 renewals reaching nearly 3.3 million square feet. TAMI dropped the ball and came in second place with 5.5 million square feet of total leasing activity—50.7 percent less volume.
Despite a 5.6 percent dip in the financial services sector’s lease renewal activity year-over-year, new leasing activity was up 45 percent—fueled by 10 new leases that were each more than 100,000 square feet. The strong leasing by large occupiers increased the average new lease size by this sector to 44,109 square feet, up from a 33,694-square-foot average in 2016. The public sector led all sectors in this category with a 69,501-square-foot average in 2017.
The financial services industry was not only leasing more in 2017 but was also paying more. Starting rents on deals for this sector averaged $80.17 per square foot in 2017, an 8.9 percent increase from 2016. The TAMI sector averaged higher starting rents in 2017 as well, up 4.8 percent year-over-year, but at $72.72 per square foot, this sector paid an average of 10.2 percent lower than financial services.