The Real Deal New York

Nonprofit, public sector office tenants had most active year since recession

Regional hospital mergers helped push activity 78 percent YOY to 4.1M sf
March 06, 2017 09:30AM

237 Park Ave and 220 East 42nd Street

Nonprofit and public-sector tenants leased 4.1 million square feet of office space in the city last year – the most since the recession.

Health care mergers, the search for less expensive space and institutions looking to monetize their real estate holdings all contributed toward the increase.

The total square footage nonprofit and public sector tenants leased in 2016 climbed 78 percent in 2016 mostly on the backs of large leases resulting from regional hospital mergers, according to data from Cushman & Wakefield cited by the Wall Street Journal.

These tenants inked 155 deals last year, accounting for 9.9 percent of new Manhattan leases of 10,000 square feet or more. Over the last five years the sector averaged 4.3 percent.

New York Presbyterian Hospital, for example, signed a lease for 500,000 square feet at RXR Realty’s 237 Park Avenue, and the Visiting Nurse Service signed a deal for a 30-year leasehold condominium interest at SL Green Realty’s 220 East 42nd Street covering more than 300,000 square feet.

The most sought-after neighborhood for these kinds of tenants was Grand Central, where average asking rents were $70.77 per square foot in the fourth quarter of 2016, roughly 11 percent less than the average of $78.39 per square foot for Midtown as a whole.

Sales and purchases of real estate among nonprofits and the public sector tripled in 2016 as they looked to cash in on their real estate assets. They notched 24 sales adding up to 1.2 million square feet of office space and 24 purchases accounting for 1.1 million square feet. [WSJ] Rich Bockmann