Downtown’s sublease space up 76 percent
Prospective office tenants will have a lot of office options Downtown. The submarket saw a 76 percent increase in the amount of office space available for sublease over the past 18 months, totaling 1.2 million square feet as of May, according to data from Cushman & Wakefield. In comparison, the Midtown and Midtown South submarkets saw just 3.6 and 5.5 percent growth, respectively, in sublease space over the same period. In addition, Downtown’s vacancy rate is expected to hit double digits in the second quarter because of the recent opening of 3 World Trade Center. The 2.2 million-square-foot tower was delivered with 45 percent of the space pre-leased.
But it’s not all bad news. As of now, the submarket has a vacancy rate of 9.5 percent. Available sublease space accounts for only about 1.5 percent of that, and demand for sublease space is strong, said Rich Persichetti, research director at Cushman. In fact, Midtown South faced a similar dilemma last year, where sublease space nearly doubled within the first five months of the year. It was quickly absorbed, and by the end of the year, vacancy was back down to the level it started at. “We still have a large supply of smaller startup companies that want flexible lease terms,” Persichetti said. “And a lot of subleases offer that.”
Sixth Avenue leads Midtown office market
The Sixth Avenue submarket has been outperforming all other Midtown avenues on multiple indicators, according to a report from JLL. The avenue has seen five continuous quarters of positive absorption through the first quarter of 2018, and six continuous quarters of vacancy rate declines. The vacancy rate dropped to 6.5 percent in the first quarter of 2018 from 10.7 percent in the fourth quarter of 2016. Meanwhile, Midtown as a whole had a rate of 8.7 percent. Several large lease deals in the area include Blank Rome relocating to a 137,986-square-foot space at 1271 Sixth Avenue and Bank of America’s lease at the Grace Building at 1114 Sixth Avenue, spanning 127,000 square feet. Both 1271 and 1114 Sixth Avenue were among several buildings that underwent extensive renovations, which may have contributed to the area’s success, according to the report. Some tenants along Sixth Avenue are “paying a premium, especially for newly renovated space and buildings with green-space views,” said Craig Leibowitz, director of research at JLL. As of June, the average asking rent along Sixth Avenue was $90 per square foot, compared with $83 per square foot for Midtown overall.
Outlook for NYC’s hotel market gets an upgrade
New York City’s hotel market had a better-than-expected first quarter in 2018, with revenue per available room growing 7.4 percent, according to data from PricewaterhouseCoopers. That’s in part because the first quarter also saw the lowest influx of new supply since 2015, helping increase an already high occupancy rate. There was a 3.7 percent uptick in occupancy rates and a 3.5 percent increase in average daily rates — the highest since 2014. Downtown, where supply did increase by a substantial 8.2 percent, daily rates remained flat.
The hotel market has had a tough run, with the final quarter of 2017 marking the first positive RevPAR in more than two years. Meanwhile, pricing has continued to trend upward through June, said Sean Hennessey, CEO of Lodging Advisors, though it’s relative to how depressed prices were previously. “We’ve really cut prices in the past, and now the upturn is looking dramatic in comparison,” he said. “We’re still well below room rates that hoteliers achieved before 2008.”
After strong first quarter, multifamily market relapses
The multifamily market slowed considerably in April after notching a strong first quarter. There was a total of $431 million worth of multifamily transactions in Manhattan, Brooklyn, Queens and the Bronx — down 48 percent from the six-month trailing average, and down 3 percent from a year earlier, according to data from Ariel Property Advisors. Brooklyn bucked the trend with a 62 percent increase in dollar volume, totaling $224 million. A huge chunk of that was from Forest City Realty Trust’s $156 million sale of 461 Dean Street to Principal Global Investors.
The dollar volume decrease was driven instead by a 69 percent drop in Queens and a 59 percent drop in the Bronx. Manhattan’s dollar volume totaled $119 million, which made up 28 percent of the total for all four boroughs, compared with 54 percent in March. While pricing metrics generally remained stable across the city, price per square foot increased by 21 percent in Brooklyn and cap rates fell by 5.5 percent. TRD