Major commitments push New York’s Class A vacancy rate down to 10.5 percent in 3rd quarter of 2017; minimal rent increases despite new construction
Midtown claimed eight of the top 10 deals completed in New York during the third quarter of 2017, according to JLL, with tenants again preferring the Hudson Yards/ManhattanWest submarket.Major commitments by some of America’s largest companies fueled a drop in Manhattan’s Class A vacancy rate, which fell to 10.5 percent this quarter from 11.2 percent just three months ago.
“Seven of the eight largest deals completed in New York this quarter were located west of Fifth Avenue, a trend which began earlier this year,” said Sean Coghlan, director of investor research. “We expect a handful of large, high-profile transactions at Hudson Yards/Manhattan West, as the new submarket’s reputation has transitioned from viable to highly desirable over the past 12 months. As firms continue to relocate to new space on the west side, vacancy on the east side is expected to rise in the next few years.”
BlackRock, Inc. completedthe largest transaction of the third quarter with its decision to anchor 50 Hudson Yards. The financial services company signed for 850,000 square feet and is relocating to the building from the Plaza District. Amazon.com, Inc. will take the last large block of space at the nearby, newly renovated 5 Manhattan West. Accenture PLC will join Skadden, Arps, Slate, Meagher & Flom LLP at 1 Manhattan West, occupying approximately 250,000 square feet at the under-construction tower.
Despite the strong activity this quarter, Manhattan’s overall asking rents rose by less than 1.0 percent year over year. This increase was mainly the result of new construction, as existing building asking rents have flattened. Overall rates increased to $71.72 per square foot this quarter compared with $72.25 per square foot one year ago.
Lower Manhattan continued to record strong activity in the third quarter of 2017, with the submarket witnessing two of the largest new leases year-to-date. The New York City Housing Authority signed a 461,000-square-foot renewal at 90 Church Street in the largest transaction Downtown so far this year. In addition, MacMillan Publishers Ltd. relocated from its iconic Flatiron building to 260,836 square feet at 120 Broadway.
Led by MacMillan this quarter and Spotify AB in the first quarter, Lower Manhattan has recorded roughly 1 million square feet in relocations from Midtown South alone in 2017, a testament to Lower Manhattan’s thriving culture and value relative to other Manhattan markets.
Pending City Hall approval, the New York City Department of Investigations will occupy 276,000 square feet at 180 Maiden Lane. Other large Downtown leases this quarter include The Stagwell Group taking 83,955 square feet at 1 World Trade Center and WeWork signing for 85,000 square feet at 115 Broadway. The WeWork lease represents the firm’s sixth Financial District location.
After a slow start to the year, TAMI leasing in Midtown South bounced back in the third quarter, led by Group Nine Media, Inc. The digital media company renewed its 39,770-square-foot space at 568-578 Broadway and also expanded in the building by an additional 58,739 square feet. Website building platform Squarespace and digital marketing firm Yelp Inc.also expanded, signing for 49,705 square feet at 225 Varick Street and 39,565 square feet at 11 Madison Avenue, respectively. Netflix, Inc. is opening its first New York office. The Silicon Valley-based streaming giant signed asublease for 11,592squarefoot at 245 West 17th Street.
The submarket ended the quarter with a large drop in overall average asking rents, due primarily to expensive product being leased up and taken off the market. Midtown South recorded overall average asking rates of $74.13 per square foot in the third quarter of 2017 compared with $76.66 per square foot three months earlier.
For more news, videos and research resources from JLL, please visit the firm’s U.S. media center Web page. Bookmark it here: http://bit.ly/18P2tkv.
JLL is a leader in the New York tri-state commercial real estate market, with more than 2,400 of the most recognized industry experts offering brokerage, capital markets, property/facilities management, consulting, and project and development services. In 2016, the New York tri-state team completed approximately 28.2 million square feet of lease transactions; arranged investment sales, notes, debt and equity transactions valued at more than $12.0 billion; managed projects valued at $7.9 billion; and oversaw a property management, facilities management and agency leasing portfolio exceeding 146.7 million square feet.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. A Fortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $145 billion. At the end of the second quarter of 2017, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of nearly 80,000. As of June 30, 2017, LaSalle Investment Management had $57.6 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit ir.jll.com.