MARKETBEAT Office Q3 2020

YoY 12-Mo. ECONOMY: Employment Levels Start to Rebound Chg Forecast Total employment in declined by nearly 860,000 jobs from March to May but steadily increased over the past three months, adding nearly 150,000 new jobs from June through August. Office-using employment regained 16,000 jobs over the same time period. The 13.3% unemployment rate fell from 15.9% in July to 12.5% in August. Vacancy Rate Upon the arrival of COVID-19 in the U.S., the economy entered a recession in March 2020, recording the worst decline in post-war history in the second quarter of 2020. Mounting evidence indicates that the recovery began in May or June with third quarter 2020 data likely reflecting that. But, until there is a public health resolution to the pandemic, the recovery is likely to remain uncertain and gradual. Only then can -8.2M households and businesses become more confident. Access the most recent research on CRE and the state of economyhere. Net Abs. YTD, SF SUPPLY AND DEMAND: Leasing Registers the Second-Lowest Quarter in 25 Years Despite a slight uptick in third quarter leasing, tenant demand remained weak as total new leasing reached only 2.5 million square feet $74.13 (msf)—down from a quarterly average of 8.7 msf in 2019. Only three new leases greater than 100,000 square feet (sf) were transacted Asking Rent, PSF during the quarter, with Facebook’s 730,000-sf lease at 390 Ninth Avenue (Farley Post Office) accounting for 29.0% of third quarter leasing velocity. The slow quarterly total brought year-to-date (YTD) activity to 10.8 msf—down 57.6% from one year ago and the lowest consecutive (Overall, All Property Classes) nine-month total since 1995. TAMI (technology, advertising, media and information services) continued to fuel most of the activity for new leases 10,000 sf and larger, accounting for 34.8% of YTD activity, and was the top leasing sector in all three major markets. Renewal activity reached nearly 1.7 msf in the third quarter, generating a YTD total of almost 4.5 msf—up a modest 1.7% from one year ago. The Manhattan overall vacancy rate increased by 140 basis points (bps) during the quarter to a 24-year high of 13.3%, as overall supply ECONOMIC INDICATORS jumped to nearly 54.0 msf. In addition to 13 blocks greater than 100,000 sf entering the market, the completion of Avenue Q3 2020 was the first major development of 2020 and brought 625,028 sf of vacant space to the market. Sublease vacant space increased for the seventh consecutive quarter to a 17-year high of 16.1 msf—already surpassing the peak levels of the global financial crisis. Third quarter YoY 12-Mo. sublease space additions totaled 3.4 msf, marking the largest quarterly jump since 2001. An additional 2.8 msf of “shadow” sublease space Chg Forecast being tracked could potentially lead to a more substantial increase in vacancy as it enters the market more rapidly in 2021. The TAMI sector 4.0M accounts for more than half of the shadow space being tracked, followed by financial services at 19.1% New York City Employment PRICING: Minimal Rent Declines Despite Stagnant Leasing Manhattan overall asking rents increased by $0.81 to $74.13 per square foot (psf) during the quarter as direct asking rents climbed by $2.11 to $79.08 psf. Midtown asking rents increased by $1.71 psf to $78.00, as higher-priced space brought to the market at One drove Grand Central asking rents to an all-time high of $83.94 psf. asking rents dropped by $2.66 psf to $73.05, triggered 12.5% by lower-priced sublease space added at 675 Avenue of the Americas. Downtown overall asking rents dipped by $0.96 to $62.07 psf, while New York City sublease asking rents fell by $3.16 to $55.74 psf, as less expensive sublease space was added at One World Trade Center and 17 Battery Place Unemployment Rate South. 8.8% OVERALL VACANCY DIRECT VS. SUBLEASE SPACE AVAILABLE COMPARISON U.S. 13% 60 Direct Sublease Unemployment Rate 50 11% Source: BLS 40 9% 30 Historical Average = 9.4% 20 7% 10 5% 0 MARKETBEAT MANHATTAN Office Q3 2020

Midtown MANHATTAN SHADOW SUBLEASE SPACE Midtown new leasing totaled approximately 2.0 msf in the third quarter despite being down from a quarterly average of 5.1 msf in 2019. With only 7.1 msf leased YTD, activity marked the lowest consecutive nine-month total on record. was the only Midtown submarket to register a year-over-year increase in leasing, up 5.7% to 1.1 msf, driven by the Raymond James lease for 160,000 sf at 320 Park Avenue. Midtown vacancy increased by 170 bps in the third quarter to 14.3% as the completion of One Vanderbilt Avenue brought 625,028 sf of vacant space to the market. A block of 127,044-sf entering the market at 75 Rockefeller Plaza pushed the /Rock Center submarket vacancy rate up 180 bps during the % quarter to 11.3%—the highest quarterly total in seven years. Sublease space jumped by 23.5% in the third quarter to 9.3 msf 19.1 8.6% largely driven by 190,932 sf entering the market at . Year-to-date absorption was negative at 5.6 msf. 55.1% Financial Real Midtown South Services Estate The pace of leasing in Midtown South slowed to an all-time quarterly low of only 290,930 sf as 90.0% of transactions were below 20,000 sf—compared to a quarterly average of nearly 1.6 msf in the prior three years from 2017 to 2019. % % Year-to-date new leasing plummeted 75.5% from one year ago to nearly 1.4 msf with Hudson Square/West Village down Retail/ 12.9 4.3 TAMI the sharpest at 94.1%. Overall vacancy increased for each of the past nine months, ending the quarter at 11.1%—the first Wholesale Other double-digit quarterly vacancy recorded since 2009. Sublease space reached an all-time high of 3.0 msf led by a block of By Industry & SF 104,331 sf added at 675 Avenue of the Americas and 102,539 sf entering the market at 1250 . SUBLEASE SPACE ADDED BY MARKET YTD Downtown Downtown new leasing registered an unprecedented quarterly low of only 183,017 sf, which brought the YTD amount to 2.5 2.4 msf leased—a total lower than the leasing during the first quarter of 2019. Nearly 95.0% of third quarter leases were less than 20,000 sf, with Remarkable Foods representing the largest lease of the quarter for 68,666 sf at Four World 2.0 2,170,574 Trade Center. Even with a 330,350-sf block of direct space entering the market at One Liberty Street, Downtown vacancy increased a modest 40 bps during the quarter to 12.1%—though it was the highest quarterly vacancy rate since 2013. 1.5 Sublease space increased by 33.6% to a 70-quarter high of nearly 3.7 msf. 1,493,561 1,256,452 MSF 1.0

Outlook 0.5

0.0 • New York City’s employment gains over the past few months will likely continue into 2021, albeit Midtown Midtown South Downtown at a slow pace ASKING RENT COMPARISON • Expect leasing activity to remain below average through 2021 $85 • Look for shadow sublease space to enter the market at a faster pace in the fourth quarter $81.51

$75 $74.13 $ PSF

$65 Q3 16 Q3 17 Q3 18 Q3 19 Q3 20 Class A Overall MARKETBEAT MANHATTAN Office Q3 2020 MARKET STATISTICS DIRECT SUBLET OVERALL CURRENT QTR YTD OVERALL YTD LEASING UNDER OVERALL AVG OVERALL AVG SUBMARKET INVENTORY VACANT VACANT VACANCY OVERALL NET NET ABSORPTION ACTIVITY CNSTR ASKING RENT ASKING RENT (SF) (SF) (SF) RATE ABSORPTION (SF) (SF) (SF) (SF) (ALL CLASSES)* (CLASS A)* East Side/UN 20,794,447 1,922,645 616,663 12.2% -298,218 -505,507 355,532 N/A $71.24 $71.89 Grand Central 45,798,830 6,041,183 1,523,304 16.5% -81,070 -209,530 1,222,248 N/A $83.94 $89.00 Madison/Fifth 22,500,251 3,641,574 836,608 19.9% -456,563 -609,071 615,263 N/A $93.25 $99.12 Murray Hill 14,142,543 1,399,457 424,637 12.9% -347,683 -391,971 223,472 N/A $60.12 $67.75 Park Avenue 20,217,866 1,947,746 847,499 13.8% -507,377 -593,840 1,085,984 292,100 $90.81 $90.81 Penn Station 21,190,661 1,005,804 826,743 8.6% -120,008 205,020 1,963,759 4,353,052 $84.58 $92.32 Sixth Avenue/Rock Center 41,816,982 3,398,750 1,325,113 11.3% -750,689 -1,084,608 657,711 68,995 $80.12 $81.11 South 30,984,874 3,600,952 1,534,945 16.6% -472,699 -1,800,741 445,870 N/A $58.94 $65.02 West Side 30,981,301 3,331,612 1,407,699 15.3% 91,684 -591,281 550,980 95,347 $75.80 $79.11 MIDTOWN TOTALS 248,427,755 26,289,723 9,343,211 14.3% -2,942,623 -5,581,529 7,120,819 10,372,946 $78.00 $85.29 Chelsea 16,660,129 1,210,138 618,234 11.0% -174,104 -261,136 311,487 574,722 $68.17 $89.69 Greenwich/NoHo 4,850,579 305,550 137,652 9.1% -79,387 -119,547 106,203 222,074 $84.68 $108.12 Hudson Square/West Village 10,000,435 243,007 832,141 10.8% -372,355 -467,806 152,978 N/A $73.66 $96.85 Madison/Union Square 32,593,617 2,339,144 1,280,350 11.1% -811,046 -929,853 733,732 180,893 $71.83 $82.38 SoHo 4,187,232 423,752 179,805 14.4% -147,465 -111,099 63,023 N/A $86.39 $115.32 MIDTOWN SOUTH TOTALS 68,291,992 4,521,591 3,048,182 11.1% -1,584,357 -1,889,441 1,367,423 2,878,738 $73.05 $90.39 City Hall 7,731,533 650,133 65,717 9.3% -21,690 -168,040 68,622 N/A $61.75 $50.12 Financial East 32,962,294 2,547,939 1,301,444 11.7% -372,669 256,492 1,322,650 48,077 $54.49 $56.37 Financial West 6,017,928 897,117 202,702 18.3% -41,329 106,004 182,070 185,295 $58.32 $70.36 Insurance 13,055,933 1,090,045 301,648 10.7% -79,815 -199,857 86,263 51,755 $57.34 $63.04 TriBeCa 5,124,468 170,887 90,324 5.1% -392 -110,266 4,861 N/A $72.93 $74.29 World Trade 24,103,907 1,740,064 1,721,712 14.4% -379,168 -576,340 685,942 39,879 $71.13 $72.15 DOWNTOWN TOTALS 88,996,063 7,096,185 3,683,547 12.1% -895,063 -692,007 2,350,408 325,631 $62.07 $65.74 MANHATTAN TOTALS 405,715,810 37,907,499 16,074,940 13.3% -5,422,043 -8,162,977 10,838,650 13,577,315 $74.13 $81.51 *Rental rates reflect full service asking ** Manhattan Totals are not reflective of U.S. MarketBeat Tables

KEY LEASE TRANSACTIONS Q3 2020 PROPERTY SUBMARKET TENANT SF TYPE 390 Ninth Avenue (Farley Post Office) Penn Station Facebook 730,000 New 787 Seventh Avenue Sixth Avenue/Rock Center BNP Paribas 322,586 *Renewal 620 Eighth Avenue Times Square South Goodwin Proctor, LLP 216,247 *Renewal *Renewals not included in leasing statistics

KEY SALES TRANSACTIONS Q3 2020 PROPERTY SUBMARKET SELLER / BUYER SF PRICE / $ PSF 522 Grand Central Morgan Stanley / RFR Realty 575,000 $350.0M / $609 110 Fifth Avenue Madison/Union Square Samson Management / Eastgold Properties 170,000 $106.8M / $628

COMPLETED CONSTRUCTION 2020 YTD PROPERTY SUBMARKET MAJOR TENANT SF OWNER/DEVELOPER One Vanderbilt Avenue Grand Central Carlyle Group/TD Securities/McDermott Will & Emery 1,732,955 SL Green Realty Corp. 809 Broadway Greenwich/NoHo N/A 30,422 802 Broadway Holdings LLC MARKETBEAT MANHATTAN Office Q3 2020

OFFICE SUBMARKETS

RICHARD PERSICHETTI Vice President Tri-State Region Research Lead [email protected]

LORI ALBERT Research Director [email protected]

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