CBRE releases 2014 Q3 Manhattan Office & Retail Market Report

CBRE Group, Inc. has reported that Midtown, Midtown South and Downtown's major indicators were positive year-to-date third quarter 2014, continuing the strongly positive year-over-year trend for the Manhattan office leasing market. 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 St., respectively. Year-over-year, third quarter 2014 saw Midtown leasing activity increase to 12.64 million s/f from 11 million s/f at the same time in 2013. Absorption improved to 1.46 million s/f from negative 0.59 million s/f and average asking rent rose to $74.73 per s/f from $70.19 per s/f. Over the same period, Midtown South saw leasing activity increase to 5.16 million s/f from 3.06 million s/f; absorption improve to 0.51 million s/f from negative 0.95 million s/f, and average asking rent rise to $66.58 per s/f from $64.21 per s/f. Downtown saw leasing activity increase to 5.15 million s/f from 3.99 million s/f; absorption improve to 0.98 million s/f from negative 0.25 million s/f, and average asking rent rise to $50.78 per s/f from $46.96 per s/f. "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 Andrew Goldberg, vice chairman, said, "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 St. and the opening of a Saks Fifth Ave. Downtown." The opening of Ralph Lauren's first Polo flagship store in Manhattan at 711 Fifth Ave., "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, 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 St. 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." Q3 2014 Manhattan Office Quarterly Snapshot Market Highlights: * MIDTOWN - Leasing activity totaled 4.01 million s/f during Q3 2014, up 4% from the five-year quarterly average of 3.87 million s/f and 14% lower than the 4.69 million s/f of activity recorded during Q2 2014. Year-to-date leasing activity reached 12.64 million s/f, 15% ahead of the pace of activity through the first three quarters of 2013. A total of 1.01 million s/f of net absorption was measured in Midtown during Q3 2014, an improvement on the 830,000 s/f of absorption during the second quarter. The year-to-date Midtown absorption total remained in positive territory, at 1.46 million s/f, well ahead of the negative 590,000 s/f 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 s/f, up from the $73.82 per s/f average reported at the end of Q2 2014, and up 6% from the $70.19 reported at the same time in 2013. * MIDTOWN SOUTH - A total of 1.75 million s/f of leasing was recorded during Q3 2014, 43% higher than the five-year quarterly average of 1.23 million s/f and on par with leasing activity in Q2 2014. The year-to-date leasing total reached 5.16 million s/f, 69% higher than the 2013 year-to-date total of 3.06 million s/f and the highest year-to-date total for any year on record. At 510,000 s/f, year-to-date net absorption was well ahead of the negative 950,000 s/f 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 - Leasing activity during Q3 2014 was healthy, at 1.63 million s/f, up 31% over the five-year quarterly average of 1.25 million s/f Year-to-date leasing totaled 5.15 million s/f, 29% higher than the 3.99 million s/f total at the same point in 2013. A total of 920,000 s/f 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 s/f, up 4% quarter-over-quarter, and up 8% from the $46.96 per s/f average reported during Q3 2013.