Downtown gets crop of fresh office spaces

Despite fears that Lower Manhattan was out of big office blocks, three news ones hit market
By Adam Pincus | October 01, 2014 07:00AM
Manhattan office stats
AVAILABILITY
RATE
AVERAGE ASKING
RENT
Manhattan
3Q'1410.2%$65.97
3Q'1311.9%$59.21
Midtown
3Q'1410.6%$75.74
3Q'1311.6%$69.36
Midtown South
3Q'148.5%$58.19
3Q'139.7%$53.23
Downtown
3Q'1412.2%$51.70
3Q'1315.2%$47.48
Source: Colliers International

A crop of new big blocks of office space will keep the Lower Manhattan market in the running when it comes to wooing large tenants, according to commercial brokers.

On the heels of Brookfield Property Partners’ frenetic year-long leasing run — during which time the company inked more than 3 million square feet of deals — some feared that the Downtown market would be out of fresh spaces for potential office tenants to choose from.

Brokers say there are new blocks hitting the market now that will keep tenants interested. (There remains more than 4 million square feet available within towers 1, 3 and 4 at the World Trade Center, as well — see page 162. But that space has been on the market for years.)

“Firms looking for a diverse environment will still have options,” said John Wheeler, managing director at commercial firm JLL and director of the firm’s Lower Manhattan office.

At least three new big spaces are hitting the market in the coming months.

The largest of those three is about 1.1 million-square feet in 1 Chase Manhattan Plaza, which is located on Liberty Street between Nassau and William streets. The Chinese investment firm Fosun International purchased the 2.2-million-square-foot building last year for $725 million and last month tapped a JLL team, including Wheeler and New York Regional President Peter Riguardi, to lease up the empty space.

In addition, Brookfield will begin marketing two large blocks at 1 Liberty Street and another at 300 Vesey Street, at Brookfield Place.

David Cheikin, senior vice president of leasing at Brookfield, said he is seeing “good corporate confidence” among companies on the prowl for new offices. That, he said, is allowing potential tenants to look “a little bit further ahead and to make the investment in their business” — and generating activity in the real estate market.

Neither JLL nor Brookfield would disclose asking rents for the properties. However, a preliminary third quarter report by JLL showed average Class A asking rents in Lower Manhattan at $57.66 per foot.

The overall Manhattan asking rent was $65.97 per square foot in the third quarter, up 11.4 percent from the same period a year ago, according to commercial brokerage Colliers International. In addition, the availability rate, which tracks space that is currently vacant or that will be available in the next year, declined by 1.7 points over the last year to 10.2 percent.

Midtown

Asking rents in the Midtown market crept up over the past year.

There were only two deals for more than 100,000 square feet in Midtown during the third quarter, an analysis by The Real Deal of data from CoStar Group showed.

The bigger of the two deals was inked by the white-shoe law firm Paul, Hastings, Janofsky & Walker, which took 180,523 square feet at Tishman Speyer’s 200 Park Avenue, the MetLife Building. Meanwhile, the advertising firm R/GA Media Group leased 173,000 square feet at Brookfield Property Partners’ 450 West 33rd Street, which is slated for a $200 million renovation.

There were fewer pricey deals — defined as $100 per square foot or more — according to JLL’s preliminary third quarter report. There were only seven such deals in the third quarter, compared with 17 each in the first and second quarters. The report noted, however, that the lower deal figure could increase as confidential deal terms leak out.

“When I talk with other brokers, it seems like good space [in Midtown] is moving fairly quickly, but softening around the fringes,” said Elizabeth Juviler, a broker with the Midtown-based Rice & Associates, who focuses on deals between 3,000 square feet and 10,000 square feet.

Even with Midtown’s lackluster quarter, rents were up and the availability rate declined.

The average asking rent in Midtown was $75.74 per square foot last quarter, up 9.2 percent from the same period a year ago when it was $69.36 per foot, the Colliers figures showed. The availability rate, meanwhile, dropped by 1 point to 10.6 percent.

Midtown South

Key market indicators looked good for Midtown South in the third quarter.

One deal helping make that happen was the tech and financial firm Retail Capital, which inked a five-year lease for roughly 4,200 square feet on the 10th floor of ABS Real Estate’s 915 Broadway at the corner of 21st Street.

The asking rent in the deal was $65 per square foot, said ABS’s James Caseley, who along ABS colleagues Carol Sacks and Alex Kaskel represented the building.

Caseley said that the Retail Capital deal has driven up the asking rent in the building. Rice & Associates’ Juviler represented the tenant.

The space will be the Michigan-based Retail Capital’s first in New York.

In addition, a large block of Midtown South space hit the market last month in the Meatpacking District at 860 Washington Street. It included 87,973 square feet of office space and 25,612 of retail.

A Cushman & Wakefield team is listing it for the joint venture of Romanoff Equities and Property Group Partners, who are developing the 10-story building at the corner of West 13th Street. The asking rent was not disclosed.

But the average asking rent in Midtown South was $58.19 per square foot in the third quarter, up 9.3 percent over the year, from $53.23 per foot. The availability rate in the market declined by 1.2 points to 8.5 percent, the Colliers figures showed.

Downtown

Brookfield inked a deal last month with the Toronto-based Hudson’s Bay Company, which owns the department stores Saks Fifth Avenue and Lord & Taylor. The 400,000-square-foot office deal is divided between 225 Liberty Street and 250 Vesey Street, both at Brookfield Place in Lower Manhattan.

That deal brought the total leasing since late 2013 at the 8.5-million-square-foot Brookfield Place complex, following the expiration of a long-term lease with Bank of America Merrill Lynch, to a stunning 3.1 million square feet.

Meanwhile, as mentioned above, 1 Chase Manhattan Plaza is also on the hunt for tenants.

The strategy there is to land one or two major companies to anchor the 1.1 million square feet of available space, said JLL’s Wheeler, who added that the building is in a good position given the number of similar availabilities on the market.

“When we look at Manhattan as a whole, we see a very finite list of quality large blocks,” he said.

The other large blocks coming on to the market are about 300,000 square feet on floors nine through 15 at Brookfield’s 16-story 1 North End Avenue. The Chicago Mercantile Exchange is giving back that space, which will be available at the end of 2015. Brookfield purchased the building for $200 million from the exchange, which will lease back the lower floors for 15 years.

“It keeps us in the big-block game,” Brookfield’s Cheikin said. He said there was no asking price yet, but would “trade at a premium,” to the other Brookfield Place spaces.

Brookfield is also bringing 400,000 square feet at 1 Liberty Street to the market. That space is being vacated by the investment banking giant Goldman Sachs, which is now headquartered nearby at 200 West Street, and will be available in the first quarter of 2015.

The average asking rent Downtown hit $51.70 per square foot last quarter, up 8.9 percent over the past year from $47.48 per foot. The availability rate declined by 3.7 points to 12.2 percent.