The Real Deal New York

Manhattan office leasing ends 2013 with a bang

High-profile deals were signed in all three major markets

January 01, 2014
By Hiten Samtani

026 Commercial market se FINAL.inddDecember was a robust month for office leasing in Manhattan, with high-profile deals signed in all three major markets of Midtown, Midtown South and Downtown.

As of Dec. 27, a total of 9.1 million square feet of office space was leased in Manhattan in 2013’s fourth quarter, according to data from commercial brokerage Colliers International. That’s up sharply from 6.31 million square feet in the previous quarter and 4.97 million square feet in 2012’s fourth quarter. Colliers chief economist Peter Kozel said that the final fourth-quarter numbers may even be slightly higher, given the likelihood of deals in the very final days of the year.

It was “another good quarter in Manhattan,” Kozel said. “Asking rents were up and availability rates were down or flat.”

Indeed, average Manhattan asking rents rose steadily throughout the second half of 2013, and increased to $60.41 per square foot in December, up by $1.12 from November, according to Colliers data. The availability rate — an indicator of space currently vacant or available within the next 12 months — dropped by 0.2 points to 11.3 percent in December, from 11.5 percent in November, the Colliers data show.

The uptick in leasing activity indicates a thriving business landscape and “a high level of confidence” in the market, said Richard Bernstein, a vice-president at commercial firm Cassidy Turley.

Going forward, Bernstein was bullish about the office leasing market. “I think we might see rents rising a little bit more aggressively in 2014,” he said. The services sector, including the financial, legal and marketing industries, had been cautious about growing their office footprints despite consistent revenue growth, but “they’re now poised to take on additional space as they continue to expand.”

Midtown

Boston Properties received a shot in the arm last month when it leased a nearly 100,000-square-foot chunk of its long-struggling spec office tower at 250 West 55th Street to billionaire George Soros’ investment fund. The firm will pay rents north of $100 per square foot at the 1 million-square-foot building. Hanley Advisors’ principals Jim Coleman and Steve Kaufman represented Soros’ Fund in the deal, while Boston Properties was represented in-house by Andrew Levin working in concert with a team from CBRE Group.

The real estate investment trust is also in talks with Qatari media giant Al Jazeera to take 50,000 square feet in the building, according to news reports. The company launched its U.S. television station, Al Jazeera America, in August.

Even the Midtown submarkets thought to be vulnerable, such as Sixth Avenue, have “demonstrated a lot of resilience,” Bernstein said. A number of notable leases were signed there last month, including publisher Hachette Book Group’s deal to take 137,000 square feet at Vornado Realty Trust’s 1290 Sixth Avenue. Hachette will fill a large chunk of the void left behind by Microsoft, which is relocating to the spec office tower 11 Times Square.

Moving further east, SL Green Realty signed Metro-North Railroad Co., a unit of the Metropolitan Transportation Authority, to a 20-year, 265,903-square-foot lease renewal and expansion at 420 Lexington Avenue, better known as the Graybar Building. Rents paid in the building range from the mid-$40s to the low $50s per square foot, according to data from commercial real estate information firm CompStak.

By comparison, the average asking rent in Midtown rose to $69.73 per square foot in December, up $0.24 from November, Colliers data show. The availability rate, meanwhile, dropped 0.3 points to 11.3 percent.

Midtown South

The evolution of the garment industry hub into a hip cluster for tech mavens continued yet again last month.

Blogging platform Tumblr, acquired by Yahoo for $1.1 billion in May, expanded further at Centaur Properties’ 35 East 21st Street. It now holds about half of the 100,000-square-foot property. Centaur was represented by Newmark Grubb Knight Frank’s Danny Levine and David Falk, while Tumblr worked on the deal in-house. Asking rents at the building are $55 per square foot.

Levine told Crain’s that Tumblr created a space that “incorporates everything from an internal cafeteria, to meeting rooms, to open-plan bench-style work seating, to a private elevator, to outdoor space.”

The average asking rent in Midtown South rose to $55.18 per square foot last month, up by $1.20 from the prior month, while the availability rate dipped by 0.1 points to 9.1 percent, the lowest of the three major Manhattan markets by some distance.

Downtown

Lower Manhattan was the standout of the quarter, Colliers’ Kozel said, with a series of massive leases signed. First, Citigroup opted to stay at its 2.7 million-square-foot offices at SL Green’s 388-390 Greenwich Street, in a renewal and gut renovation deal that is valued at over $1 billion (see “The office building comeback”). Citi was represented by a leasing team from CBRE and by a legal team from the law firm Fried Frank.

Also in the area, media agency GroupM announced at the end of last month that it had committed to anchor Larry Silverstein’s 3 World Trade Center in a 20-year, 516,000-square-foot deal. CBRE brokers Lauren Crowley Corrinet, Gregory Tosko, Brendan Herlihy, and Mary Ann Tighe represented the tenant. Silverstein’s Jeremy Moss represented the landlord in-house. Financial terms weren’t disclosed.

On the smaller side, healthcare records provider eClinicalWorks took 12,893 square feet at 140 Broadway on part of the 50th floor, and will pay rents starting in the low $50s per square foot over a 10-year term, according to data from CompStak.

Even as the area is inundated with new office stock, including 3 and 4 World Trade Center, space in older buildings continues to come onto the market. At 55 Water Street for example, the entire 61,304-square-foot third floor is up for grabs, according to CoStar. The space is being marketed by CBRE’s Howard Fiddle, Evan Haskell and Bradley Gerla. The brokers declined to comment about the asking rents, but CoStar data show that the building’s average rent is $45 per square foot.

The average asking rent in Downtown jumped by $1.09 to $48.60 in December, while the availability rate dropped by 0.1 points to 14.3 percent.

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