NEW YORK CITY-In a briefing filled with surprising and controversial statements, Cushman & Wakefield Tuesday revealed its fourth quarter findings—coupled with a heavy dose of 2014 forecasting—during a press conference in Midtown.
“Now that financial firms have a better understanding of the legislative landscape, I think employment in the sector will grow this year,” declared chief economist Ken McCarthy. “There may not be a boom but several firms reported good profits this morning on earnings calls.”
He was similarly optimistic about office lease rental rates in a surprising portion of Manhattan. “I think we'll see the first $100 per square foot rent outside of Midtown.” McCarthy declined to site the submarket(s) where he expects this to happen, but he noted that 60 deals closed last year in Midtown were made with asking rents that started at $100 per square foot or higher, representing the largest total since 2008—when there were a total of 90 transactions at that rent high.
Several figures hit staggering levels in 2013, noted Ron Lo Russo, president, New York tri-state region. “We did 1200 transactions last year that had $11 billion of value. 2013 was great for us; I didn't want it to end.”
The 2013 leasing volume totaled 37.1 million square feet, representing the second highest total in a decade. A total of 45 leases of 100,000 square feet or larger were closed. At year-end, the overall average asking rent in Manhattan increased 6.5% year-over-year to $63.40 per square foot from $59.54 per square foot and the Manhattan class-A average asking rent increased 1.4% to $68.90 per square foot.
All three major Manhattan submarkets saw increases in average asking rent year-over-year and both Midtown and Downtown saw year-over-year increases in new leasing activity—14.3% and 19.8%, respectively. Midtown South was the only submarket that had a decrease in year-over-year new leasing activity, hitting 14.5%, but that's due to limited available space, according to C&W's report.
The retail sector also finished out the year strong, prompting great expectations for 2014, noted Gene Spiegelman, vice chairman.
“Manhattan retail real estate continues to perform beyond expectations and the supporting fundamentals point to sustainability,” he said. “The drivers were tourism, job growth and NYC residents' income.” Manhattan's per capita income is 133% higher than the average of the six key urban centers: Boston, Chicago, Los Angeles, Miami, San Francisco and Washington DC.
Manhattan's per capita income is 133% higher than the average of the six key urban centers: Boston, Chicago, Los Angeles, Miami, San Francisco and Washington DC.
As a result of these factors, eight of retail's 10 submarkets experienced rent growth in 2013, Spiegelman reported. But he highlighted a somewhat forgotten retail corridor as a potential growth target. “The most undervalued piece of retail real estate in Manhattan is west 57th street. Expect a lot of action there in the next few years.”
Meanwhile, the investment sales market hit “record pricing for various property sectors,” said Helen Hwang, EVP. The total volume of deals for the year was $37 billion, partly because of the return of mega deals.
Sales of trophy class-A office properties drove up the average per square foot sale price for the year to a record $1,060 per square foot average, she said.
In the multifamily segment, “pricing was strong because the fundamentals are rock solid,” according to Hwang. “Vacancies in the sector never went below 2%, even in the recession.”
And on the demand side, “the fourth quarter was the busiest Q4 for condominiums in 25 years. As long as supply remains in check, pricing should hold.”
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
