News
A QUARTER RICHER
July 13, 2011
| It’s difficult to find anything overly negative about Q2, said Cushman & Wakefield NY metro region COO Joe Harbert yesterday at the firm’s quarterly research breakfast at Michael’s Restaurant. That's either a backhanded compliment, or a forehanded insult. Read on to find out which. |
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| (Sure, we get the same podium shot every time, but like a parent tracking a child’s height, we enjoy seeing the growth of Joe’s ties and Michael’s floral arrangements.) NYC had recovered 46.9% of jobs lost so far versus the US's 20.4%. Leasing’s even better—YTD, we’ve had 17.6M SF signed. “I consider a good year to have 25M SF in leasing,” he says. We’re up 40% year-over-year, and this was the strongest first half in over a decade. There were 29 deals over 100k SF, beating ’98, ’99, ’01 through ’03, and ’05. “If the second half is anything like the first, we’re headed toward a record year,” he says. Overall absorption in NYC was 3.2M SF, the first time it’s been positive from January through June since ’07, while vacant space declined more than 4.4M SF since the end of ’10. Now sublease space only accounts for 14.4% of available space. |
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| Of those large deals, 15 were in Midtown, says Joe (here with vice chairman Josh Kuriloff and retail maven Joanne Podell) which led the market with 6.1M SF in Q2 (vacancy, 10.5%). Midtown South saw the lowest vacancy rate of any major CBD in the nation (7.1%) and experienced a 2.1% increase in asking rents to $44.63/SF. Downtown’s overall asking rents increased the most, up 4.2% to $39.38/SF. Is it possible to see an 80% or higher rise in rents from trough to peak? Josh thinks so, telling us that the low is never as low as the past, and the highs are always higher than the last. (Isn't that a Journey song?) Large blocks are still at a premium—Joe’s on the ground with a 650k SF-tenant who needs to move by year’s end, but there’s only four or five places it could go. |
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Other Q2 tidbits:
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| Cue a soaring Whitney Houston ballad (pronounce it How-stenthough), as Downtown’s experiencing its moment in time. CBRE EVPs Brad Gerla and Peter Turchin, executive managing director Matt Van Buren, and senior managing director Shelly Cohen switched up the firm’s usual quarterly breakfast to Silverstein Properties’ 7 World Trade Center (where Brad and Peter are on the leasing team) to get a taste of what’s to come. “This isn’t your grandfather’s or even your father’s Downtown,” says Shelly. “You have to think of it in a much different way now.” Pricing is competitive, and tenants who are looking in Midtown are also looking at Downtown on every core metric—and Cond é Nast’s 1M SF lease at 1 World Trade Center set the inflection point. Absorption was 1.9M SF, even without the Condé’s deal, and much of the sublet space has been absorbed. 3.2M SF has been leased YTD and availability is at 11.3%. |
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| The group took us for a tour of World Trade Center site, where we snapped this somewhat birds-eye-view from the 16th floor of 4 WTC (we’ll just pretend we were a pigeon perched on one of the steel beams): (1) the North Tower footprint, which will be one of the reflecting pools at the memorial. The waterfall was being tested. (2) National September 11 Memorial & Museum building. The South Tower reflecting pool is to the immediate south. (3) 1 WTC. (4) 7 WTC. (5) Construction of Greenwich Street is to the right. (6) The future home of 2 WTC. Immediately south will be the transportation hub, followed by 3 and 4 WTC. |
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| Brad overlooks World Trade Center construction activity, with 4 WTC—40 stories high so far—in the background. Overall, Downtown’s availability is lower than Midtown and no longer trails Midtown or Midtown South. By ‘15, Downtown will have the highest percentage of post-2000 office buildings, eclipsing Midtown (7% versus 12.9%), and already surpasses Midtown in post-1980 product. This is important—there’s a huge appetite among tenants for operation efficiency and competing for a younger talent force that wants green, modern buildings. Some of the largest relocations are from Midtown: Condé Nast (from 4 Times Square), Gap’s 265k SF at 40 Worth (from 620 Avenue of the Americas), and WilmerHale’ s 210k SF at 7 WTC (from 399 Park), among others. |
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| The attendees in the future lobby of Silverstein Properties’ 4 WTC, which will be double the size of 7 WTC’s lobby. Overall, the expected completion dates for all of the WTC properties: the National September 11 Memorial & Museum this year; 1 WTC, the vehicle security center, and 4 WTC in 2013; the transportation hub in 2014; 3 WTC in 2015; and 2 WTC beyond that. |
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| Construction on 1 WTC progresses next to 7 WTC. Or is that just a mirror for people on huge, building-sized posters Downtown? |
