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News release

NEW YORK, NY

Jones Lang LaSalle Reports Strong Leasing in New York at Year-End 2013

Downtown posts strongest deal volume since 1998, second highest total ever recorded


NEW YORK, January 9, 2014 — Led by the ongoing economic recovery, an easing of corporate caution, continuing growth of creative industries, and strength in the Downtown submarket, New York’s office market continued to improve in the fourth quarter of 2013.

Jones Lang LaSalle reported that Lower Manhattan posted around 10 million square feet in total leasing activity for the year, marking the highest transaction volume since 1998 and the second highest total ever recorded in the submarket. Downtown also recorded 2.75 million square feet of relocations, a 56.7 percent boost from 2012 and the highest total since JLL began keeping records in 2002.

Noteworthy relocations to Lower Manhattan from Midtown included GroupM’s commitment to 516,000 square feet at 3 World Trade Center and Jones Day’s lease of 330,210 square feet at 250 Vesey Street. In addition, Citigroup Inc. will reportedly move its headquarters operations from its longtime home at 399 Park Avenue into the 2.6 million square feet the bank already occupies Downtown at 388 Greenwich Street and 390 Greenwich Street.

“The year ended with New York enjoying positive absorption, lower vacancy, rising rents and the highest total of annual leasing activity since the financial crisis,” said Tristan Ashby, director of research for JLL’s New York tri-state office. “Although market indicators were healthy for both the final quarter of 2013 and the year as a whole, difficulties faced earlier in the year indicate that the city is still recovering from the economic downturn. Perhaps the most encouraging sign that the market has turned the corner, however, was Manhattan leasing activity, which was already on track to best 2012 and was then driven even higher by a rush of large leases Downtown. Strong leasing activity from tenants looking for value deals remained the theme throughout 2013.”

Downtown’s overall vacancy rate fell to 12.7 percent this quarter, a decrease of 7.3 percent (or 1.0 percentage points) from 13.7 percent in the third quarter of 2013. The submarket’s Class A vacancy rate dropped to 14.3 percent at year-end 2013, a decrease of 7.7 percent (or 1.2 percentage points) from 15.5 percent the previous quarter.

Overall average asking rental rates Downtown rose to $50.19 per square foot this quarter, an increase of less than 1.0 percent from $49.91 per square foot in the third quarter of 2013. Lower Manhattan’s Class A rents grew to $54.77 per square foot at year-end 2013, an increase of less than 1.0 percent from $54.63 per square foot the previous quarter.

Strong leasing throughout much of the city in the final quarter of the year and fewer large blocks of space returned to the market helped New York post falling vacancies in just about every building class and submarket. Manhattan’s overall vacancy rate fell to 11.1 percent this quarter, a decrease of 5.9 percent (or 0.7 percentage points) from 11.8 percent in the third quarter of 2013. The city’s Class A vacancy rate dropped to 12.1 percent at year-end 2013, a decrease of 6.9 percent (or 0.9 percentage points) from 13.0 percent the previous quarter.

Building owners raising rents at the top of the market and the removal of cheaper sublease space helped push up average asking rental rates in just about every building class and submarket in the city. Overall average asking rents in New York rose to $61.81 per square foot this quarter, an increase of 1.1 percent from $61.11 per square foot in the third quarter of 2013. The city’s Class A rents grew to $68.83 per square foot at year-end 2013, an increase of 1.0 percent from $68.13 per square foot the previous quarter.

Midtown
In Midtown, activity in buildings at the top of the market returned to pre-recession levels, driven primarily by a rising stock market. This trophy segment of the market, populated largely by hedge funds, asset management and other financial service firms, is directly tied to Wall Street’s performance more than any other in the city. Space users signed 80 transactions with average asking rental rates north of $100 per square foot in 2013, compared with 51 such deals in 2012.

Midtown’s overall vacancy rate fell to 11.1 percent this quarter, a decrease of 5.9 percent (or 0.7 percentage points) from 11.8 percent in the third quarter of 2013. The submarket’s Class A vacancy dropped to 11.7 percent at year-end 2013, a decrease of 7.1 percent (or 0.9 percentage points) from 12.6 percent the previous quarter.

Overall average asking rental rates in Midtown rose to $67.65 per square foot this quarter, an increase of 1.3 percent from overall rates of $66.79 per square foot in the third quarter of 2013. The submarket’s Class A rents grew to $75.38 per square foot at year-end 2013, an increase of 1.4 percent from $74.36 per square foot the previous quarter.

Midtown South
After an extended run as one of the nation’s hottest office submarkets, Midtown South saw a sharp decline in activity over the past few months. The area has few large blocks of space remaining available and activity is expected to remain focused on renewals. Midtown South recorded just one lease exceeding 100,000 square feet this year — AppNexus’ 220,000-square-foot renewal and expansion at 28-40 West 23rd Street — compared with seven in 2012.

Midtown South’s overall vacancy rate fell to 8.4 percent, a decrease of 1.2 percent (or 0.1 percentage points) from 8.5 percent in the third quarter of 2013. The submarket’s Class A vacancy rate fell to 6.1 percent at year-end 2013, a decrease of 9.0 percent (or 0.6 percentage points) from 6.7 percent the previous quarter.

Midtown South was the only submarket in the city to post a drop in Class A average asking rental rates in the final quarter of the year, although this decrease came about primarily due to the removal of more expensive space from the market. Overall average asking rental rates in Midtown South rose to $57.88 per square foot this quarter, an increase of almost 1.0 percent from overall rates of $57.52 per square foot in the third quarter of 2013. The submarket's Class A rents ticked down to $74.58 per square foot, a decrease of less than 1.0 percent from $75.06 per square foot the previous quarter.

For more news, videos and research resources from Jones Lang LaSalle, 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 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 $46.7 billion of real estate assets under management. For further information, visit www.jll.com.