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MANHATTAN Savills Research Q3 2019 MARKET IN MINUTES MANHATTAN Savills Research The We Company's IPO fiasco creates KEY STATISTICS y-o-y Q3 2018 Q3 2019 market uncertainty Change The We Company filed an S-1 on August 14, 2019, as New York City’s largest occupier Inventory 443.5 MSF 452.3 MSF valued at $47 billion. Less than 60 days later, WeWork has all but stopped signing Availability Rate 11.5% 11.0% leases while undertaking a massive organizational restructure and pursuing more “strategic” growth. WeWork’s turmoil will cast a shadow of skepticism over the Asking Rental Rate $75.00 $82.04 market in the fourth quarter as owners re-evaluate WeWork’s tenancy, credit, and Class A Asking Rental Rate $85.73 $97.01 contracts. This may create opportunity as unfunded or canceled WeWork expansions become available for traditional occupiers. Prior to the restructure, WeWork leased Quarterly Leasing Activity 8.7 MSF 8.6 MSF an additional 500,000 square feet (sf) during the third quarter, occupying nearly 8.0 million square feet (msf) in total, and controlling over 58% of the flexible office inventory. Stay tuned for an upcoming scenario analysis that will evaluate the impact ASKING RENT TRENDS Overall Asking Rent Class A Asking Rent of a potential WeWork default on the New York City market. $120.00 $97.01 TAMI expands with FAANGS $100.00 The TAMI (technology, advertising, media and information) sector continued to $80.00 consume space across the market as Manhattan’s tenant composition continues to $82.04 evolve away from financial services. TAMI comprised 35.3% of total year-to-date $60.00 leasing volume though the third quarter of 2019. This is up almost two times compared $ / SF $40.00 to the same period last year (15.8%). Financial services accounted for 23.3% of year- to-date demand, down from 30.5% in 2018. Google completed one of the largest leases $20.00 in 2019 so far, a 1.3 million-square-foot commitment at the former St John’s Terminal (550 Washington Street) a 2022 redevelopment by Oxford Properties. Facebook, $0.00 Q3 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019 Amazon and Apple are circling Hudson Yards for large blocks to attract and retain top tier talent. Combined requirements are estimated at up to 3.0 msf. Additionally, AVAILABILITY TRENDS advertising giant Publicis renewed 680,000 sf while expanding by 280,000 sf at 375 Overall Availability Class A Availability 15.0% Hudson Street, where it will consolidate operations. 11.6% Availability compressing; Midtown has majority of large blocks Manhattan’s overall availability is down 50 basis points over the year to 11.0%. Class A 10.0% 11.0% availability saw a sharper decline, falling 90 basis points year over year to 11.6%, even as new product delivers. As demand shifts around the market, so do available options. Midtown’s availability increased by 80 basis points over the past quarter to 11.6%, a 5.0% two-year high. Downtown availability held firm at 12.5%, while Midtown South dipped 20 basis points to 7.5%, the lowest it has been since the start of 2015. An increase in Midtown large blocks creates an opportunity for tenants looking for more than 0.0% 100,000 sf. Three-fourths of the 66 large blocks available of that size are in Midtown. Q3 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019 LEASING ACTIVITY Outlook Quarterly Leasing Activity 5-Year Quarterly Average 14.0 • Continued competition for large blocks is anticipated due to 12.0 ongoing growth of the TAMI sector recruiting efforts 10.0 • Midtown boasts the most options for tenants seeking blocks of 100,000 sf or more 8.0 • WeWork’s failed IPO attempt could result in opportunities for 6.0 tenants as expansions may be canceled and existing locations 4.0 closed. Square feet(millions) 2.0 0.0 Q3 2014 Q3 2015 Q3 2016 Q3 2017 Q3 2018 Q3 2019 Manhattan Market in Minutes - Q3 2019 MAJOR TRANSACTIONS 60.3% 63.7% 63.9% of major transactions were relocations TAMI tenants accounted for 63.7% of of major transactions occurred in or new locations top transactions Midtown South Tenant Square feet Address Transaction type Submarket Industry Google 1,295,800 550 Washington Street New Location Hudson Square TAMI Publicis 977,265 375 Hudson Street Renewal and Expansion Hudson Square TAMI Shearman & Sterling 400,000 599 Lexington Avenue Renewal East Side/UN Legal Services WeWork 362,197 437 Madison Avenue New Location Plaza South Coworking For more information, please contact us: District Council 37 130,449 55 Water Street Relocation Financial District Government Savills EisnerAmper 124,327 733 Third Avenue Relocation Grand Central Professional Services 399 Park Avenue 11th Floor 122,606 1114 Avenue of the Americas Relocation Grand Central Financial Services Israel Discount Bank (IDB) New York, NY 10022 +1 212 326 1000 WeWork 107,785 16 E 34th Street New Location Park Avenue South Coworking Kelley Drye & Warren LLP 103,000 175 Greenwich Street Relocation WTC/Brookfield Place Legal Services Mitchell S. Steir Chairman and 101,568 220 E 42nd Street Relocation Grand Central TAMI Tribune Media / WPIX Chief Executive Officer +1 212 326 1000 [email protected] Source Savills Research Mitchell E. Rudin AVAILABILITY RATE COMPARISON RENTAL RATE COMPARISON ($/SF) President Manhattan Submarkets Manhattan Submarkets +1 212 326 1000 [email protected] Hudson Square 2.4% Plaza North $123.56 Flatiron 5.5% Hudson Yards $118.53 Lesley Kamnitzer Union Square Greenwich Village 5.5% $111.51 Senior Research Manager Midtown South Total 7.5% Hudson Square $107.19 Chelsea 8.5% Manhattan Class A $97.01 +1 212 326 1000 Greenwich Village 8.7% Plaza South $93.41 [email protected] Hudson Yards 8.9% Soho $91.35 Soho 9.3% Midtown Total $87.56 Times Square 9.5% Grand Central $86.56 About Savills Inc. Tribeca 10.0% Park Avenue South $85.14 Savills helps organizations find the Plaza South 10.2% Midtown South Total $84.71 right solutions that ensure Park Avenue South 10.6% Times Square $84.40 employee success. Sharply skilled and fiercely dedicated, the firm’s Grand Central 10.7% Manhattan $82.04 integrated teams of consultants and Manhattan 11.0% Union Square $80.60 brokers are experts in better real East Side / UN 11.4% Chelsea $78.67 estate. With services in tenant Penn Plaza/Times Square South 11.6% East Side / UN $77.13 representation, workforce and Midtown Total 11.6% Columbus Circle $73.04 incentives strategy, workplace Manhattan Class A 11.6% Penn Plaza/Times Square South $72.29 strategy and occupant experience, Financial District 11.8% WTC/Brookfield Place $71.76 project management, and capital Downtown Total 12.5% Tribeca $68.21 markets, Savills has elevated the WTC/Brookfield Place 13.5% Downtown Total $64.44 potential of workplaces around the Columbus Circle 13.8% Flatiron $63.58 corner, and around the world, for City Hall 14.6% City Hall $63.45 160 years and counting. Plaza North 19.0% Financial District $58.62 For more information, please visit 0.0% 5.0% 10.0% 15.0% 20.0% $0.00 $30.00 $60.00 $90.00 $120.00 Savills.us and follow us on LinkedIn, Twitter, Instagram and Facebook. Unless otherwise noted, all rents quoted throughout this report are average asking gross (full service) rents per square foot. Statistics are calculated using both direct and sublease information. Current and historical availability and rent data are subject to change due to changes in inventory. The information in this report is obtained from sources deemed reliable, but no representation is made as to the accuracy thereof. Unless otherwise noted, source for data is Savills Research. Copyright © 2019 Savills savills.us.
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