Trend Tracker 2Q 2017

THE OFFICE MARKET REPORT

LEE NYC MANHATTAN TREND TRACKER 2Q 2017

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2 MANHATTAN TREND TRACKER 2ND QUARTER 2017 LEE & ASSOCIATES NYC MARKET SUMMARY

2017 | 2Q Manhattan Office Total Total Total Direct Sublease Overall Inventory Available Under Vacancy Availability Net Asking Asking Asking Market (MSF) Total Construction Rate Rate Absorption Rent Rent Rent (Rnd.) (SF) (SF) (%) (%) (SF) ($PSF) ($PSF) ($PSF) Midtown 223 26,840,888 8.8% 12.0% -73,277 2,724,099 $81.21 $56.98 $77.68 Grand Central 71 9,209,981 9.8% 12.9% (387,475) 1,732,955 $74.08 $50.40 $70.21 Midtown East 25 2,231,252 4.5% 8.8% (85) 90,505 $73.78 $60.67 $69.95 Midtown West 20 1,555,262 5.7% 7.7% (52,505) 94,211 $86.32 $53.35 $82.61 Plaza District 39 6,368,323 11.6% 16.3% 14,669 806,428 $112.13 $82.19 $107.86 Rockefeller Plaza 29 2,652,274 7.8% 9.3% 185,569 - $78.08 $61.33 $73.67 Times Square 38 4,823,796 9.1% 12.7% 166,550 - $74.96 $61.83 $73.49

Midtown South 153 16,926,059 7.2% 11.1% 229,456 9,482,876 $65.65 $52.31 $62.82 Chelsea 18 1,751,862 7.7% 9.6% (155,467) 877,867 $58.41 $50.12 $53.71 Gramercy | Flatiron 31 2,180,512 4.7% 7.1% 24,307 73,323 $72.13 $55.38 $70.28 Hudson Square | Tribeca 22 3,116,665 9.8% 14.4% 62,224 - $78.56 $60.90 $74.87 Murray Hill 13 1,364,392 8.8% 10.5% (14,585) - $60.45 $45.78 $57.28 Penn Station-Garment 57 7,049,495 7.2% 12.4% 321,384 8,272,745 $61.43 $48.61 $58.97 SoHo | NoHo 13 1,463,133 6.0% 11.6% (8,407) 258,941 $76.34 $60.90 $74.83

Downtown 105 12,476,261 9.2% 11.9% -55,784 2,861,402 $62.33 $45.67 $60.90 City Hall | Insurance Dist. 27 1,760,047 4.7% 6.6% (41,146) - $52.67 $38.60 $51.38 Financial District 43 6,323,683 9.8% 14.6% 172,998 - $61.39 $55.17 $58.90 World Trade Center 35 4,392,531 11.9% 12.7% (187,636) 2,861,402 $63.63 $53.34 $63.61

Manhattan 481 56,243,208 8.3% 11.7% 100,395 15,068,377 $72.08 $56.57 $69.48

1. Arrows are an indication based on quarter-over-quarter movements. 2. All rent figures are based on market and submarket weighted averages. Overall Asking Rents take Direct and Sublease rents into account. 3. Under Construction only includes buildings with expected deliveries, with a primary office use and over 50,000 square feet. Buildings under construction that include office as a secondary or tertiary use are excluded. All proposed new construction buildings were excluded.

Commenced with report, 1Q 2015, Lee & Associates utilizes new metric methods from its prior reporting methods. Lee & Associates Office Metrics are based on office buildings with a minimum rentable building area of 100,000 square feet, with the exception in the submarket of Soho/Noho, which uses metrics based on office buildings with a minimum rentable building area of 50,000 square feet. Lee & Associates Office Metrics comprise data representing existing office buildings for Classes A, B and C. Since new metric methods have been applied, the correlation of data for this report (and all reports since 1Q 2015) will have no bearing over the reports previously published by Lee & Associates (prior to 1Q 2015).

Lee & Associates NYC accepts no liability or responsibility for the accuracy or completeness of the information contained herein and no reliance should be placed on the information contained in this document.

3 MANHATTAN TREND TRACKER 2ND QUARTER 2017 LEE & ASSOCIATES NYC MIDTOWN

idtown accounted for 42.8% of Manhattan’s leasing activity in Q2. Leasing space at the BMW Building (555 West 57th Street) onto the market, thus pushing Mactivity decreased 3.3% quarter-to-quarter to 3,276,533 SF and is down sublet availability higher; and sublet’s accounting for one-fifth of all available 48.4% year-over-year. New York-Presbyterian Hospital’s lease at the Park space. The average time on the market is currently nine months, three months Avenue Atrium (237 Park Avenue) accounted for 14.4% of Midtown’s leasing lower than a year ago. Vacancy has increased 30 basis points to 5.7% and is up activity. Availability decreased 20 basis points to 12% quarter-to-quarter and is 120 basis points year-over-year. With vacancy still below its five-year average of up 40 basis points year-over-year, and just slightly above its five-year average of 6.8%, but rising, net absorption experienced a negative output of 52,505, and 11.9%. The market posted a negative net absorption for the consecutive quarter negative 402,898 year-to-date. Asking rents increased $0.27 to $82.61 quarter- with negative 73,277, with a negative net absorption of 688,602 year-to-date. to-quarter and are up 11.3% year-over-year. Year-over-year, the annual taking Nevertheless, Q2 net absorption improved by 88.1% since last quarter, and we rent average increased 11% from $69.36 to $76.99 and net effective increased forecast that Q3 net absorption will be posting a positive. With the improvement 9.9% from $66.40 to $72.95. The annual average of free rent is currently 5 in the market’s net absorption, vacancy decreased 20 basis points to 8.8% months and up one month from a year ago. Notable Deal: CBS Broadcasting quarter-to-quarter and is slightly above its five-year average of 8.6%. Overall Inc. (23,697 SF at 1700 Broadway | 7th Floor). asking rents decreased 3.3% to $77.68 from $80.31 quarter-to-quarter, and are down 5.9% year-over-year. Plaza District accounted for 16.5% of all of Midtown’s leasing activity in Q2. Leasing activity increased 26.2% quarter-to-quarter to 541,529 SF, but is Grand Central accounted for 44.3% of Midtown’s leasing activity in Q2. down 29.8% year-over-year. STARR Companies’ lease at the CitiBank Building Leasing activity decreased 6.7% quarter-to-quarter to 1,450,949 SF and is (399 Park Avenue) accounted for 18% of the submarket’s leasing activity. down 45.6% year-over-year. New York-Presbyterian Hospital’s lease at the The availability rate continued to increase and is up another 20 basis points Park Avenue Atrium (237 Park Avenue) accounted for 32.5% of Grand Central’s from last quarter and is up 70 basis points year-over-year. The submarket’s leasing activity. The availability rate decreased 30 basis points to 12.9% quarter- available supply is 3.6 percentage points above its five-year average of 12.7%. to-quarter (also the same year-over-year). Availability is 120 basis points below An estimated 490,000 SF of prospective direct space may become available its five-year average of 14.1%, and we forecast available inventory to decrease in Q3. A positive output of net absorption finished the quarter with 14,669 SF, going into Q3. Buildings along the Park Avenue corridor have made the most however we forecast if availability continues to increase into Q3, net absorption space available; with the Park Avenue Atrium alone adding over 200,000 SF should swing back into the high negative numbers. With vacancy stagnant at of vacant sublet space. The vacancy rate continued to increase and finished 11.6% year-to-date, and 2.6 percentage points above its five-year average of the quarter at 9.8%, a 50 basis point increase quarter-to-quarter and 10 basis 9%, the probability of vacant supply sitting on the market will increase into Q3. points below its five-year average of 9.9%. Sublet space currently accounts for Asking rents decreased 0.7% quarter-to-quarter from $108.67 to $107.86 and 14.2% of all vacant space, up from 9.5% a year ago. With vacancy increasing, are down 0.8% year-over-year. Year-over-year the annual taking rent average the submarket experienced a consecutive quarter of negative net absorption, decreased 8.8% from $98.36 to $89.70 and net effective decreased 10.5% with a negative output of 387,475, and negative 596,723 year-to-date. Asking from $93.89 to $84.07. The annual average of free rent is currently 5.2 months rents decreased 4.1% to $70.21 from $73.21 quarter-to-quarter, and are down up from 4.4 months a year ago. Notable Deals: Starr Companies (97,303 SF 5.9% year-over-year. The annual taking rent average decreased 1.4% to $62.32 at 399 Park Avenue | 10 Years); Colony NorthStar (40,000 SF at 590 Madison from $63.22 and net effective decreased 0.8% to $59.05 from $59.53. The Avenue | 33rd & 34th Floors); Cyrus Capital Partners (38,480 SF at 65 East 55th annual average of free rent is currently 4.2 months from 4.5 year-over-year. Street | 33rd to 35th Floors). Notable Deals: New York-Presbyterian Hospital (471,016 SF at 237 Park Avenue | Various Floors); Sandow Media (42,000 SF Sublet at 101 Park Avenue Rockefeller Plaza leasing activity decreased 3.1% quarter-to-quarter to | 4th Floor); Glencore (41,210 SF at 330 Madison Avenue | 7th Floor); Cyrus 441,964 SF and is drastically down 75.5% year-over-year. Availability decreased Capital Partners (38,383 SF Sublet at 245 Park Avenue | 40th Floor). 60 basis points to 9.3% quarter-to-quarter and is 140 basis points below its five-year average of 10.7%. The submarket’s net absorption has been positive Midtown East leasing activity increased 254% quarter-to-quarter to 312,080 for three straight quarters and is 369,395 year-to-date. Vacancy is at a four- SF, after a stagnating Q1 performance of just 87,987 SF, with over two million year trough of 7.8% and has decreased three percentage points just from last square feet available. Year-over-year leasing activity is up 21.4%. Sublet activity quarter, due to large signings along Avenue of the Americas. Asking rents weighed heavily on leasing numbers with sublet deals accounting for 48.4% increased 1.3% from $72.74 to $73.67, however are down 7.2% year-over-year. of leasing activity. For instance, 777 Third Avenue leased 98,600 SF of sublet Year-over-year the annual taking rent average increased only 0.5% to $71.93, space. The sublet availability rate in Midtown East is currently at a four year peak while net effective decreased 3.5% from $68.16 to $65.79. The annual average of 2.1%, and accounting for 30.6% of all available inventories. The availability of free rent is currently 6.1 months up from 5 months a year ago. Notable and vacancy rates both remained stable, only decreasing 10 basis points to Deals: Mizuho Americas (140,676 SF at 1271 Avenue of the Americas | 2nd & 8.8% and 4.5%, respectively, quarter-to-quarter. Vacancy is currently 30 basis 3rd Floors); Deloitte (98,018 SF at 1221 Avenue of the Americas | 39th & 40th points below its five-year average of 4.8% and availability is 130 basis points Floors). above its five-year average of 7.5%. Net absorption continued its negative trend for the fourth consecutive quarter, and had an output of negative 85. Rents Times Square leasing activity has decreased by half or 50.5% to 375,496 didn’t change much quarter-to-quarter and only increased $0.09 to $69.95 quarter-to-quarter and is down 39.3% year-over-year. Availability has grown 1.7 but are down 3% year-over-year. On the other hand, sublet rents are down percentage points year-over-year to 12.7% and is 40 basis points above its five- 3.8% from $63.04 to $60.67 quarter-to-quarter. The annual taking rent average year average of 12.3%; and a 10 basis point decrease since last quarter. Year- increased 3.5% from $66.37 to $68.71 and net effective increased 5% from over-year sublet availability increased 67.5% to over 800,000 SF, and driving $62.07 to $65.15. The annual average of free rent is currently 4.2 months and asking sublet rents down 10.8% to $61.83 quarter-to-quarter. Net absorption has been consistent for the past two years. put out a positive 166,550, helping decrease vacancy by 30 basis points to 9.1%, just above its five-year average of 8.8%. Change is asking rents were Midtown West leasing activity increased 52.7% quarter-to-quarter to 154,515 stagnant at $73.49 and are down 6.8% year-over-year. The annual taking rent SF and is down 31.9% year-over-year. CBS Broadcasting Inc. signed a lease at average increased 2.8% from $61.26 to $63 and net effective increased 2% 1700 Broadway that accounting for 15.3% of the submarket’s leasing activity. from $58.22 to $59.41. The annual average of free rent is currently 5.3 months The availability rate increased 10 basis points to 7.7% quarter-to-quarter and up from 5 months a year ago. Notable Deal: Ballard Spahr LLP (27,251 SF at is 30 basis points up year-over-year. Availability is 140 basis points below its 1675 Broadway | 19th Floor | 10 Years). five-year average of 9.1%. CBS Broadcasting have also put 51,057 SF of sublet

4 MANHATTAN TREND TRACKER 2ND QUARTER 2017 LEE & ASSOCIATES NYC MIDTOWN

Midtown Vacancy and Availability 16.0% 14.0% Midtown Vacancy and Availability 12.0% 11.7% 10.0%16.0% Midtown Vacancy and Availability 14.0%8.0% 16.0% 11.7% 12.0%6.0% 7.8% 14.0% 10.0%4.0% 12.0% 11.7% 2.0%8.0% 10.0% 7.8% 0.0%6.0% 4.0%8.0% 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 7.8% 2.0%6.0% 2007 2008 2009 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2017 4.0% 0.0% Vacancy Availability 10Y Vacancy Avg. 10Y Availability Avg. 2.0% 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 0.0% 2007 2008 2009 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2017 Midtown Leasing Activity 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q Vacancy Availability Ten Year10Y Average Vacancy Avg. 10Y Availability Avg. 8,000,0002007 2008 2009 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2017 4,430,763 7,000,000 Vacancy AvailabilityMidtown Leasing10Y VacancyActivity Avg. 10Y Availability Avg. 6,000,000 Ten Year Average 5,000,0008,000,000 Midtown4,430,763 Leasing Activity 7,000,000 4,000,000 Great Recession Ten Year Average 8,000,000 3,000,0006,000,000 4,430,763 7,000,000 2,000,0005,000,000 6,000,000 1,000,0004,000,000 Great Recession 5,000,000 3,000,000 - 4,000,0002,000,000 3Q Great1Q Recession3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3,000,0001,000,000 20072008200820092009201020102011201120122012201320132014201420152015201620162017 Historical2,000,000 statistics are updated to reflect new ly released market - information. SF Leased 10Y Avg. 1,000,000 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q - 20072008200820092009201020102011201120122012201320132014201420152015201620162017 Midtown Net Absorption Historical statistics3Q are 1Qupdated3Q to reflect1Q new3Q ly 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q SF Leased 10Y Avg. released3,000,000 market2007 information.20082008 20092009201020102011201120122012201320132014201420152015201620162017 Historical2,500,000 statistics are updated to reflect new ly released market information. MidtownSF Leased Net Absorption10Y Avg. 2,000,000 1,500,0003,000,000 Midtown Net Absorption 1,000,0002,500,000 3,000,000 2,000,000500,000 2,500,000 1,500,0000 2,000,000 1,000,000(500,000) 1,500,000 (1,000,000)500,000 1,000,000 (1,500,000)0 500,000 (2,000,000)(500,000) 0 (2,500,000)(1,000,000) (1,500,000)(500,000) 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q (2,000,000)(1,000,000) 20072008200820092009201020102011201120122012201320132014201420152015201620162017 (2,500,000)(1,500,000) (2,000,000) 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q (2,500,000) 20072008200820092009201020102011201120122012201320132014201420152015201620162017 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 20072008200820092009201020102011201120122012201320132014201420152015201620162017

5 MANHATTAN TREND TRACKER 2ND QUARTER 2017 LEE & ASSOCIATES NYC MIDTOWN SOUTH

idtown South accounted for 46.4% of Manhattan’s leasing activity in Q2. submarket is common as a major part of the inventory is controlled by Trinity Real M Leasing activity increased 69.1% quarter-to-quarter to 3,527,027 SF and is up Estate, thus we see it in the decrease in asking rents this quarter by 7.8% from $81.23 4.5% year-over-year. 1199 National Benefit and Pension Funds lease at 498 Seventh to $74.87. Annual average of concessional free months increased 32.1% year-over- Avenue accounted for almost 15% of Midtown South’s leasing activity. Availability year from 5.3 months to 7 months, with starting rents slightly decreasing 0.6% to continued its increase and is up 80 basis points to 11.1% quarter-to-quarter, is up $71.24 and net effective rents decreasing 3.4% from $66.80 to $64.52. Notable a full two percentage points year-over-year and is 160 basis points higher than its Deals: MAC Cosmetics (86,524 SF at 233 Spring Street | 10th to 12th Floors & five-year average of 9.5%. The market posted a positive net absorption of 229,456. Penthouse); Harry’s Razors (61,000 SF at 75 Varick Street | 9th Floor); MAC Cosmetics Vacancy decreased 10 basis points to 7.2% quarter-to-quarter, is up 70 basis points (Glossier (26,079 SF at 161 Avenue of the Americas | 10th Floor | 10 Years). year-over-year and is 80 basis points above its five-year average of 6.4%. Overall asking rents decreased 2.5% quarter-to-quarter from $64.43 to $62.82 and is 6.7% Murray Hill leasing activity increased 5.9% quarter-to-quarter to 169,446 SF down year-over-year. and is down 28.1% year-over-year. Murray Hill continued to stagnate into Q2, with availability increasing slightly by 10 basis points to 10.5% (170 basis points above its five-year average of 8.8%) and vacancy held at 8.8% for Chelsea’s leasing activity increased 38.1% quarter-to-quarter and is down the third straight quarter (and above its five-year average of 6.6% by 220 basis 17.3% year-over-year. Leasing activity has been slow compared to prior years, points). Net absorption was a negative 14,585 in Q2, but with asking rents and the available inventory is one of the highest over two-and-a-half years at 9.6%, a continuing to decrease, we forecast a positive net absorption in Q3. Asking rents 30 basis point increase from last quarter and 1.5 percentage points above its decreased 2.3% quarter-to-quarter from $58.62 to $57.28, and is down 13.3% year- five-year average of 8.1%. Year-to-date net absorption has had a negative output of over-year. Annual average of concessional free months increased 35.3% year-over- 305,822. Vacancy increased by 90 basis points to 7.7%, which is the year from 3.4 months to 4.6 months, with starting rents increasing 8.3% from $51.35 highest it’s been in twelve years and two percentage points above its five-year to $55.61 and net effective increasing 8% from $49.65 to $53.61. average of 5.7%. Vacancy in the sublet market increased 15.2% Notable Deal: Surdna Foundation (12,641 SF at 200 Madison Avenue | 25th Floor | 15 Years). quarter-to-quarter, which we forecast will account for a larger part of the inventory in

Q3, since sublet rents increased 8.9% from $46.01 to $50.12. Asking rents decreased 5.1% from $56.62 to $53.71 quarter-to-quarter and are 8.8% down year-over-year. Penn Station-Garment accounted for 65.9% of Midtown South’s leasing activity. Annual average of concessional free months have increased 60.7% year-over-year Increasing 149% quarter-to-quarter to 2,324,344 SF. It’s been seven years since the from 2.8 months to 4.5 months, with starting rents increasing 5% from $54.21 to submarket leased over two-million square feet in a quarter. The lease signing at 498 Seventh Avenue by 1199 National Benefit and Pension Funds accounted for 22.7% of $56.93 and net effective increasing 5.1% from $52.20 to $54.87. Notable Deals: Aetna Inc. (145,741 SF at 61 Ninth Avenue | 2nd to 9th Floors | 12 Years).s. the submarket’s leasing activity. HSBC’s renewal at 452 Fifth Avenue accounted for 23.6% of the submarket’s leasing activity. BlackRock’s 846,990 SF lease signing at 50 Hudson Yards were not included in existing office metrics, due to the building still Gramercy Park and Flatiron leasing activity remained below the 400,000 under construction. Availability has increased by 140 basis points to 12.4% quarter- benchmark for a consecutive quarter, only increasing 1.6% to 369,528 SF. Last time to-quarter, is up 2.3 percentage points year-over-year, and 2.2 percentage points leasing activity in this submarket remained this low was at the end of the Great above its five-year average of 10.2%. The quarter had 36 spaces over 20,000 SF Recession in mid-2009. There were 29% less deals done compared to Q1, however each become available. A positive net absorption of 321,384 finished Q2 compared averaged larger square footage signings at 20,800 SF compared to an average of to a negative 413,353 in Q1, a 734,737 point turn-around. The vacancy rate decreased 9,800 SF in Q1. Capital One’s new lease signing at 11 West 19th Street accounted for 20 basis points quarter-to-quarter to 7.2%, is up a full percentage point year-over- 14% of the submarket’s leasing activity. NYC’s Human Resources Administration’s year and is 60 basis points above its five-year average of 6.6%. Asking rents renewal at 109 East 16th Street was not included in submarket leasing statistics, decreased only 0.8% from $59.43 to $58.97 quarter-to-quarter and are down 9.1% since the space was never made available. Availability decreased 20 basis points year-over-year. Annual average of concessional free months increased 26.3% year- quarter-to-quarter to 7.1%, is up 40 basis points year-over-year and is 90 basis points over-year from 3.8 months to 4.8 months, with starting rents increasing 15.4% from below its five-year average of 8%. Net absorption has swung into a positive output of $50.55 to $58.33 and net effective increasing 14.1% from $48.14 to $54.92. 24,307 compared to negative 142,451 in Q1. Vacancy decreased 10 basis points to Notable HSBC Bank (548,000 SF Renewal at 452 Fifth Avenue | Various Floors); 1199 4.7%, is 40 basis points year-over-year and is 70 basis points below its five-year Deals: National Benefit and Pension Funds (528,191 SF at 498 Seventh Avenue | Various average of 5.4%. The submarket was the only one in Midtown South to lower its Floors); JPMorgan Chase & Co. (306,004 SF at 5 Manhattan West | 14th & 15th inventories supply and have an increase in overall rent. Asking rents increased 2.9% Floors); Intermix (80,903 SF at 111 West 33rd Street | 8th, 9th & 16th Floors). from $68.34 to $70.28 quarter-to-quarter and is down 3.6% year-over-year. Annual average of concessional free months increased 19.4% year-over-year from 3.6 months to 4.3 months, with starting rents decreasing 2.6% from $63.52 to $61.86 SoHo and NoHo leasing activity increased 11.6% quarter-to-quarter to 161,085, however is down 59.9% year-over-year. Sublets accounted for a third of all square and net effective decreasing 3.5% from $60.25 to $58.16. Notable Deals: NYC Dept. of Citywide Administration (349,777 SF Renewal at 109 East 16th Street | Whole feet signed. Availability in the sublet market grew 54.6% since last quarter. Availability Building); Capital One (52,000 SF at 11 West 19th Street | 5th & 6th Floors). in the submarket increased 90 basis points to 11.6%, an astounding growth from where it was one year ago at 7%, and is 2.5 percentage points above its five-year average of 9.1%. An output of three straight quarters of negative net absorption, with Hudson Square and Tribeca leasing activity decreased 18.6% quarter- Q2 ending with negative 8,207, mostly due to vacant and available sublet space. to-quarter to 238,644 SF and is down 24.3% year-over-year. Harry Razor’s lease Vacancy decreased 20 basis points to 6% quarter-to-quarter, is still 130 basis points signing at One Hudson Square (75 Varick Street) accounted for 25.6% of the higher year-over-year and is 80 basis points above its five-year average of 5.2%. submarket’s leasing activity, while MAC Cosmetics’ deal at 233 Spring Street Asking rents were stagnant quarter-to-quarter at $74.83 and are up 8.6% year-over- accounted for 36.3%. Availability increased 130 basis points to 14.4%, up 220 basis year. Annual average of concessional free months decreased 15.6% year-over-year points year-over-year and is 270 basis points above its five-year average from 3.2 months to 2.7 months, with starting rents increasing 7.4% from $65.55 to of 11.7%. Available supply hasn’t been this high since end of 2011. Sublet availability $70.37 and net effective increasing 1.4% from $63.59 to $64.50. The quarter-to-quarter has increased 41.3% to just over 700,000 SF. Notable Deals: Wing (12,250 SF at 477 Broadway | 5th Floor | 5 Years); M&E Mott (12,097 SF at 740 Penguin Random House put their spaces at 375 Hudson Street for subleasing Broadway | 2nd Floor | 10 Years). 277,339 SF. Net absorption finished Q2 with a positive 62,224. Vacancy decreased a full percentage point to 9.8% quarter-to-quarter, is down 70 basis points year-over- year and is 110 basis points above its five-year average of 8.7%. Volatility in this

6 MANHATTAN TREND TRACKER 2ND QUARTER 2017 LEE & ASSOCIATES NYC MIDTOWN SOUTH

Midtown South Vacancy and Availability 14.0%

12.0% 10.0% Midtown South Vacancy and Availability 10.0% 14.0% 8.0% Midtown South Vacancy and Availability 12.0%6.0% 10.0% 14.0% 6.5% 10.0%4.0% 12.0% 10.0% 2.0%8.0% 10.0% 0.0%6.0% 8.0% 6.5% 4.0% 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 6.0%2007 2008 2009 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2017 2.0% 6.5% 4.0% 0.0% Vacancy Availability 10Y Vacancy Avg. 10Y Availability Avg. 2.0% 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 1Q 4Q 3Q 2Q 0.0%2007 2008 2009 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2017 3Q 2Q 1Q 4Q 3QMidtown2Q South 1QLeasing 4QActivity 3Q 2Q 1Q 4Q 3Q 2Q Vacancy Availability 10Y Vacancy Avg. 10Y Availability Avg. 8,000,0002007 2008 2009 2009 2010 2011 2012 2012 2013 2014 2015 2015 2016 2017 Ten Year Average 7,000,000 Vacancy Availability 10Y Vacancy Avg. 10Y Availability Avg. Midtown South 3,243,829Leasing Activity 6,000,000 8,000,000 5,000,000 Midtown South Leasing Activity 7,000,000 Ten Year Average 4,000,000 8,000,000 3,243,829 6,000,000 3,000,000 7,000,000 Great Recession Ten Year Average 5,000,000 3,243,829 2,000,000 6,000,000 4,000,000 1,000,000 5,000,000 3,000,000 Great Recession 4,000,000 - 2,000,000 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3,000,000 Great Recession 1,000,000 20072008200820092009201020102011201120122012201320132014201420152015201620162017 2,000,000 Historical statistics - are updated to reflect SF Leased 10Y Avg. new 1,000,000 ly released market3Q 1Qinformation.3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q - 20072008200820092009201020102011201120122012201320132014201420152015201620162017 Midtown South Net Absorption 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q Historical statistics are updated to reflect SF Leased 10Y Avg. 1,500,000new ly released market2007 2008information.2008 20092009201020102011201120122012201320132014201420152015201620162017

Historical statistics are updated to reflect SF Leased 10Y Avg. 1,000,000new ly released market information. Midtown South Net Absorption 1,500,000 500,000 Midtown South Net Absorption 1,000,000 1,500,0000 500,000 (500,000)1,000,000 0 (1,000,000)500,000 (500,000) (1,500,000) 0 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q (1,000,000) (500,000)20072008200820092009201020102011201120122012201320132014201420152015201620162017

(1,500,000)(1,000,000) Net Absorption 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q (1,500,000)20072008200820092009201020102011201120122012201320132014201420152015201620162017 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q Net Absorption 20072008200820092009201020102011201120122012201320132014201420152015201620162017

Net Absorption

7 MANHATTAN TREND TRACKER 2ND QUARTER 2017 LEE & ASSOCIATES NYC DOWNTOWN

owntown accounted for 11.1% of Manhattan’s leasing activity far this year and is 338,661 year-to-date and 172,998 in Q2. We forecast D in Q2. Leasing activity decreased 63.2% quarter-to-quarter to that the submarket continues to be greatly active in Q3 and should put 843,824 SF and is down 37.9% year-over-year. New York City Human out another positive net absorption. Vacancy decreased 30 basis points Resources Administration’s lease at 375 Pearl Street accounted for 25.6% to 9.8% quarter-to-quarter, is up 50 basis points year-over-year and of Downtown’s leasing activity. Availability decreased 20 basis points to is 90 basis points below its five-year average of 10.7%. Asking rents 11.9% quarter-to-quarter, is up 50 basis points year-over-year and is 1.6 gradually increased 0.2% to $58.90 and the affordability of rents is a major percentage points below its five-year average of 13.5%. The market posted stimulating factor in the Financial District’s leasing activity, since it provides a negative net absorption of 55,784 (due to the lack of activity in the World access to an abundance of office inventory and transportation. Asking Trade Center submarket.) compared to positive 100,594 in Q1. Vacancy rent increased 5.2% year-over-year from $56 to $58.90. Annual average decreased 10 basis points to 9.2% quarter-to-quarter, is up 40 basis points of concessional free months decreased 10.9% year-over-year from 4.6 year-over-year and is 110 basis points below is five-year average of 10.3%. months to 4.1 months, with starting rents increasing 5.1% from $47.41 to Overall asking rents continue to go up and have increased just slightly by $49.81 and net effective increasing 5% from $45.15 to $47.43. Notable 0.2% to $60.90 quarter-to-quarter, and are down just 0.3% year-over-year. Deals: Sanctuary for Families (50,734 SF Sublet at 120 Broadway | 7th Floor); Broadway Technology (25,110 SF at 28 Liberty Street | 50th Floor); CetraRuddy Architecture (22,894 SF at 1 Battery Park Plaza | 8th Floor | City Hall and Insurance District leasing activity increased 76.9% quarter- 10 Years). to-quarter to 263,219 SF and is down 17.1% year-over-year. Majority of the square feet leased in Q2 can be attributed to the lease signing at 375 Pearl Street by the New York City Human Resources Administration, which World Trade Center leasing activity decreased 83.2% quarter-to-quarter would account for 82.1% of the market’s activity. Availability continued to go to 238,769 SF, due to signings on smaller spaces that averaged 18,100 up and increased 20 basis points to 6.6% quarter-to-quarter, is 150 basis SF compared to Q1’s average of 77,200 SF. Despite the high decrease points higher year-over-year and is just 10 basis above its five-year average in leasing activity, this should not be a concerning factor in the overall of 6.5%. Sublet availability in the submarket grew 211% quarter-to-quarter, performance of the submarket. The submarket’s volatility in leasing volume pushing sublet asking rents down 9% from $42.43 to $38.60. However, correlates to buildings that offer large blocks of space, and not based on sublets only accounted for 4.2% of the submarket’s leasing activity in Q2. the number of deals signed. As in this case for comparative reasons, both Net absorption is negative for the consecutive quarter and had an output Q1 and Q2 had 28 leases signed, with Q1 comprising lease signings of of negative 41,146 in Q2, and is negative 90,306 year-to-date. Vacancy larger blocks of space. Availability decreased 40 basis points quarter- increased 10 basis points to 4.7% quarter-to-quarter, is up 20 basis points to-quarter to 12.7%, is down 50 basis points year-over-year and is 5.4 year-over-year and is 30 basis points below its five-year average of 5%. percentage points below its five-year average of 18.1%. Nevertheless, City Hall and Insurance District was the only Downtown submarket to have even with availability rate decreasing gradually, net absorption has availability and vacancy both increase in Q2. Asking rents decreased 0.9% been experiencing a negative output for four straight quarters. Year-to- to $51.38, and are around the same as they were a year ago at $51.24. date net absorption is negative 277,691 and the quarter finished with Annual average of concessional free months decreased 14.6% year-over- negative 187,636. If vacancy decreases in Q3 and availability continues year from 4.1 months to 3.5 months, with starting rents decreasing 3.1% its downward trend, then the submarket should experience a positive net from $49.85 to $48.32 and net effective decreasing 4% from $48.48 to absorption next quarter. Vacancy has been stagnant between 11.7% and $46.53. Notable Deals: New York City Human Resources Administration 11.9% for the past year, and is currently 11.9% and 2.2 percentage points (216,100 SF at 375 Pearl Street | 20th to 25th Floors | 21 Years). below its five-year average of 14.1%. Asking rents increased 1.6% from $62.61 to $63.61 quarter-to-quarter, but is down 4.9% year-over-year. Annual average of concessional free months decreased 19.7% year-over- Financial District District leasing activity decreased 53% quarter- year from 6.6 months to 5.3 months, with starting rents decreasing 5.7% to-quarter to 341,836 SF and is 49.5% down year-over-year. Sublets from $56.31 to $53.08 and net effective decreasing 4% from $53.19 to accounted for 34.8% of done deals and comprised 34.1% of all square $ 51.07. Notable Deal: Business Insider (88,050 SF at 1 Liberty Plaza | 8th feet leased. Availability decreased 30 basis points quarter-to-quarter to & 9th Floors | 10 Years). 14.6%, is up 70 basis points year-over-year and is 50 basis points above its five-year average of 14.1%. Net absorption has been positively high thus

8 MANHATTAN TREND TRACKER 2ND QUARTER 2017 LEE & ASSOCIATES NYC DOWNTOWN

Downtown Vacancy and Availability 18.0% 16.0% Downtown Vacancy and Availability 14.0% 18.0% 12.5% 12.0% 16.0% Downtown Vacancy and Availability 10.0% 14.0% 12.5% 18.0%8.0% 12.0% 9.1% 16.0%6.0% 10.0% 14.0%4.0% 12.5% 8.0% 12.0%2.0% 9.1% 6.0% 10.0%0.0% 4.0% 8.0% 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q9.1%1Q 3Q 1Q 3Q 1Q 6.0%2.0% 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 4.0%0.0% 3Q 1Q Vacancy3Q 1Q 3Q 1QAvailability3Q 1Q 3Q 1Q10Y3Q Vacancy1Q Avg.3Q 1Q 3Q 10Y1Q Availability3Q 1Q Avg.3Q 1Q 2.0% 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 0.0% Downtown Leasing Activity 3Q 1Q Vacancy3Q 1Q 3Q 1QAvailability3Q 1Q 3Q 1Q10Y3Q Vacancy1Q Avg.3Q 1Q 3Q 10Y1Q Availability3Q 1Q Avg.3Q 1Q 4,000,0002007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 3,500,000 Vacancy TenAvailability Year AverageDowntown Leasing10Y Vacancy Activity Avg. 10Y Availability Avg. 3,000,000 4,000,000 1,563,448 2,500,000 3,500,000 Downtown Leasing Activity 2,000,000 Great Recession Ten Year Average 3,000,000 1,500,0004,000,000 1,563,448 2,500,000 1,000,0003,500,000 2,000,000 Great Recession Ten Year Average 3,000,000 500,000 1,563,448 1,500,000 2,500,000 - 1,000,000 2,000,000 3Q Great1Q Recession3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 1,500,000 500,000 20072008200820092009201020102011201120122012201320132014201420152015201620162017 1,000,000Historical - statistics are updated to reflect new ly released market3Q information.1Q 3Q 1Q 3Q 1Q 3Q 1QSF Leased3Q 1Q 3Q10Y1Q Avg.3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 500,000 20072008200820092009201020102011201120122012201320132014201420152015201620162017 - Historical statistics are updated to reflect new ly Downtown Net Absorption released market3Q information.1Q 3Q 1Q 3Q 1Q 3Q 1QSF Leased3Q 1Q 3Q10Y1Q Avg.3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 4,000,000 20072008200820092009201020102011201120122012201320132014201420152015201620162017 Historical statistics are updated to reflect new ly Downtown Net Absorption 3,000,000released market information. SF Leased 10Y Avg. 4,000,000 2,000,000 Downtown Net Absorption 3,000,000 1,000,0004,000,000 2,000,000 3,000,0000 1,000,000 (1,000,000)2,000,000 0 (2,000,000)1,000,000 (1,000,000) (3,000,000)0 (2,000,000) 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q (1,000,000) 20072008200820092009201020102011201120122012201320132014201420152015201620162017 (3,000,000) (2,000,000) 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 20072008200820092009201020102011201120122012201320132014201420152015201620162017 (3,000,000) 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 20072008200820092009201020102011201120122012201320132014201420152015201620162017

9 MANHATTAN TREND TRACKER 2ND QUARTER 2017 LEE & ASSOCIATES NYC CONSTRUCTION

Under Construction Office Property Developer Submarket Square Feet Class Est. Delivery 3 World Trade Center Silverstein Properties World Trade Center 2,861,402 A 2018 30 Hudson Yards Related Companies Penn Station-Garment 2,600,000 A 2019 (500 West 33rd Street)

400 West 33rd Street (One Manhattan West) Brookfield Properties Penn Station-Garment 2,216,609 A 2019 (North Tower) 3 Hudson Boulevard Moinian Group Penn Station-Garment 1,900,000 A 2019 (555 West 34th Street) One Vanderbilt Avenue SL Green Realty Corp. Grand Central 1,732,955 A 2020 55 Hudson Yards Related Companies Penn Station-Garment 1,556,136 A 2018 (550 West 34th Street) 425 Park Avenue GreenOak Real Estate Plaza District 670,000 A 2018 57 Eleventh Avenue RXR Realty Chelsea 263,835 A 2018 (Pier 57) 512 West 22nd Street Albanese Organization Chelsea 174,222 A 2017 61 Ninth Avenue Aurora Capital Associates Chelsea 167,170 A 2018 412 West 15th Street LM Legacy Group Chelsea 144,273 A 2017 432 Park Avenue Macklowe Properties Plaza District 136,428 A 2017 540 West 26th Street Savanna Chelsea 128,367 A 2017 600 West 58th Street Durst Organization Midtown West 94,211 A 2017 (Frank 57 West) 2 Pike Street Yeung Real Estate Dev. SoHo | NoHo 93,000 A 2018 330 East 62nd Street Joy Construction Corp. Midtown East 90,505 B 2018 300 Lafayette Street Related Companies SoHo | NoHo 83,000 A 2018 9 Orchard Street DLJ Real Estate Capital SoHo | NoHo 82,941 B 2018 44 Union Square East Liberty Theaters Inc. Gramercy | Flatiron 73,323 B 2018

Reconstruction Office Property Owner Submarket Square Feet Class Completion 390 Madison Avenue Clarion Partners Grand Central 862,154 A 2018 787 Eleventh Avenue Pershing Square Capital Midtown West 470,000 B 2017 233 Spring Street Stellar Management Hudson Square 341,134 A 2017 (One SoHo Square West) 110 East 60th Street Princeton International Plaza District 181,917 A 2017 (Park Sixty)

Pre-Construction Office Property Sponsor Submarket Square Feet Class Commencing 415 Tenth Avenue Related Companies Penn Station-Garment 2,900,000 A 2018 (50 Hudson Yards)

435 Tenth Avenue Tishman Speyer Penn Station-Garment 2,850,000 A N/A (66 Hudson Boulevard) 2 World Trade Center Silverstein Properties World Trade Center 2,800,000 A 2019 400 West 33rd Street (Two Manhattan West) Brookfield Properties Penn Station-Garment 1,976,602 A N/A (South Tower) 511 West 35th Street Spitzer Enterprises Penn Station-Garment 950,000 A 2018

123-131 West 23rd Street JHG Holdings Chelsea 186,562 A 2018

40 Tenth Avenue William Gottlieb Real Estate Hudson Square 138,938 A 2017 104-106 West 56th Street Savanna Midtown West 90,000 A 2017 315 East 46th Street Fisher Brothers Management Midtown East 75,170 A 2017

OnlyOnly Properties Properties with with over over 50,000 50,000 Square Square Feet Feet are arelisted. listed.

10 MANHATTAN TREND TRACKER 2ND QUARTER 2017 LEE & ASSOCIATES NYC NOTABLE INVESTMENT SALES

Office Property Submarket Class SF Buyer Seller Price $PSF 245 Park Avenue Grand Central A 1,723,993 HNA Group Brookfield Property Partners $2,210,000,000 $1,282 1515 Broadway One Astor Plaza Times Square A 1,750,000 China Investment Corp. SL Green Realty Corp. $2,000,000,000 $1,143 (Pending Sale) (Partial Interest Sale) George Comfort & Sons 825 Eighth Avenue DRA Advisors Worldwide Plaza Times Square A 2,055,583 NY REIT $1,400,000,000 $681 RCG Longview (Partial Interest Sale) Feil Organization Ivanhoe Cambridge Beacon Capital Partners 85 Broad Street Financial Dist. A 1,118,512 $652,000,000 $583 Callahan Capital Partners MetLife Real Estate Investors 375 Hudson Street Saatchi & Saatchi Bldg. Trinity Real Estate Hudson Square A 1,088,126 Tishman Speyer $615,000,000 $565 (Pending Sale) Norges Bank (Leasehold) 1328 Broadway Two Herald Square Penn Station A 351,750 JEMB Realty Corp. Sitt Asset Management $350,000,000 $995 (Pending Sale) (Leasehold) 441 Eighth Avenue Farley Post Office Vornado Realty Trust Penn Station - 1,378,125 Empire State Dev. Corp. $320,000,000 $232 (Development) Related Companies (Leasehold) 237 Park Avenue Park Avenue Atrium Grand Central A 500,000 NY Presbyterian Hospital RXR Realty $250,900,000 $502 (Condominium) (Leasehold) 114 Fifth Avenue (Leasehold) Flatiron B 351,552 Columbia Property Trust Allianz Real Estate of America $220,000,000 $626 (Partial Interest Sale) 95 Morton Street Hudson Square B 217,084 RFR Realty Brickman Associates $206,000,000 $949 619 West 54th Street MovieLab Building Midtown West B 326,861 Silverstein Properties Taconic Investment Partners $175,800,000 $538 (Partial Interest Sale) 430 West 14th Street aka 875 Washington Street Hudson Square C 61,321 ASB Real Estate Investments Thor Equities $130,000,000 $2,120 (Recapitalization) (Partial Interest Sale)

Properties are sorted by highest priced sale. Selective pending sales, bulk portfolio sales, leaseholds and condominium units are excluded.

11 MANHATTAN TREND TRACKER 2ND QUARTER 2017 LEE & ASSOCIATES NYC Lee & Associates NYC 845 Third Avenue, Fourth Floor New York, NY 10022 | 212.776.1200 www.leeassociatesnyc.com James Wacht President 212.776.1202 [email protected]

Henry Abramov Research Director [email protected] Carly Farkas Research Associate [email protected]

With offices across the nation, the Lee & Associates® group of independently owned and operated companies is the largest provider of regional commercial real estate services in the United States and the fourth-largest full-service commercial real estate organization overall.