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Premiums on the Park

August 2012 Premiums on the Park August 2012 - Battery Page 2 Page Not on Park © 2012, CBRE, Inc. River On Park Hudson Line The High Square g consultin and research Global Madison Bryant $0 Source: CBRE Research. $90 $80 $70 $60 $50 $40 $30 $20 $10 Figure 1: Buildings on Park vs. Buildings Not on Park vs. Buildings Buildings on Park Figure 1: $100 45% higher than the overall average. South higher than the Midtown 45% asking rents between the 2001, to By comparison, prior same range. two groups of buildings were in the the new Asking rents in buildings adjacent to rents in com- higher than 51% average, on are, Park As there is a limited parable buildings one block away. demand strong park, the around space office of supply is driving rents higher prompting new development and activity. Of the five parks in the buildings study, along Hudson have the smallest pricing differential—only River Park 14% higher than rents in buildings located in the vicinity of the park. However, new office development occur increase ring over the next few years will likely rents both on and near the park. Average asking rents in buildings across from Battery are, on average, 39% higher than rents in buildings Park higher than 20% and from the park, one block away average. Although the buildings located the Downtown one block away from the park are older than those on buildings in the sample have of the majority the park, recently undergone major renovations, making them newer buildings located the to quality in comparable on the park. Click to play video. Similarly, asking rents in buildings directly across from Similarly, than are, on average, 54% higher Madison Square Park from the park, and rents in buildings one block away The analysis shows that an office building’son location the park has a significant effect on asking rents for For example, averageoffice asking space. rents for of- fice space located in buildings across Park from Bryant 63% higher than asking rents for are approximately comparable office space located just one block farther average Midtown’s than higher 46% and park, the from asking rent. The rent premium for office space on the high-qualityhas incentivized develop park landlords to and renovate aging buildings directly on new towers the park. Over the past 20 years, has seen the restora- Over the past 20 years, Manhattan has , tion of several key public spaces including and the newly created High Line Madison Square Park surrounding these revitalized parks have Areas Park. estatereal commercial of renaissance a experienced development, with strong demand fueling significantly higher rents. A CBRE analysis of five city parks reveals that as of July 2012, approximatelycommand parks improved to adjacent on average, office properties properties located44% higher rents than comparable one block away.

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1993 1992 $0 Source: CBRE Research. $40 $20 $80 $60 Figure 2: Bryant Park Figure 2: $160 $140 $120 $100 Bryant Park Fountain – 2007 Fountain Bryant Park strong demand for high-quality office space with park views has considerably tightened the market for avail- able space on the park. Since to the park reopened for buildings the availability rate the public in 1992, 620 approximately by the park has dropped bordering comparison, the By July 2012. of as 5% basis points to availability rate for buildings one located block away was 12%, the same as Midtown’s overall availability rate. One example, 452 , recently leased of space that sq. ft. 80% of the 350,000 approximately period, as the became available within a six-month building’s Bryant Park views helped attract legal and financial firms from the Plaza District. Courtesy of Bryant Park Corporation Courtesy of Bryant Park Landlords of buildings located on or close to the park to buildings located on or close of Landlords have benefited significantly from the park’s caché. The Furthermore, Furthermore, several as owners realized the attrac- upgraded were 1970s built before high-quality Of the 18 buildings tion of Bryant Park. the located on or within a one-block radius of the park, eight have undergone massive renovations after the park’s reopening, including The Grace Building and 1095 Avenue of the Americas. The park’s rebirth increased investor the park, includ- spurred new trophy development along confidence and and Seven completed in 2009, ing One Bryant Park, scheduled for completion by 2015. Other Bryant Park, major post-1992 Class A office developments in close proximity to Bryant Park (1999), include 505 Fifth Avenue (2006) Four and (2002). Bryant Park Park Bryant a was Midtown, of in the heart located Park, Bryant haven dealers for drug the homeless and late until the avoided residents York New and tourists Most 1970s. visiting the area. Quality commercial real estate adja- was limited, with the Grace Building the park cent to as the only prime office building on the park. Restoration Corporation Bryant Park early 1980s, the In the which rehabilitated the park, revived the surrounding in public the to reopened Park Bryant significantly. area 1992, and quickly became one of the busiest outdoor world. public spaces in Park Fountain – 1983 Fountain Bryant Park

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1993 1992 $0 Source: CBRE Research. $80 $70 $60 $50 $40 $30 $20 $10 Figure 3: Madison Square Park Square 3: Madison Figure Courtesy of Madison Square Park Conservancy Courtesy of Madison Square Park Madison Square Park Fountain – After Fountain Madison Square Park Madison Square Park South Gravel – After Madison Square Park Numerous new condominium developments, along developments, along Numerous new condominium with redevelopment and conversions of older proper Park, Square Madison around ties, have occurred including the Western Union condo Telegraph conver Center North Building conversion at 1107 sion, the Toy at One and the new condo development Madison Park. Courtesy of Madison Square Park Conservancy Courtesy of Madison Square Park 1. Madison Square Park Conservancy. http://madisonsquarepark.org. http://madisonsquarepark.org. Conservancy. 1. Madison Square Park 05/11/2012 Times, Circle”, Comes Full Square 2. “A - - - dramatically increasing dramatically 1 Courtesy of Madison Square Park Conservancy Courtesy of Madison Square Park Madison Square Park Fountain – Before Fountain Madison Square Park The park was a key factor in the successful in the redevelop key factor a was The park In addition to the renovation residential new of spurred has revival park’s existing the buildings, commercial hotels—creat and developments, restaurants, retail development development and office leasing activity in surrounding bordering buildings for rate The availability buildings. Madison Square was Park 46% in 1994. In July 2012, that rate was a mere rate for 7%, compared with a 12% and an 8% rate for Midtown away buildings one block South overall. ment of 200 Fifth Avenue, just north of . In the build- park, its ideal location facing the due to part ing was able to achieve rents that submarket average. The building greater than the were significantly companies such as Tiffany & Co., prominent attracted IMG Worldwide and Grey Group, all three of relocated their headquarters from Midtown. which called NoMad. completely new neighborhood ing a Madison Square Park South Gravel – Before Madison Square Park Conservancy Courtesy of Madison Square Park pair during the 1990s. In 2001, the park underwent a $6 million renovation, quare Park Park quare S Madison Despite easy access and location its prime to public disre was in a state of Square Park transit, Madison

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1999 1998 $0 Bordering submarkets include: Hudson Square/ & Chelsea. Hudson Square/Tribeca Bordering submarkets include: Source: CBRE Research. $20 $80 $60 $40 Figure 4: High Line Park 4: High Figure $140 $120 $100 High Line – After located along the High Line had an availability rate ofrate availability an had Line High the along located blockone buildings for rate 21% a to compared 4%, rate was Before the park opened, the availability away. at about 40%high for both groups of buildings, peaking in 2002. It was only after plans were announced for the that the availability rate differential began High Line Park to widen.

3 4 - - www.jonathanflaum.com High Line – Before 5 Photo by Jonathan Flaum | | Photo by Jonathan Flaum 3. “First Phase of High Line Is Ready for Strolling”, New York Times, 6/8/2009. of High Line Is Ready for Strolling”, New York Phase 3. “First Real Estate Group. http://www.greenbuildingsnyc.com/properties/837-washington-street/ 4. gbNYC Expansion. http://www.chelseamarketnext.com 5. Proposed With available office space a willingness tolimited, tenants have demonstrated on the pay above-averageHigh for older stock. Older rents—even Park Line buildings such as 75 and 414 West 14th achieved rents inStreet—part of Chelsea Market—have aver market the to low-$70scompared the per-sq.-ft., tion is expected to open in the spring of 2014. This tion is the spring of 2014. to open in expected one-of-a-kind has revitalized the neighborhood park and increased investor confidence, with as of 2009. underway planned or new projects either at least 30 Recent commercial the High Line developments include Building at 450 West , completed in 2011; a proposed 12-story office building at 437West 13th building 80,000-sq.-ft. completed recently a and Street; plans are there addition, In Street. 12th West Little 15 at to develop office buildings at 837Washington Street, 240,000-sq.-ft. proposed a and Street, 22nd West 510 expansion of Chelsea Market. buildingsage of mid-$50s. As of July 2012, commercial igh Line Park Line Park High The is a one-mileHigh Line The developed park elevated rail tracks freight on abandoned stretch that from Gansevoort Street to 30th Street in Chelsea. The first sections and second in 2009 of the park opened and 2011, respectively, and the third and final sec

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1993 1992 $0 Bordering submarkets include: Hudson Square/Tribeca, Chelsea, Times Bordering submarkets include: Hudson Square/Tribeca, Station and City Hall. Side, Penn Square/West Source: CBRE Research. $60 $50 $40 $30 $20 $10 6. Hudson Yards Development Corporation. http://www.hydc.org 6. Hudson Yards Figure 5: Hudson River Park Figure 5: Pier 64 – After Pier 66 – After The area 6 Courtesy of The Hudson River Park Trust Courtesy of The Hudson River Park Courtesy of The Hudson River Park Trust Courtesy of The Hudson River Park will also benefit from the forthcoming 7 subwayextension. Other new developments along the park line include the IAC (InterActiveCorp) building at 555 West 18th Street, completed in 2007. Pier 64 – Before Pier 66 – Before River Park Hudson Over the past 15 years, the Park, which five-mile runs Hudson along River the Highway from Battery Place to West , has warehouses and evolved piers from into large amenity-filled green over Trust, Hudson River Park the to spaces. According capital has been invested $3 billion in private in build- from the park during the past 10 ings located across years. The revitalization of Manhattan’s far west side is resulting in several in the major new developments the Hudson Rail Yards of portion The eastern area. approxi- alone will ultimately add development project mately 4.5 million sq. ft. of office space in the planned North and South office towers, which are expected to respectively. 2017, and come online in 2015

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1993 1992 Source: CBRE Research. $60 $55 $50 $45 $40 $35 $30 $25 $20 Figure 6: Battery Park Figure 6: 7. The Battery Conservancy. http://www.thebattery.org 7. The Battery Conservancy. Battery Bosque – After Battery Promenade – 2003 Battery Promenade According to 7 Courtesy of the Battery Conservancy Courtesy of the Battery Conservancy the Battery Conservancy, the sources the sources of funding for the Conservancy, the Battery wealthy gifts, corporate private are park’smaintenance has Park Battery Although individuals and foundations. on commercial the same effect had leasing yet not there is great and rents as the other parks in this study, nears the park the renovation of as potential upside completion. Battery Bosque – Before Battery Promenade – 1994 Battery Promenade Battery Park Battery of southern tip the park at a 25-acre Park, Battery a gradual transformation has undergone Manhattan, unpleasant, an from years, evolving 18 last over the largely concrete largest open green area into the space sq. 75,000 offers The park Manhattan. in Downtown waterfront promenades, and easy ft. of gardens, long access to the Smithsonian’s Museum of the American Indian, the Museum the park should Museum. Restoration of of Jewish Heritage be and completed within the the next walking distance of approximately is located within five years. The park residents. and 50,000 workers 280,000 Premiums on the Park August 2012 - Page 8 Page © 2012, CBRE, Inc. ct: Enkeleda Gjeci Research Analyst 212.656.0531 [email protected] ogy g consultin and research Global Methodol For the purposes of this analysis, a sample of Park,York City parks was used: Bryant five New Hudson Line Park, High Madison Square Park, River Park and Battery Park. For parks, each office of asking the rental rates on the park werelocated immediately buildings for statistical statisticalcompared to asking rental rates for onebuildings of comparable quality located block away from the park. In addition, asking the res rents were compared before and after toration of each park for both groups of build- toration of each park for both groups data rent asking analysis, this preparing In ings. currentwas sourced from CBRE Research. The whiledata used in this report is as of July 2012, as 1992.the historical data goes as far back Interviews were also conducted New York CBRE brokers and professionals from with various and Recreation and City Department of Parks non-profit organizations such as the Battery Conservancy and Trust, River Park the Hudson the Downtown Alliance. both landlords and tenants is and tenants both landlords evidenced by the pace of commercial has surrounded activity that real estate these five subject parks. Developerslooking at future intrinsic projects see the development value economic green and are incorporating of parks, space into their by the master plan for the plans, as demonstrated promenade. Hudson Yards - - - ort, please conta OCAL report, TING Sean White Research Supervisor 212.984.8176 [email protected] Information contained herein, including projections, has been obtained from sources believed to be reliable. While we While reliable. be to believed sources from obtained been has projections, including herein, contained Information your is It it. about representation or warranty guarantee, no make and it verified not have we accuracy, its doubt not do use for exclusively presented is information This completeness. and accuracy its independently confirm to responsibility by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of the CBRE Global Chief Economist. OBAL RESEARCH AND CONSUL 8 Pamela Murphy Pamela Senior Vice President 212.984.8004 [email protected] ation Regarding this L for more information CBRE GL 8. Bryant Park Corporation. http://www.bryantpark.org Corporation. http://www.bryantpark.org 8. Bryant Park provide consultants who preeminent researchers community of and integrated is an Consulting Researchand Global investors and public sector strategies to and corporate and real estate market research, econometric forecasting, occupiers around the globe. Conclusion higher to contributed significantly has revitalization Park for surrounding rental rates and lower availability rates for park’sproposition a value of Recognition buildings. Revitalized parks and recreational amenities contribute amenities contribute recreational Revitalized parks and live to place better a city the making toward significantly and work by not only increasing investor confidence, by renovation, but resulting in new development and engage them. increasing quality of life for those who rounding buildings. Employers, increasingly rounding buildings. conscious environment of the competitive talent, use these for top tool in recruiting parks as an additional and retaining talent. Key office occupancy trends, such asa blurring and remote access play, and work lines between the of the employee, increase per footage square reduced of of parks as an integral part value and importance offers example, for Park, Bryant environment. office the a full-scale fitness program and free Wi-Fi for employ ap The park attracts work outdoors. ees who wish to visitors proximately 10,000 over the course a lunch of visitors to 30,000 20,000 throughout hour and about the day. Parks as an Amenity as Parks Revitalized parks make officebuildings more competitive nearby space of valuable than and on the park occupiers and guarantee parks The similar quality. a sunlight and views, increased unobstructed investors sense park. They face the of openness for those that tenants in sur amenity to also serve as an invaluable