Commercial Office Market

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Commercial Office Market OFFICE RETAIL TOURISM & HOSPITALITY RESIDENTIAL CAPITAL IMPROVEMENTS ALLIANCE FOR DOWNTOWN NEW YORK Q2 2015 LOWER MANHATTAN REAL ESTATE MARKET OVERVIEW COMMERCIAL OFFICE MARKET Leasing Activity Rising private sector employment and large, pending commercial moving to Lower Manhattan: Gucci finalized a lease for 83,964 leases indicate a strong commercial market in Lower Manhattan square feet at 195 Broadway. The luxury retailer will be moving in the months ahead, even as year-to-date leasing drops from from Midtown in the first quarter of 2016. record levels in 2013 and 2014. Despite this, the vacancy rate has remained steady year over year at 10.3%. Several other large deals were announced in the second quarter at the World Trade Center but are not yet finalized. In June, According to CBRE, Lower Manhattan’s second quarter leasing 21st Century Fox and News Corp. signed a letter of intent with activity totaled 860,000 square feet, 38% below the five-year Silverstein Properties to anchor 1.3 million square feet in the average. Year-to-date leasing is also lagging historical averages; at future 2 World Trade Center. As part of the deal, Bjarke Ingels has 2.01 million square feet, activity is 24% below the five-year average. been hired to redesign the proposed 80-story, 2.8 million square foot office tower in order to best serve the needs of the media and However, leasing activity is expected to accelerate in the second television companies. This deal has the potential to be the largest half of the year and to bolster 2015 annual totals. Several large transaction in Lower Manhattan in 2015, and the company’s deals have already closed in July, and several more are still relocation would further cement Lower Manhattan’s status as pending. a media center in New York City. At One World Trade Center, Moody’s is expected to announce a lease for 80,000 square feet, In early July, Ironshore finalized its lease for 101,958 square feet an addition to its current 836,902 square-foot Lower Manhattan in 28 Liberty Street, which was previously announced in April 2015. footprint in the 100% leased 7 World Trade Center. A Moody’s Ironshore will be relocating and expanding from 50,000 square feet expansion deal would mean that One World Trade Center is 66% in 1 State Street. July also brought news of a major fashion icon leased (it is currently 63% leased). LOWER MANHATTAN LEASING ACTIVITY, Q2 2011 - Q2 2015 Source: Downtown Alliance, CBRE 2.0 Million 1.8 Million 1.6 Million 5-Year Quarterly Average: 5-Year Quarterly A1v.e3r8a gMei:l 1lio.3n8 S MF illion SF 1.4 Million d d 1.2 Million e e s s a a e e 1.0 Million L L 860,000 F F S S 0.8 Million 0.6 Million 0.4 Million 0.2 Million 0.0 Million Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2011 2012 2013 2014 2015 Lower Manhattan Real Estate Year in Review | Q2 2015 1 OFFICE RETAIL TOURISM & HOSPITALITY RESIDENTIAL CAPITAL IMPROVEMENTS Second Quarter Leasing Trends LOWER MANHATTAN TOP 15 LEASES, Q2 2015 Source: Downtown Alliance, CBRE, CoStar, Colliers International, Newmark Grubb The second quarter’s top deals reflected the growing diversity Knight Frank of the Lower Manhattan office market, with activity in new Tenant Name SF Leased growth industries — such as coworking providers — as well as Sector Location Transaction Type the traditional FIRE sector. According to Jones Lang LaSalle, Morgan Stanley the FIRE sector and Professional/Business Services sector, 68,325 1 Smith Barney FIRE Expansion which includes coworking, accounted for 27% and 42% of 1 New York Plaza all new leasing activity, respectively. TAMI (growth industries Port Authority of NY & NJ 62,250 2 Government including Technology, Advertising, Media and Information) 115 Broadway Renewal uncharacteristically lagged this quarter, accounting for less Globe Tax 60,000 3 FIRE than 2% of all new activity. With below-average leasing activity, 1 New York Plaza Moving Within LM the absence of TAMI this quarter was a drag on the market Cowork|rs 40,000 Professional 4 and demonstrated the importance of these sectors to Lower 60 Broad Street Expansion Services Manhattan’s commercial market. Cowork|rs 30,000 Professional 5 55 Broadway Expansion Services Holborn Companies 29,878 Morgan Stanley Smith Barney signed the largest deal in the 6 FIRE 180 Maiden Lane Moving Within LM second quarter, committing to an expansion space of 68,325 Dixon Advisory USA 25,391 square feet in 1 New York Plaza where it already occupies more 7 FIRE 140 Broadway 1st NYC office than 747,000 square feet. In addition, Dixon Advisory, a Jersey MCIC Vermont, Inc. 22,255 City-based REIT advisor, committed to opening its first New York 8 FIRE 125 Broad Street Moving Within LM City office in a 25,391 square-foot space in 140 Broadway. United Synagogue of 16,331 9 Conservative Judaism Nonprofit Relocation The coworking and flex office space industry continued to 120 Broadway expand its stake in Lower Manhattan with two new leases signed Banco Popular, FSB 15,111 10 FIRE this quarter by Cowork|rs. Cowork|rs committed to a total 85 Broad Street Expansion of 70,000 square feet at two Lower Manhattan locations this Icahn School of Medicine 14,600 11 at Mount Sinai Education quarter, including 40,000 square feet at 60 Broad Street and Relocation 30,000 square feet at 55 Broadway. Currently, the company 225 Greenwich Street Refinery29 12,805 has one other Manhattan location in the Flatiron neighborhood 12 TAMI 225 Broadway Expansion and a future location in the Gowanus neighborhood in Brooklyn. Gilbane Building Co. 12,707 These leases reflect the second consecutive quarter of top 13 FIRE 88 Pine Street Expansion deals among the coworking industry – last quarter, WeWork Loeb Partners Corporation 11,540 committed to 240,000 square feet in 85 Broad Street. 14 FIRE 100 Wall Street Expansion Catholic Medical 11,406 15 Mission Board Nonprofit Relocation 100 Wall Street LMHQ On July 1, 2015, the Downtown Alliance opened LMHQ, a cross sector collaboration space created to foster the ongoing evolution of Lower Manhattan into a bustling tech and creative center. LMHQ opened in 12,500 square feet on the 20th floor of 150 Broadway and offers opportunities to work, take meetings, network and learn about industry trends. It features a 140-seat event space available for meet ups, hackathons and other networking opportunities. LMHQ also provides leadership events and original programming from a robust partner network that includes New York Tech Meetup, New York Technology Council, Center for an Urban Future, TheLi.st, and Uncubed Wakefield; Pace University will serve as an education partner. LMHQ offers both individual and company memberships as well as drop-in opportunities. For more information or for membership options, please visit www.lmhq.nyc. Lower Manhattan Real Estate Year in Review | Q2 2015 2 OFFICE RETAIL TOURISM & HOSPITALITY RESIDENTIAL CAPITAL IMPROVEMENTS Rise in Employment SHARE OF LOWER MANHATTAN EMPLOYMENT In the fourth quarter of 2014, private sector payroll employment GROWTH BY SECTOR, in Lower Manhattan reached its highest level since December Q4 2013 - Q4 2014 Source: New York State Department of Labor 2001, with its fifth consecutive quarter of growth.1 The number Other of private sector employees is up by more than 2,200 since the Other 7% third quarter of 2014 and more than 13,000 year-over-year. Services 7% A collection of industries is driving this major gain, including Hotel, Retail & Professional Services, Information, Education and Social Services Restaurants 7% Education and Hospitality and Retail. Nearly 50% of all jobs added during & Social this period were in Education and Social Services, followed by +14,177 Services 21% in Information and 13% in Professional Services. Professional 41% Services ADDED JOBS 14% Several large corporate relocations over the past year, many of them in the TAMI sector, fueled rises in both Information and Professional Services employment in Lower Manhattan. In 2014, companies such as Condé Nast (which relocated to One World Information Trade Center) and HarperCollins Publishers (which moved into 24% 195 Broadway) drove employment gains. Future moves from other large TAMI firms will extend this trend over the next several years; these include TIME Inc.’s planned relocation to a new More than headquarters in Brookfield Place and GroupM’s relocation in 3 TAMI World Trade Center, among many others. Tenants Technology, Advertising, Media, & Information 1 Source of employment totals: New York State Department of Labor, Q4 2014 reflects most current data available LOWER MANHATTAN PRIVATE SECTOR PAYROLL EMPLOYMENT, Q4 2001-Q4 2014 Source: New York State Department of Labor 240,000 236,745 227,051 230,000 s e 220,000 e y o l p m E r 210,000 o t c e S e t a 200,000 v i r P 198,878 f o r e 190,000 b m u N 180,000 170,000 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Lower Manhattan Real Estate Year in Review | Q2 2015 3 OFFICE RETAIL TOURISM & HOSPITALITY RESIDENTIAL CAPITAL IMPROVEMENTS Rents Lower Manhattan commercial Overall Asking Rents up LOWER MANHATTAN CLASS A AND B ASKING RENTS, rents continued their steady, Q2 2014 -Q2 2015 upward climb.
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