Downtown Major Market Analysis: Fourth Quarter 2005
Battery to Canal Street
River to River:
Lower Manhattan consists of the following submarkets:
Hudson Square, City Hall, World Trade/Battery Park, Financial District, and
the Insurance District. These submarkets aggregate over 115.5 MM sq ft of
office space.
Prior to 9/11/01, the inventory of Lower Manhattan was predominately Class B
and Class C space. The inventory of Lower Manhattan is changing to a
weighting of predominately Class A property. Currently Class A is 40% of all
inventory; Class B space is 22%; Class C space is 26%; and Class D space is
12%. Residential conversion, demolition of property surrounding Ground Zero,
and the addition of new buildings at Ground Zero are starting to change the
inventory mix.
Summary:
| Total Inventory |
115.5 MM sq ft |
430 buildings |
| Class A (1969-current) |
45.5 MM sq ft |
56 buildings |
| Class B (1931-1969) |
25.8 MM sq ft |
67 buildings |
Class C
(before 1931>250,000sq ft) |
30 MM sq ft |
61 buildings |
Class
D
(before 1931<250,000sq ft) |
14.2 MM sq ft |
246 buildings |
4Q 2005 Asking Rates:
| Class |
A |
B |
C |
D |
Avg |
| Direct |
$45.06 |
31.94 |
31.43 |
27.65 |
36.18 |
| Sublease |
34.40 |
26.36 |
28.50 |
25.22 |
31.23 |
| Avg |
43.75 |
31.64 |
31.11 |
27.49 |
35.96 |
4Q 2005 Asking Rates vs. 3Q 2005:
| Class |
A |
B |
C |
D |
Avg |
| 4Q 2005 Avg |
$43.75 |
31.64 |
31.11 |
27.49 |
35.96 |
| 3Q 2005 Avg |
43.22 |
31.17 |
31.17 |
28.01 |
35.80 |
| |
0.53 |
0.47 |
(0.06) |
(0.52) |
0.16 |
4Q 2005 Asking Rates vs. Jan. 1, 2005:
| Class |
A |
B |
C |
D |
Avg |
| 4Q Avg |
$43.75 |
31.64 |
31.11 |
27.49 |
35.96 |
| 1/1/05 |
33.60 |
31.74 |
30.45 |
27.64 |
31.68 |
| |
10.15 |
(0.10) |
0.66 |
(0.15) |
4.28 |
Vacancy has decreased slightly.
In the fourth quarter, total vacancy decreased
from 11.8% to 11.6%. However, availability rates in Lower Manhattan have
shown a large premium to vacancy rates since 9/11/01. Total availability
includes vacant space and space not on the market, also known as shadow
space. Although vacancy is 11.6%, once shadow space is added in total
availability may hover at close to 19%. Large corporations are still on the
sidelines, looking for an opportune exit through sublease or termination.
Pricing was flat overall; Class B sublease
pricing increased.
Pricing remained flat overall in the fourth
quarter. There was a slight decrease in Class C and Class D pricing and a
slight increase in Class A and Class B pricing. Sublease pricing in Class B
increased by $2.17 psf, an increase of nearly 9% from the beginning of the
quarter. The only major leasing activity was in the Class A category as
approximately 170,000 sq ft was absorbed during the fourth quarter.
Year-to-date pricing is skewed.
Year-to-date activity tells another story. The
addition of 7 World Trade Center brought 1.7MM sq ft of
Class A footage to the market and has caused a $10.15 jump in asking prices
of Class A space, a 30% increase.
Fourth quarter building absorption decreased
from third quarter.
In the fourth
quarter a total of 52 buildings displayed positive absorption, with a median
listing size of 5,837 sq ft. In the third quarter, 58 buildings showed
positive absorption with a median listing size of 11,234 sq ft.
|
Square Feet |
Number of Transactions |
| Greater than 50,000 |
3 |
| 25,000-50,000 |
7 |
| 10,000-25,000 |
10 |
| 5,000-10,000 |
7 |
| 0-5,000 |
25 |
Class C space begins to get leased.
Over the course of the past year, Class C
availability decreased by 300,000 square feet. During the past year, Class C
pricing slightly increased. Year-to-date pricing in Class C indicates a
$0.66 increase or 2% rise, despite the small decrease in pricing during the
fourth quarter. As small as it seems, this increase is the first real sign
of stability of older buildings in Downtown since 9/11/01. Lower Manhattan
may finally be attracting smaller, value oriented tenants for whom pricing
is paramount. Given the extraordinary increases in Midtown rents, this
increase is not significant. However, it may signal the beginning of the end
of the bad news in Lower Manhattan.
Pricing for 7 World Trade Center continues to distort market averages;
however, once the newer buildings are rented, the market will become better
and healthier. To date, only one tenant, the New York Academy of Sciences,
has agreed to terms at 7 World Trade Center, signing a 15-year lease for
40,000 square feet.
Comparison of Downtown Market Research:
| |
CBRE |
Newmark |
C&W |
Grubb & Ellis |
Colliers |
TenantWise |
| Total Size MM |
82.7 |
92.3 |
- |
76.5 |
88 |
115.5 |
| No. of Bldgs |
133 |
- |
- |
- |
- |
430 |
| Availability |
14.3 |
14 |
- |
- |
- |
- |
| Vacancy |
11.7 |
- |
10.6 |
11.7 |
11.2 |
11.6 |
| Ask Direct |
36.80 |
34.89 |
30.89 |
34.26 |
- |
36.18 |
| Ask Sublease |
28.01 |
27.86 |
- |
32.49 |
- |
31.23 |
| Ask Avg |
35.41 |
33.33 |
- |
33.76 |
31.10 |
35.96 |
Completed transactions.
The fifteen largest lease transactions completed in
the Downtown market in the fourth quarter 2005 are as follows:
| |
Address |
Tenant |
Square Feet |
| 1 |
3 WFC |
American Express |
200,000 |
| 2 |
1 Seaport Plaza |
The NYC Office of the
Comptroller |
130,000 |
| 3 |
26 Broadway |
National Sports Museum |
100,000 |
| 4 |
120 Broadway |
Tower Group Inc. |
93,727 |
| 5 |
40 Worth St |
Medical Health Research
Association |
69,000 |
| 6 |
1 Chase Man. Plaza |
Fireman’s Fund |
53,500 |
| 7 |
1 Chase Man. Plaza |
Assurant |
50,000 |
| 8 |
25 Broadway |
City College for Worker
Education |
43,785 |
| 9 |
One New York Plaza |
CrossBorder Solutions |
43,353 |
| 10 |
32 Sixth Ave |
Bartle Bogle Hegarty |
43,000 |
| 11 |
61 Broadway |
Professional Staff
Congress |
25,506 |
| 12 |
2 WFC |
OppenheimerFunds |
25,000 |
| 13 |
125 Maiden Lane |
Lower Manhattan Cultural
Council |
11,243 |
| 14 |
55 Broad St |
The Horn Group |
10,105 |
| 15 |
60 Broad St |
W. J. Bonfanti, Inc. |
8,000 |
| For further information
contact: |
|
M. Myers Mermel
Chief Executive Officer
(212) 943-7777 |
Caroline McLain
Chief Financial Officer
(212) 943-1902 |
|
|
|
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