MARKETBEAT Office Snapshot Q3 2015 Manhattan

MANHATTAN OFFICE Economy The New York City economy slowed in the third quarter as Economic Indicators employment fell slightly following a very strong second 12-Month Q3 14 Q3 15 Forecast quarter increase. In August total employment declined by New York City Employment 4,127.10 4,201.40 12,900 jobs, the largest drop since mid-2010. However, the drop comes after a strong second quarter and total New York City Unemployment 6.70% 5.40% employment was still up a solid 66,000 jobs from a year ago. U.S. Unemployment 5.90% 5.10% Office-using employment also declined in August, but remains solidly above year-ago levels. The slowdown in New York City reflects the uncertainty that gripped financial Market Indicators markets during the quarter and created some hesitancy 12-Month among businesses about the future direction of the national Q3 14 Q3 15 Forecast economy. Expect the U.S. economy to grow at a solid pace Overall Vacancy 10.2% 8.9% for the balance of 2015 and that New York City will Net Absorption 5.3M 2.4M participate in that growth. Under Construction 7.9M 6.7M Average Asking Rent (FS) $66.62 $71.02 Market Overview A summer slowdown in activity caused the Manhattan vacancy rate to remain relatively flat during the third quarter Net Absorption/Asking Rent at 8.9%. With 21.9 million square feet (msf) leased year to 4Q TRAILING AVERAGE date, activity is down by 10.0% from the same time last year. The drop-off in activity is not necessarily indicative of a 3.0 $80 slowing market—but rather an absence of the mega-deals 2.0 that characterized the market in 2014. Through the third quarter last year there were 30 new leases over 100,000 1.0 $70 square feet (sf), seven of which exceeded 400,000 sf. So far 0.0 in 2015, there have been 18 new leases over 100,000 sf and only two over 400,000 sf. Despite the dip in leasing, Millions -1.0 $60 absorption has remained healthy with 2.4 msf absorbed

-2.0 through September.

-3.0 $50 In Midtown, two new construction projects—7 Bryant Park and 2010 2011 2012 2013 2014 Q3 15 34 East 51st Street—were completed during the quarter and Net Absorption, SF Asking Rent, $ PSF added 519,000 sf of inventory to the market, including 260,000 sf of available space. 7 Bryant Park/1045 Avenue of the Americas is a 448,000-sf building that will be anchored Overall Vacancy by owner Bank of China, while the boutique 71,000-sf building

14% at 34 East 51st Street remains vacant. The addition of the 13% available space in these properties, along with more than 12% 537,000 sf of Time Life’s space placed on the market at 1271 11% Avenue of the Americas, caused Midtown’s vacancy rate to Historical Average = 10.6% 10% rise to 9.3%, from 8.9% at the end of June—ending seven 9% consecutive quarters of declining vacancy. Year-over-year, 8% however, the overall vacancy rate is down by 1.7 percentage 7% points (pp). Major leases during the quarter included: Morgan 6% Stanley’s renewal at 750 Seventh Avenue for 380,000 sf and 5% Citadel Investments Group pre-lease of 200,000 sf at 425 4% Park Avenue. The Citadel transaction is notable as it is 2010 2011 2012 2013 2014 Q3 15

cushmanwakefield.com | 1 MARKETBEAT Office Snapshot Q3 2015 Manhattan

reported to have a starting rent of $300 per square foot (psf) Office-Using Employment vs. Vacancy for the penthouse floor—a record for Manhattan. DESPITE ALL-TIME HIGH EMPLOYMENT, VACANCY HAS NOT Redevelopment of the property is currently underway with REACHED PREVIOUS LOW completion slated for 2019. 1,350 12.0% Average asking rents in Midtown ended the quarter at $77.04 1,300 psf, up 4.5% over the same period last year and its highest level since January 2009. 1,250 8.0% 1,200

NEWSCORP HAS A DEAL PENDING AT TWO Thousands

WORLD TRADE CENTER WHICH, IF COMPLETED, 1,150 WOULD ALLOW CONSTRUCTION OF THE 1,100 4.0% PROJECT TO COMMENCE. Q1 05Q1 06Q1 07Q1 08Q1 09Q1 10Q1 11Q1 12Q1 13Q1 14Q1 15 Office Using Employment Vacancy Rate The overall vacancy rate for Midtown South dropped to 5.8% during the quarter, a low not seen since early 2008. The market remains the tightest in Manhattan and has had the lowest vacancy rate in the country for the last several years, Leasing Activity with San Francisco a close second. While widely considered MANHATTAN 10-YEAR LEASING AVERAGE IS 24.9 MILLION SF the market for the TAMI (technology, advertising, media and information) sectors, several other industries are also taking an interest in Midtown South. The largest lease of the quarter 40.0 was signed by Avenues: The World School at 540 West 26th Street for 85,421 sf, followed by online retailer One Kings Lane 30.0 at 315 Hudson Street for 51,576 sf. Average asking rents are up by more than 15.0% since third quarter 2014 and are $10.00 psf higher than Downtown and $10.00 lower than Midtown. 20.0 SF in Millions in SF A trio of leases over 100,000 sf by KCG Holdings (Knight 10.0 Capital), NYC Department of City Planning and Ironshore Insurance kept Downtown’s vacancy rate at 10.3% for a second consecutive quarter. Leasing activity, however, is off 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q3 15 by 37.0% from the same time last year. Not unlike Midtown, last year was exceptionally strong Downtown with tremendous velocity at Brookfield Place. Although Downtown has had two quarters of positive absorption, the year-to-date Class A Asking Rent Trend total is negative 356,188 sf—all of which occurred in the first ASKING RENTS FOR MIDTOWN CLASS A SPACE HAVE RISEN STEADILY quarter as a result of space at 28 Liberty Street. Average $85 asking rents rose to $57.92 psf during the quarter and are up

20.0% year-over-year. $75

Outlook $65 $ PSF $ • The absence of new construction in the short-term is $55 expected to result in steadily declining vacancy rates and rising rents through 2016. $45 • Beyond 2017, new construction and densification of space

are expected to allow both vacancy and rental rates to $35 rise for a period. Q3 10 Q3 11 Q3 12 Q3 13 Q3 14 Q3 15 Midtown Midtown South Downtown

cushmanwakefield.com | 2 MARKETBEAT Office Snapshot Q3 2015 Manhattan

AVERAGE AVERAGE TOTAL SUBLET DIRECT VACANCY CURRENT NET YTD NET UNDER SUBMARKET INVENTORY ASKING RENT ASKING RENT BLDGS VACANT VACANT RATE ABSORPTION ABSORPTION CNSTR (ALL CLASSES) (CLASS A) East Side 60 18,473,475 125,667 843,529 5.2% 130,206 362,157 0 $72.94 $74.34

Grand Central 136 43,440,836 395,674 4,281,417 10.8% 14,927 226,126 0 $68.39 $69.22

Madison/Fifth 121 24,213,456 262,630 2,728,682 12.4% -112,763 418,645 0 $98.62 $103.03

Murray Hill 83 14,366,499 160,546 751,205 6.3% 223,963 286,456 0 $62.05 $71.05

Park Avenue 30 21,842,808 438,969 1,488,312 8.8% 53,091 1,251,781 746,000 $92.13 $92.13

Penn Station 44 14,041,056 211,080 551,200 5.4% -113,472 290,553 3,299,002 $56.85 $49.24

Sixth Avenue/Rock Center 72 39,901,482 1,319,125 2,282,855 9.0% -775,950 -370,833 0 $80.83 $81.65

Times Square South 147 31,556,988 613,732 2,583,630 10.1% 218,994 -284,580 0 $67.19 $95.26

United Nations 15 2,332,166 16,666 30,513 2.0% 0 -38,179 0 $64.25 $63.83

West Side 85 30,089,001 601,046 2,634,880 10.8% -49,080 -184,262 0 $75.82 $78.25

MIDTOWN TOTALS 793 240,257,767 4,145,135 18,176,223 9.30% -410,084 1,957,864 4,045,002 $77.04 $81.60

Chelsea 85 14,928,755 84,616 690,874 5.2% -99,984 150,523 99,000 $58.19 N/A

Greenwich/NoHo 36 4,759,517 31,180 109,896 3.0% -3,807 137,949 0 $63.71 N/A

Hudson Square/West Village 43 10,688,412 93,449 513,541 5.7% 16,400 29,800 88,000 $68.03 $73.65

Madison/Union Square 219 32,028,013 498,573 1,635,398 6.7% 212,110 536,484 0 $69.86 $77.47

SoHo 49 4,199,254 54,845 180,357 5.6% 1,408 -10,560 0 $67.67 N/A

MIDTOWN SOUTH TOTALS 432 66,603,951 762,663 3,130,066 5.80% 126,127 844,196 187,000 $67.05 $76.56

Office asking rents converted to Full Service City Hall 39 12,798,515 11,000 288,361 2.3% 26,383 -147,172 0 $59.54 N/A

Financial East 52 35,261,509 285,160 2,867,367 8.9% 141,851 -251,423 0 $52.06 $54.90

Financial West 14 5,411,622 49,029 661,553 13.1% 3,286 -1,234 0 $48.28 $50.57

Insurance 39 13,268,439 124,414 1,184,237 9.9% 133,114 125,999 0 $46.99 $48.83

World Trade 15 21,091,586 142,444 3,457,360 17.1% -31,381 -82,358 2,491,861 $67.88 $68.53

DOWNTOWN TOTALS 159 87,831,671 612,047 8,458,878 10.3% 273,253 -356,188 2,491,861 $57.92 $60.79

MANHATTAN TOTALS 1,384 394,693,389 5,519,845 29,765,167 8.9% -10,704 2,445,872 6,723,863 $71.02 $75.95 Office asking rents converted to Full Service

Key Lease Transactions Q3 2015

PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET 750 Seventh Avenue 380,000 Morgan Stanley Renewal West Side 237 Park Avenue 270,000 J. Walter Thompson Renewal Park Avenue 425 Park Avenue 200,000 Citadel Investments Lease Park Avenue 300 Vesey Street 169,000 KCG Holdings (Knight Capital) Lease World Trade

Key Sales Transactions Q3 2015

PROPERTY SF TENANT TRANSACTION TYPE SUBMARKET 575 Lexington Avenue 739,000 Angelo Gordon $510,000,000 East Side 120 West 45th Street 443,056 Kamber Management $365,000,000 Sixth Avenue/Rock Center

Copyright © 2015 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy. cushmanwakefield.com | 3 MARKETBEAT Office Snapshot Q3 2015 Manhattan

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