Tighe: “In today's tech-transformed business environment, infrastructure needs and cultural imperatives are feeding the appetite for new or 'like new' buildings.”
NEW YORK CITY—Despite an influx of new office stock, the city is far from oversaturated, said CBRE Group's Mary Ann Tighe, CEO, tri-state region, during a panel discussion in Lower Manhattan late last week. The talk—part of the real estate services firm's quarterly media briefing on leasing activity around Manhattan and Brooklyn—focused on the “flight to new construction” among tenants.
“The rumors of New York City having an oversupply of new office space are wrong,” she said. “In today's tech-transformed business environment, infrastructure needs and cultural imperatives are feeding the appetite for new or 'like new' buildings.”
This points to developments such as Hudson Yards, the World Trade Center complex, One Vanderbilt and Cornell Tech—each with distinctive characteristics that speak to the evolving needs of occupiers.
In assessing Manhattan's overall office market, Paul Myers, EVP, noted, “For the past five years, the city has seen strong, steady leasing activity, driven by the hot markets of Midtown South and Downtown—with comparatively modest but solid growth in Midtown. A rising tide lifts all boats. However, the market we are in today is much more nuanced than in past years.”
On the Brooklyn front, said sales director Travis Yuengst, “Brooklyn continues to see strong activity. Three of the borough's four largest deals so far this year occurred in the past quarter. To date, we're at about 950,000 square feet in leasing activity—on pace to reach 1.27 million square feet for the year and on par with last year's total.”
Overall, according to CBRE's latest research, leasing activity totaled 3.96 million square feet in the third quarter, 3% above its five-year quarterly average. The largest transaction was Coach's sale-leaseback for 694,000 square feet at 10 Hudson Yards. Quarterly leasing activity is up 9% year-over-year. The availability rate rose 40 basis points from Q2 2016 and 160 basis points from one year ago. Quarterly net absorption registered negative 857,000 square feet. The average asking rent was virtually unchanged quarter-over-quarter and up 4% year-over-year.
In Midtown South, leasing activity totaled 701,000 square feet in Q3 2016, 45% below its five-year quarterly average. Quarterly leasing activity was down 53% compared to Q3 2015. The availability rate increased 60 bps over the past three months and 110 basis points from one year ago. Quarterly net absorption registered negative 444,000 square feet, bringing the year-to-date total to negative 1.1 million square feet. The average asking rent fell 2% year-over-year and was virtually unchanged from last quarter.
Downtown, leasing activity totaled 846,000 square feet in Q3 2016, 34% below its five-year quarterly average. Downtown experienced a 39% drop in leasing activity compared to Q3 2015, and a 21% decline from last quarter. The availability rate fell 20 bps from one year ago, ending the quarter at 11.7%. Of the three Manhattan markets, Downtown was the only one with positive year-to-date net absorption, at 451,000 square feet Downtown's average asking rent, at $57.50, was essentially unchanged quarter-over-quarter.
Over in Brooklyn, leasing activity totaled 470,000 square feet in Q3 2016, the most active quarter of the year thus far. The availability rate fell 70 basis points quarter-over-quarter to 16.8%. The average asking rent currently stands at $38.14 per square feet, slightly above last quarter's, and a sizable 32% gain from Q3 2015's $28.84 per square feet. The quarter's largest transaction was in Downtown Brooklyn—the New York City Fire Department has renewed its 320,000-square-foot lease for ten years at 9 MetroTech Center.
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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.
