tami-sector resurgence drives improved quarterly leasing · leasing activity —total amount of sq....

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



(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



(200)(150)(100)(50)

050

100150200250300

000s Sq. Ft.

Figure 5: Quarterly Net Absorption | By Submarket


0

2

4

6

8

10

12

14

16

%Q3 2016 Q3 2017 Midtown South

Figure 7: Availability Rate | By Submarket


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


MARKETVIEW



Figure 8: Average Asking Rent | Historical


0

20

40

60

80

100

$ per Sq. Ft.Q3 2016 Q3 2017 Midtown South

Figure 9: Average Asking Rents | By Submarket


$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*


*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



Figure 11: Taking Rent Index | Historical

93.3

86

88

90

92

94

96

98

100

102

%


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.


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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