CBRE Q2 2012 Manhattan Office Market Review: Sustainable Tech Sector Growth Leads Leasing Activity as Market Slows CBRE's July 2012 Manhattan Office MarketView Snapshots a Mixed Bag

The Manhattan office market slowed in the second quarter of 2012, but saw continuing strong leasing activity from the technology sector, especially in the Midtown South market, which is much desired by such companies, it was stated today at the CBRE Manhattan Market Research Media Breakfast in the firm's Midtown offices. CBRE released its July MarketView Snapshots at the event, at which Ben Friedland, executive vice president, and Sacha Zarba, senior vice president, presented an overview of the technology sector's impact on the market. "Tech companies have entered a new phase of occupancy in New York City," said Mr. Friedland. "We are far beyond the tech start-ups of 2000 that saw a boom and bust of inexperienced companies unsure of their office needs and growth. Today's tech companies, whether emerging or established, are much more sophisticated in addressing their real estate strategies. They are more committed to growing in New York, where they can attract and retain the young and highly educated workforce that wants to be here because of the career opportunities and quality of life offered by the city." "Tech is a much more sustainable growth industry that has powered a renewal of Midtown South, but is also pushing into Downtown and Brooklyn as it seeks the cool, functional and economical space necessary to its business," said Mr. Zarba. He added that, "The technology sector's growth in New York City has been fueled by private venture capital that had been going to well-known tech hubs such as Silicon Valley and the greater Boston area. Between 2007 and 2011, New York City was the only major tech hub to see an increase in venture capital deals, jumping some 32 percent, with 486 digital start-ups receiving funding in that period." CBRE July 2012 Office MarketView highlights: Manhattan Overall -- Registered 1.70 million sq. ft. of leasing activity in June, on par with the previous month's mark of 1.68 million sq. ft., but well below the 4.27 million sq. ft. of activity recorded in June 2011. Year-to-date leasing continued to trail 2011 levels, with 10.31 million sq. ft. of activity recorded for the first half of the year, compared with 15.69 million sq. ft. during the same period last year. The addition of several large new availabilities to the market, combined with below-average leasing activity in Midtown and Downtown, resulted in negative absorption of 540,000 sq. ft. for the month. Year-to-date absorption stood at negative 3.40 million sq. ft. The Manhattan-wide availability rate inched up 10 basis points to 11.2%, while the average asking rent continued to edge upward, rising by $0.69 to $55.64 per sq. ft. Midtown - Recorded 1.01 million sq. ft. of leasing activity in June, 12% below the five-year monthly average of 1.15 million sq. ft. Through the first six months of the year, Midtown logged 5.71 million sq. ft. of leasing activity, 42% below 2011 levels. New availabilities were led by 717,000 sq. ft. of remaining available space at Boston Properties' 250 West 55th Street development. The addition of this space to the market was largely responsible for a 30-basis-point increase in the availability rate as well as the month's negative net absorption. Despite the increase in the availability rate, asking rents drifted upward by 1% to $64.56 per sq. ft. Midtown South - June saw 450,000 sq. ft. of leasing, another strong month of activity, surpassing the five-year monthly average of 320,000 sq. ft. by 41%. Leasing activity has consistently paced above the market's historical average for the year, with year-to date leasing activity, currently at 2.57 million sq. ft., matching the 2011 mark of 2.55 million sq. ft. Despite strong leasing activity, year-to-date net absorption remained negative, due to a handful of large new availabilities brought to the market during the period. The availability rate was unchanged from the previous month, while the average asking rent increased by 1%. Downtown - At 240,000 sq. ft. for the month, leasing activity was 25% below the five-year monthly average of 320,000 sq. ft. With 2.02 million sq. ft. of leasing year-to-date, the total activity trailed 2011 levels by 37%. Downtown experienced 120,000 sq. ft. of positive monthly absorption in June, although year-to-date absorption levels remained in negative territory. The availability rate declined by 20 basis points for the month, while the average asking rent inched lower for the third consecutive month, falling by $0.24 to $39.29 per sq. ft. Capital Markets - BLDG Management sold a 99-year leasehold interest in 1372 Broadway to Starwood Capital Group and Herald Square for $166.2 million ($307 per sq. ft.). BLDG Management sold the leased fee interest in 1372 Broadway to New York Life for $150 million ($277 per sq. ft.) SL Green purchased 304 Park Avenue South from Walter & Samuels for $135 million ($628 per sq. ft.). Invesco purchased 130 Prince Street from Waterman Interests and JP Morgan Asset Management for $140.5 million.