Manhattan Office Markets Enjoy Positive Gains in Q3

---

According to CBRE Group, Manhattan's Midtown, Midtown South and Downtown office markets all enjoyed year-over-year performance improvements as strong office leasing activity continued in the third quarter of 2014.
 
In addition, retail real estate continued its impressive growth, as major department stores such as Neiman Marcus and Nordstrom announced their entry into the Manhattan market with stores at Hudson Yards and on West 57th Street, respectively.
 
Year-over-year, third quarter 2014 saw Midtown leasing activity increase to 12.64 million square feet from 11.00 million sq. ft. at the same time in 2013. Absorption improved to 1.46 million sq. ft. from negative 0.59 million sq. ft. and average asking rent rose to $74.73 per sq. ft. from $70.19 per sq. ft.
 
Over the same period, Midtown South saw leasing activity increase to 5.16 million sq. ft. from 3.06 million sq. ft.; absorption improve to 0.51 million sq. ft. from negative 0.95 million sq. ft., and average asking rent rise to $66.58 per sq. ft. from $64.21 per sq. ft.
 
Downtown saw leasing activity increase to 5.15 million sq. ft. from 3.99 million sq. ft.; absorption improve to 0.98 million sq. ft. from negative 0.25 million sq. ft., and average asking rent rise to $50.78 per sq. ft. from $46.96 per sq. ft.
 
"We are seeing a remarkable and broad-based improvement in the Manhattan market," said Peter Turchin, vice chairman, CBRE. "This improvement is no longer isolated to just Midtown South, but is equally strong in Midtown and Downtown." CBRE's analysis of Manhattan's 18 submarkets showed that 13 of 18 had positive absorption year-to-date, with the three negative-absorption submarkets solely due to the addition of new blocks of space.
 
In looking at Manhattan's retail real estate market, CBRE's vice chairman Andrew Goldberg commented, "Luxury department stores are demonstrating new confidence in Manhattan.  This is reflected in the recent announcement by Neiman Marcus that it will open its first New York City store at Hudson Yards, Nordstrom's purchase of store space at 225 West 57th Street and the opening of a Saks Fifth Avenue Downtown."
 
The opening of Ralph Lauren's first Polo flagship store in Manhattan at 711 Fifth Avenue, "is an exciting initiative for an iconic global brand that wants to create an 'experiential space' in the middle of one of the world's most exclusive shopping corridors," said Richard Hodos, executive vice president of CBRE.
 
In further surveying the Manhattan retail real estate scene, Amira Yunis, executive vice president, CBRE said, "In part due to changes in City regulations allowing illuminated billboard signage below Times Square, the Midtown Broadway retail corridor is moving south of 42nd Street. As office buildings south of Times Square continue to be upgraded with ground-level glass facades that are more attractive to retailers, the Broadway retail corridor has the near-term potential to stretch uninterrupted from 42nd Street all the way to Union Square, something unthinkable even a couple of years ago."
 
Midtown Q3 Snapshot
 
Leasing activity totaled 4.01 million sq. ft. during Q3 2014, up 4% from the five-year quarterly average of 3.87 million sq. ft. and 14% lower than the 4.69 million sq. ft. of activity recorded during Q2 2014. Year-to-date leasing activity reached 12.64 million sq. ft., 15% ahead of the pace of activity through the first three quarters of 2013. A total of 1.01 million sq. ft. of net absorption was measured in Midtown during Q3 2014, an improvement on the 830,000 sq. ft. of absorption during the second quarter. The year-to-date Midtown absorption total remained in positive territory, at 1.46 million sq. ft., well ahead of the negative 590,000 sq. ft. of absorption through the first three quarters of 2013. The availability rate finished the quarter at 11.1%, down 40 basis points (bps) from 11.5% in the previous quarter and 120 bps from the 12.3% rate reported one year ago. The average asking rent finished at $74.73 per sq. ft., up from the $73.82 per sq. ft. average reported at the end of Q2 2014, and up 6% from the $70.19 reported at the same time in 2013.
 
Midtown South Q3 Snapshot
 
A total of 1.75 million sq. ft. of leasing was recorded during Q3 2014, 43% higher than the five-year quarterly average of 1.23 million sq. ft. and on par with leasing activity in Q2 2014. The year-to-date leasing total reached 5.16 million sq. ft., 69% higher than the 2013 year-to-date total of 3.06 million sq. ft. and the highest year-to-date total for any year on record. At 510,000 sq. ft., year-to-date net absorption was well ahead of the negative 950,000 sq. ft. measured through the first nine months of last year. The Midtown South availability rate finished at 9.4%, down from 10.1% in the previous quarter and 9.9% one year ago. The average asking rent in Midtown South dipped slightly to $66.58 after reaching a record high during Q2 2014, yet is still up 4% from one year ago.
 
Downtown Q3 Snapshot
 
Leasing activity during Q3 2014 was healthy, at 1.63 million sq. ft., up 31% over the five-year quarterly average of 1.25 million sq. ft. Year-to-date leasing totaled 5.15 million sq. ft., 29% higher than the 3.99 million sq. ft. total at the same point in 2013. A total of 920,000 sq. ft. of absorption was measured Downtown during the third quarter as year-to-date net absorption remained in positive territory. The availability rate Downtown improved 100 basis points (bps) to 11.7% during the quarter from the 12.7% recorded during Q2 2014, and 280 bps from the 14.5% logged one year ago. The average asking rent finished at $50.78 per sq. ft., up 4% quarter-over-quarter, and up 8% from the $46.96 per sq. ft. average reported during Q3 2013.