MARKETVIEW
TAMI-sector resurgence drives
improved quarterly leasing
Midtown South Manhattan Office, Q3 2017
© 2017 CBRE, Inc. | 1
Leasing Activity
1.14 MSFAverage Asking Rent
$71.90 PSF
Renewal (R), Expansion (E), Renewal and Expansion (RE) Source: CBRE Research, Q3 2017.
Q3 2017 CBRE Research
Figure 1: Top Lease Transactions
Size (Sq. Ft.) Tenant Address
98,509 (RE) Group Nine Media 568 Broadway
59,355 (E) Google 85 Tenth Avenue
59,140 Justworks 601 West 26th Street
56,894 (R) RadicalMedia 435 Hudson Street
53,731 (E) Squarespace 225 Varick Street
Net Absorption
0.09 MSFAvailability Rate
10.8%Vacancy Rate
6.9%
MARKET OVERVIEW
• Large deals continued to prove elusive in Q3 2017, keeping leasing activity for the quarter at 1.14 million sq. ft., 8.8% below its five-year historical
average.
• Transactions below 25,000 sq. ft. remained the
driving force for deals completed in Q3 2017, making up 59% of all leasing activity.
• The average asking rent saw no change on a quarter-over-quarter basis, but is up 4% from a year ago.
• The availability rate rose a marginal 10 basis points (bps) to 10.8%, although it stands substantially
higher than its late 2015 cyclical low, largely due to new product.
• Although the market has seen activity from a wide variety of tenants year-to-date, TAMI tenants regained their status as the market’s driving force
this quarter. TAMI leasing activity more than doubled quarter-over-quarter, accounting for 48% of all Q3 2017 activity.
*Arrows indicate change from previous quarter.
MARKETVIEW
LEASING ACTIVITY
Q3 2017 CBRE Research © 2017 CBRE, Inc. | 2
MIDTOWN SOUTH MANHATTAN OFFICE
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2010 2011 2012 2013 2014 2015 2016 2017
MSFQ1-Q3 Q4
Figure 2: Leasing Activity | Historical
Source: CBRE Research, Q3 2017.
0
50
100
150
200
250
300
350
000s Sq. Ft.5Y Quarterly Avg. Q3 2017
Figure 3: Leasing Activity | By Submarket
Source: CBRE Research, Q3 2017.
Source: CBRE Research, Q3 2017.
(2.0)
(1.5)
(1.0)
(0.5)
0.0
0.5
1.0
1.5
2.0
2.5
2010 2011 2012 2013 2014 2015 2016 YTD 2017
MSF
Figure 4: Net Absorption | Historical
MARKETVIEW
NET ABSORPTION
AVAILABILITY
Q3 2017 CBRE Research © 2017 CBRE, Inc. | 3
MIDTOWN SOUTH MANHATTAN OFFICE
(200)(150)(100)(50)
050
100150200250300
000s Sq. Ft.
Figure 5: Quarterly Net Absorption | By Submarket
Source: CBRE Research, Q3 2017.
0
2
4
6
8
10
12
14
16
%Q3 2016 Q3 2017 Midtown South
Figure 7: Availability Rate | By Submarket
Source: CBRE Research, Q3 2017.
7.7
3.1
0
2
4
6
8
10
12
14
2010 2011 2012 2013 2014 2015 2016 2017
%Direct Sublease
Figure 6: Sublease and Direct Availability Rate | Historical
Source: CBRE Research, Q3 2017.
MARKETVIEW
Q3 2017 CBRE Research © 2017 CBRE, Inc. | 4
MIDTOWN SOUTH MANHATTAN OFFICE
Figure 8: Average Asking Rent | Historical
Source: CBRE Research, Q3 2017.
0
20
40
60
80
100
$ per Sq. Ft.Q3 2016 Q3 2017 Midtown South
Figure 9: Average Asking Rents | By Submarket
Source: CBRE Research, Q3 2017.
$71.90
$58.15
30
40
50
60
70
80
2009 2010 2011 2012 2013 2014 2015 2016 2017
$ per Sq. Ft.Overall Sublease
40
50
60
70
80
90
4 6 8 10 12 14
$ per Sq. Ft.
Months
25,000 SF+ Average
Figure 10: Concession Values | Rent Abatement and T.I. Allowance*
Source: CBRE Research, Q3 2017.
*This study examines all direct new leases larger than 25,000 RSF with a term length of at least 10 years (omits renewals andexpansions).
MARKETVIEW
AVERAGE ASKING RENT
TAKING RENT INDEX
Q3 2017 CBRE Research © 2017 CBRE, Inc. | 5
MIDTOWN SOUTH MANHATTAN OFFICE
Figure 11: Taking Rent Index | Historical
93.3
86
88
90
92
94
96
98
100
102
%
Source: CBRE Research, Q3 2017.
MARKETVIEW
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
MIDTOWN SOUTH MANHATTAN OFFICE
INVENTORY AT A GLANCE DEFINITIONS
Availability — Space that is being actively marketed and is available for tenant build-out within 12 months. Includes space available for sublease as well as space in buildings under construction.
Asking Rent — Weighted average asking rent.
Concession Values — The combination of rent abatement and T.I. allowance. The graph is for new leases for raw space of 10,000 sq. ft. or greater consummated over the past 3 months
Leasing Activity — Total amount of sq. ft. leased within a specified period of time, including pre-leasing and purchases of space for occupancy, excluding renewals.
Leasing Velocity — Total amount of sq. ft. leased within a specified period of time, including pre-leasing and purchases of space for occupancy, including renewals.
Net Absorption — The change in the amount of committed sq. ft. within a specified period of time, as measured by the change in available sq. ft.
Rent Abatement — The time between lease commencement and rent commencement.
Taking Rent — Actual, initial base rent in a lease agreement.
Taking Rent Index — Initial taking rents as a percentage of asking rents. This graph represents a 6-month rolling weighted average (for size and month).
T.I. — Tenant Improvements.
Vacancy — Unoccupied space available for lease.
SURVEY CRITERIA
CBRE’s market report analyzes fully modernized office buildings that total 50,000+ sq. ft. in Midtown South, including owner-occupied buildings (except those owned and occupied by a government or government agency). New construction must be available for tenant build-out within 12 months. CBRE assembles all information through telephone canvassing and listings received from owners, tenants and members of the commercial real estate brokerage community.
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