The Real Deal New York

Office market ends 2013 on high note

Total Manhattan leasing activity expected to be greater than in 2012

December 03, 2013
By Adam Pincus

commercial market reportThere’s no winter chill in the Manhattan office leasing market. Despite the distracting hubbub of parties and holiday dinners, transactions traditionally rise in the fourth quarter.

“The deal flow is there. I think we are moving with some momentum that will carry us over to next year,” said Richard Bernstein, vice chairman with commercial firm Cassidy Turley.

Bruce Mosler, chairman of global brokerage for Cushman & Wakefield, agreed.

“I think December will be a strong month. I can only judge from my own activity, what I see and feel,” he said. “[But] it will be one of the more active Decembers we’ve had from a closing perspective.”

Indeed, Teach for America, the nonprofit that places teachers in challenging schools around the country, is one of the tenants expected to sign a large lease in the coming weeks. It’s in late negotiations to relocate from the Garment District to Lower Manhattan, where it will take up to 170,000 square feet, sources said.

Commercial brokerage Colliers International projected that 2013 would conclude with a total of about 26 million square feet of Manhattan office lease deals inked for the year — more than 2 million square feet above last year, but still behind 2011, when nearly 28 million square feet was leased.

Average asking rents for Manhattan rose by $0.04 per foot to $59.29 per square foot last month compared to October, and the availability rate — which measures space vacant now or available in the next 12 months — was unchanged last month at 11.5 percent, Colliers data revealed.

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The ever-more efficient use of office space by tenants allowed household products giant Colgate-Palmolive to put about 109,000 square feet on the market at its global headquarters at 300 Park Avenue.

The move comes nearly six years after the company, which has been a tenant in the building since 1956, inked a 15-year lease for more than 537,000 square feet, CoStar Group data showed. Indeed, according to CoStar, Colgate signed a lease near the peak of the market in early 2008 for more than $100 a square foot, for 15 floors in the Plaza District building.

But in 2010, Colgate returned the 16th floor to the building’s landlord, Tishman Speyer. And in 2011, it did the same with the 15th floor. In more than three years, however, those floors have yet to be spoken for, even as the Plaza District has been active recently. So far this year, more space was leased in the Plaza District (as of the start of last month) than any other Midtown submarket, Colliers data showed.

Now, Colgate has put floors 12, 13 and 14 on the sublease market, represented by a Colliers leasing team. Unlike the previous floors, however, the company is still on the hook for the space.

There is no asking rent, but one insider estimated a tenant would pay about $85 to $90 a foot for the lease, which still has 10 years left, depending on landlord contributions.

Further south, in Midtown, the law firm Wollmuth Maher & Deutsch inked a renewal lease for 15 years at 500 Fifth Avenue, a 687,565-square-foot office building at the corner of 42nd Street, information from leasing data tracking firm CompStak shows.

Cushman & Wakefield’s Stephen Baker, Mitchell Barnett and David Malawer represented the law firm, and Cushman’s Harry Blair and Sean Kearns represented the landlord.

The asking rent for the space was $60 per square foot — far below the average asking rent for Midtown, which was $69.49 per foot in November, up 12 cents per foot from the prior month, Colliers statistics showed. The availability rate for Midtown fell by 0.1 points to 11.6 percent last month compared to the prior month.

Midtown South

The heavy concentration of tech tenants in Midtown South is not breaking news, but new data from commercial firm Jones Lang LaSalle shows just how intense interest from those tech firms actually is in the area.

Since the start of the year, 66 percent of the square footage that was rented in the Greenwich Village submarket was leased by tech firms, JLL reported. That amounted to 244,610 square feet of the total 371,095 square feet leased. The largest Greenwich Village deal was Facebook taking nearly 100,000 square feet at 770 Broadway. Meanwhile, 45 percent of the space leased in Chelsea was taken by tech firms this year.

In Midtown South overall, 38 percent of the deals were with such firms. For example, the website 1stdibs.com, an online antique store, inked a deal for about 42,232 square feet at developer Edward Minskoff’s spec tower 51 Astor Place. According to Crain’s, Twitter was also looking at the building.

But it’s mostly the old buildings luring tech tenants. One factor is that the old loft-style structures tend to have the open layouts favored by start-ups.

A new large block of space in a 1925 building, 79 Madison Avenue, was listed last month. The 287,000-square-foot building is just north of Madison Square Park, one of the city’s big tech hubs.

“We are targeting a single user for this large block, which includes the possibility for a ‘building-within-a-building’ option,” said Robert Getreu, executive vice president at Colliers.

That would give a single user a private lobby and interior elevators. Colliers declined to disclose an asking rent.

But the average asking rent in Midtown South fell by $0.58 per foot to $53.98 per square foot in November, and the availability rate rose by 0.1 points to 9.2 percent last month, Colliers figures show.

Downtown

Another big block of space hit the market in Lower Manhattan, and it might already be spoken for, insiders said.

The brokerage CBRE Group put floors 11, 12 and 13 at ACTA Realty’s 25 Broadway, an 858,000-square-foot office building at Morris Street, on the market last month, CoStar showed. The floors have a combined 130,037 square feet.

Several industry sources said the nonprofit Teach for America, represented by CBRE’s New York Tri-State CEO, Mary Ann Tighe, was negotiating a lease last month for that space at the building. It could take as much as 170,000 square feet in the building, insiders said.

Teach for America and the landlord did not respond to requests for comment. CBRE declined to comment.

The asking rent for the space was $34 per foot, CoStar data showed.

That was significantly below the average asking rent for the market, which rose by $0.14 per foot to $47.51 per square foot, as the availability rate fell by 0.3 points to 14.4 percent, last month, the Colliers statistics showed.

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