CBRE, Inc. releases Q4 2013 Manhattan Office Market Review

Downtown finished 2013 in particularly strong fashion and has "arrived" as an office market with more to offer than value-pricing alone, according to CBRE's January 2014 Special Report: "Downtown Manhattan 2014 - A Market Transformed," which was released at the firm's fourth quarter 2013 Manhattan Market Research Media breakfast, held at 4 World Trade Center. Manhattan overall finished 2013 with improved leasing activity, absorption and availability rate, compared to Q3 2013 and year-over-year results. "Downtown remains a highly attractive market in pricing compared to Midtown and Midtown South, but it has already reached critical mass in the delivery of quality new office space, as well as in amenities such as retail and restaurants," said Bruce Surry, executive vice president, CBRE. "With the completion of the Fulton St. Transit Center this year and the World Trade Center Transportation Hub in 2015, Downtown also will have delivered unrivaled mass transportation options for workers, residents and tourists." "Downtown as a magnet for business has manifested itself in a number of ways," said Adam Foster, senior vice president, CBRE. "Over the last year we have seen the volume of large deals increase. Added to this, three out of five of the top office deals were commitments for new space, with renewals at their lowest since 2006. Leasing activity is at its highest since 2006, with the exception of 2011 due to the enormous Condé Nast deal. Additionally, not only are we seeing sector growth Downtown taking up some of the drop-off from FIRE, but we are seeing occupancy growth, as well." Q4 2013 MANHATTAN OFFICE QUARTERLY SNAPSHOT MARKET HIGHLIGHTS: MIDTOWN - Posted its third consecutive quarter of above-average leasing, with Q4 2013's 4.05 million s/f of activity topping the market's five-year quarterly average of 3.61 million s/f by 12%. The largest transaction of the quarter was Warner Music Group Corporation's 288,000 s/f new lease at 1633 Broadway. Renewals and expansions accounted for four of Q4 2013's top five deals, led by Metro-North Railroad's 266,000 s/f renewal-and-expansion deal at 420 Lexington Ave. and Universal Music Group's 243,000 s/f renewal at 1755 Broadway. Full-year leasing activity totaled 15.05 million s/f, up 17% over 2012's 12.84 million s/f Q4 2013's above-average leasing activity, coupled with space withdrawals, easily offset new availabilities added to the market, resulting in a robust 1.34 million s/f of positive net absorption for the quarter. This brought the full-year net absorption mark to positive 740,000 s/f By comparison, Midtown experienced 2.44 million s/f of negative net absorption in 2012. During the quarter, the overall availability rate dropped 60 basis points to 11.7%, its lowest level since Q4 2011, while the sublease availability rate dropped 30 basis points to 2.1%. Midtown's average asking rent rose $2.66 per s/f, or 4%, during Q4 2013 to $72.85 per s/f. Year-over-year, the average was up $5.05 per s/f, or 7%. * MIDTOWN SOUTH - Midtown South logged 1.13 million s/f of leasing activity during Q4 2013, outpacing the previous quarter's 960,000 s/f of leasing activity by 17% and the market's five-year quarterly average of 1.04 million s/f by 9%. Citigroup Inc.'s 2.55 million s/f blockbuster renewal deal at 388 and 390 Greenwich St. in December was the largest lease completed in Manhattan during 2013. The quarter's largest new space commitment was by WeWork, which leased 63,000 s/f at 401 Park Ave. South. For the year, Midtown South posted 4.19 million s/f of leasing activity, down 16% from full-year 2012's tally of 5.00 million s/f Midtown South experienced 220,000 s/f of negative net absorption during Q4 2013 as new availabilities—including three 100,000 s/f plus blocks of direct space—offset the quarter's leasing activity. The overall availability rate increased 30 basis points during Q4 2013 to 10.2%. At the same point last year, the overall availability rate was 8.6%. Midtown South's average asking rent posted a net increase of $0.37 during the quarter, ending 2013 at a new record-high of $64.58 per s/f At year's end, Midtown South's average asking rent represented 89% of Midtown's average of $72.85 per s/f By comparison, the differential between the two markets was 91% at the end of Q3 2013, and 81% in Q4 2012. * DOWNTOWN - Posted its 11th consecutive quarter of above-average leasing, with Q4 2013's 1.71 million s/f of activity outperforming the market's five-year quarterly average of 1.09 million s/f by 58%. This was Downtown's strongest quarter of leasing activity since Q2 2011. Three of the quarter's top five transactions were commitments for new space, led by Jones Day's 330,000 s/f deal at 250 Vesey St.. For the year, Downtown posted 5.7 million s/f of leasing, up 27% from 2012's full-year total of 4.48 million s/f Downtown absorbed 880,000 s/f of space during Q4 2013, as the quarter's strong leasing activity, coupled with space withdrawals, offset new availabilities brought to market during the period. Full-year net absorption was positive 630,000 s/f, a major improvement compared to 2012's negative 3.23 million s/f. At year's end, the overall availability rate stood at 13.5%, down 100 basis points from Q3 2013's rate of 14.5% and 70 basis points from year-end 2012's rate of 14.2%. The average asking rent remained in the $46 to $48 per s/f range throughout the year, ending 2013 at $46.47 per s/f.