Skip Ribbon Commands
Skip to main content

News release

NEW YORK, NY

Jones Lang LaSalle Reports Marked Increase in New York Leasing Activity

Midyear 2013 deal volume boost driven by tenants focused on value office space, space users at top of the market


NEW YORK, July 10, 2013 — Jones Lang LaSalle reported a significant increase in leasing activity throughout New York in the second quarter of 2013, driven mostly by tenants focused on value office space. The exception was at the top tier of the market, the realm of hedge funds and private equity, where both pricing and activity increased.

One of the more interesting trends in the market has been tenant focus on sublease deals and discounted Class A space. As an example, Morgan Stanley, the only financial services firm represented in the top 10 transactions this quarter, subleased 148,421 square feet in the base of 1290 Avenue of the Americas. Avenue of the Americas was one of the most active parts of Midtown, recording several subleases at rents below the market average at midyear 2013. Across town, the Third Avenue corridor — typically more affordable than other Midtown avenues — has seen vacancy rates drop to 13.9 percent from 15.0 percent one year ago. Other tenants found value in new product in less traditional office submarkets. L’Oreal and SAP America announced they will join Coach at Related’s Hudson Yards, the ambitious new development on Manhattan’s Far West Side.

“After two quarters of weak activity, Manhattan office space is being leased at just about the same rate as it is being returned to the market,” said Tristan Ashby, director of research for JLL’s New York tri-state office. “While this was not enough to cause positive absorption or propel rents much higher, the activity does signal a willingness of tenants to enter the market.”

Although vacancy rates rose throughout Manhattan at midyear 2013, the increase was largely the result of new availabilities Downtown at One World Trade Center and 180 Maiden Lane. New York’s overall vacancy rate rose to 12.1 percent this quarter, an increase of 5.2 percent (or 0.6 percentage points) from the overall vacancy rate of 11.5 percent in the first quarter of 2013. The Class A vacancy rate grew to 13.4 percent in the second quarter of the year, an increase of 5.5 percent (or 0.7 percentage points) from the Class A vacancy rate of 12.7 percent the previous quarter.

New York saw overall average asking rents rise to $60.66 per square foot this quarter, an increase of 1.9 percent from overall rates of $59.50 per square foot in the first quarter of 2013. The city’s Class A rents grew to $67.81 per square foot in the second quarter of the year, an increase of 1.0 percent from Class A rates of $67.16 per square foot the previous quarter.

Midtown South
Midtown South rebounded in the second quarter of 2013, with seven of the top 10 transactions of the year for the submarket occurring in the past three months. Most notably, Facebook signed a 98,570-square-foot lease at 770 Broadway for its New York headquarters. Sublease opportunities in Midtown South are virtually non-existent following a number of sublease deals inked this quarter by technology tenants that include BuzzFeed and High 5 Games. In addition, Facebook’s direct lease at 770 Broadway was for space previously marketed for sublease but later recaptured by the building owner.

Midtown South’s overall vacancy rate fell to 8.1 percent this quarter, a decrease of 5.8 percent (or 0.5 percentage points) from the overall vacancy rate of 8.6 percent in the first quarter of 2013. The submarket’s Class A vacancy rate plummeted to 7.0 percent in the second quarter of the year, falling 37.5 percent (or 4.2 percentage points) from the Class A vacancy rate of 11.2 percent the previous quarter.

Overall average asking rental rates in Midtown South rose to $56.73 per square foot this quarter, an increase of 1.6 percent from overall rates of $55.82 per square foot in the first quarter of 2013. The submarket’s Class A rents climbed to $76.07 per square foot in the second quarter of the year, a boost of 9.7 percent from Class A rates of $69.33 per square foot the previous quarter.

Midtown
The increased appetite for trophy space by hedge funds and other boutique financial services firms has fueled the resurgence of top-of-the-market office space in Midtown. The submarket boasts 16 trophy buildings with average asking rental rates of $100 per square foot or higher, compared with 13 in June 2012. Over the past six months, Midtown recorded 29 leases with starting rents at $100 per square foot or higher — 18 of which occurred in the second quarter — compared with 21 at this point in 2012. At the top of the spectrum, some trophy buildings are testing even higher rents.

Midtown’s overall vacancy rate remained unchanged at 12.1 percent this quarter. The submarket’s Class A vacancy rate dropped to 12.7 percent in the second quarter of 2013, a decrease of 1.6 percent (or 0.2 percentage points) from the Class A vacancy rate of 12.9 percent the previous quarter.
Overall average asking rental rates in Midtown rose to $66.45 per square foot this quarter, an increase of 2.0 percent from overall rates of $65.13 per square foot in the first quarter of 2013. The submarket’s Class A rents grew to $74.26 per square foot in the second quarter of the year, an increase of 1.9 percent from Class A rates of $72.88 per square foot the previous quarter.

Downtown
The significant and steady increase in vacancy Downtown since 2008 — the unfortunate result of financial crisis downsizing and new space from the reconstruction of the World Trade Center — is finally abating. All future availabilities at One World Trade Center and Four World Trade Center are now on the market and reflected in the current vacancy rate.

Lower Manhattan’s overall vacancy rate rose to 14.5 percent this quarter, an increase of 22.9 percent (or 2.7 percentage points) from the overall vacancy rate of 11.8 percent in the first quarter of 2013. The Class A vacancy rate grew to 16.6 percent in the second quarter of the year, a boost of 33.9 percent (or 4.2 percentage points) from the Class A vacancy rate of 12.4 percent the previous quarter.

Overall average asking rental rates Downtown expanded to $49.60 per square foot this quarter, an increase of 5.5 percent from overall rates of $47.00 per square foot in the first quarter of 2013. Lower Manhattan’s Class A rents rose to $54.51 per square foot in the second quarter of the year, an increase of 3.9 percent from Class A rates of $52.44 per square foot the previous quarter.

JLL is a leader in the New York tri-state commercial real estate market, with more than 1,600 of the most recognized industry experts offering brokerage, capital markets, property/facilities management, consulting, and project and development services. In 2012, the New York tri-state team completed approximately 23.8 million square feet in lease transactions, arranged capital markets transactions valued at $1.57 billion, managed projects valued at nearly $7.0 billion, and oversaw a property and facilities management portfolio of 102.1 million square feet and an agency leasing portfolio of 76.0 million square feet.

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management. For further information, visit www.jll.com.