Office market

From The Real Deal: "Nearly every building in the city, perhaps with the exception of 9 West 57th Street and the General Motors Building, is offering incentives to tenants. They include additional periods of free rent and higher tenant improvement allowances. The stars are aligned for a bleak office leasing market for at least the next 12 months, which will provide great opportunities to tenants seeking a good deal on commercial space."

CB Richard Ellis in a new report declares London's West End and Moscow the world's most expensive office markets, according to occupancy costs for the 12 months ending Sept. 30. Among the 50 office markets ranked by cost in the report, New York doesn't make an appearance until No. 15: Midtown, with occupancy costs of $98.08 a square foot annually.

Here's more, including a run-down on the Top 50:  read more »

CB Richard Ellis is out this morning with a release on the 15-year, 100,000-square-foot lease it arranged for law firm Pryor Cashman at Boston Properties' Times Square Tower (a.k.a. 7 Times Square). My colleague Dana Rubinstein reported the deal on Nov. 18.

The way things are going, this will surely be one of the last big leases of 2008.  read more »

A fresh Newmark Knight Frank report paints a gloomy future for New York City's office market in the near-term, and it's understandable: Being the world's financial capital has its drawbacks.

Newmark Knight Frank’s outlook for New York City calls for a substantial decline in asking rents despite a moderate level of new development, largely because it is at the epicenter of the financial crisis that is gripping the global economy.

The report forecasts a local office-sector employment drop of 5 to 6 percent before any recovery bgins, and as much as 4 million square feet of new space will likely come online in 2009 or early 2010. At the same time, asking rents will decline "substantially," and the "peak to trough decline in asking rents will be much larger, and the fall in effective rents will be larger again."  read more »

Probably the biggest story in the Manhattan office market at the close of 2008 is sublease space. A lot of it's spilling onto the market, a stark indicator of what belted the office market, long the nation's healthiest, off its pedestal just a few months ago: the economic crisis.

Simply put, many companies are looking to shed office space they no longer need because of layoffs or tighter budgets. (Most recent exhibit: two financial firms at 1095 Avenue of the Americas.)

Above is a chart by Colliers ABR research ace Robert Sammons showing the amount of Manhattan office space available for sublease from March 2003 to October 2008. Currently, there's over 6.79 million square feet of Class A space available for sublease, and another 4 million-plus of Class B and C space.

From The Real Deal: "Midtown saw the greatest amount of office space returned to that submarket since January 2003, fueling an increase in vacancies and a decrease in asking rents throughout Manhattan, according to a report released today by CB Richard Ellis. Midtown experienced a net absorption of negative 1.85 million square feet in October driving up the overall Manhattan vacancy rate to 6.6 percent from 6.1 percent in September, while average asking rents fell more modestly to $69.10 from $70.72."

From The Real Deal: "Sublet space has grown more rapidly, increasing 123 percent since January to 6.8 million square feet, the company reported. Although the sublet increase was substantial, the total amount did not approach the 11 million square feet recorded for March 2003. 'Sublets are nowhere near as high as they were around 2000 and 2001 after the new media, dot-com implosion. But they are climbing, and climbing fairly rapidly,' Sammons said."

Two financial firms are looking to dump 100,000 square feet a piece in the Blackstone Group's 1095 Avenue of the Americas, according to Real Estate Weekly's Dan Geiger. Centerline Holding Company and iStar Financial would sublease the spaces, but not at the high rent of around $140 a square foot that they themselves signed on to pay last year.

Above are the world's 10 most expensive office markets by occupancy costs (rent, taxes, insurance, etc.), according to the latest Manhattan Market Overview by Cushman & Wakefield. The list was compiled pre-financial crisis, so a couple of open-ended questions:

1. Will Manhattan, with Midtown already having fallen from No. 9 in 2007 to No. 10 in 2008, even be on the list in 2009, if its office vacancy rates continue to rise and its rents to drop?

2. Will London stay on top? As reported by various media, the British capital suffers from an impending glut of office space due to a faltering economy and layoffs (sound familiar?).

And, finally, look down the list from London, to Nos. 2, 3 and 4--Hong Kong, Tokyo and Mumbai, all non-Western office markets that have exploded out of the gate in the last decade or so as the Western ones sowed the very seeds of their current troubles.  read more »

Hedge funds were supposed to be the saviors of the higher-end Manhattan office market as the credit crunch and the financial crisis claimed Class A leasers like Lehman Brothers, Bear Stearns and Merrill Lynch, and generally contracted what had been a boom real estate sector.

Now, according to Real Estate Weekly, these saviors are starting to pull back. Reporter Daniel Geiger cites several hedge funds that are either shedding space, subleasing it, or edging toward one of the two. These include:  read more »

The Consulate General of the Netherlands has renewed its lease in Tishman Speyer's One Rockefeller Plaza, taking 17,156 square feet on the 11th floor for 10 years, according to CB Richard Ellis, which represented the consulate.

Apparently, in these uncertain economic times, consulates and other foreign missions are sought-after office tenants, according to CBRE senior VP Matthew McBride in a statement about the Netherlands lease. Why? The foreign offices aren't as affected by the economic zigs and zags as private sector tenants.

A new Colliers ABR report reminds us that it’s not the number of private-sector city jobs being lost, but the types of jobs.

The City Comptroller’s office last week estimated that over 165,000 private-sector jobs could disappear in the next 24 months. That’s a lot, no doubt. But during the early 1990s recession, private employers shed 309,600 jobs, according to Colliers. During the dot-com bust and the aftermath of September 11, the city lost over 217,000.

This time around, the job-loss amount may be smaller—but a lot of them will come from the city’s animating industries, including financial services, which is the city’s biggest leaser of prime office space and a general driver of job creation in other fields.  read more »

Our neighbors to the north have a stronger office market and a brighter outlook for said market going into 2009, according to a CB Richard Ellis analysis. Highlights from the analysis, part of an invitation-only Webcast held Oct. 14, include:

• Canada’s commercial real estate market is faring better compared to other downturns, and in comparison with the U.S., with national vacancy rates of 6.3 percent (office) and 6.2 percent (industrial).

 read more »

Dutch insurance giant ING Group signed a lease for 9,600 more square feet at Monday Properties' 230 Park Avenue. ING currently occupies 200,000 square feet in the tower. The lease runs from February through April 2013.

Full release below:  read more »

The lines above come courtesy of last week's third-quarter Manhattan office market report by Cushman & Wakefield. Anyone following at home knows the market's taken a grim turn (more here from the current Observer). The asking rents per square foot above are likely peaks for Midtown, Midtown South and Downtown's top-flight, Class A space. At least for a long while.

Well, that is that. We wrote in this week's print Observer that the reign of landlords atop the Manhattan office market has decisively ended. The credit crisis wounded it, and the financial meltdown of last month finished it off. Further proof above from Cushman & Wakefield.

Companies leased 15.7 million square feet of office space in the first nine months of 2008. Barring a year-end bump, the total number of square feet leased will likely not exceed that in 2003 and maybe--just maybe--2001, making 2008 the paltriest year this decade for office leasing.

Midtown south, that region of heavily commercial Manhattan from roughly Houston Street to 42nd Street, may be the crystal ball for New York's financial health. It has a lot of the island’s cheapest office space; and, yet, that same space is emptying slowly as companies trickle out sans successors.

Midtown south’s scruffier buildings—think old Silicon Alley hangouts hastily rewired 15 years ago, groaning under the weights of sporadic upkeep and old infrastructure—have considerably lower rents than midtown’s gleaming towers: In September, the average midtown south asking rent was $52.86 a square foot, according to CB Richard Ellis; in midtown, it was $84.  read more »

Oh, NBC Universal! When ever will you make up your mind?

At this morning's CB Richard Ellis third quarter breakfast, Global Chairman Steve Siegel ticked off a bunch of pending deals, including NBC Universal's negotiations to take 200,000 square feet of space in Midtown. Reporters took note. What a tantalizing hint!

Turns out, Mr. Siegel wasn't far from the truth.

NBC Universal, which recently took two floors of "swing space" at 75 Rockefeller Center, is also in talks with reps from 1633 Broadway and 1271 Avenue of the Americas to take a short-term, 200,000-square-foot lease at either, according to two knowledgeable sources. NBC may also take more temporary space at 75 Rock.

All of this shuffling around would be in preparation for NBC Universal's consolidation of its business operations into one, over 600,000-square-foot, permanent location (possibly at Worldwide Plaza).

We know this is confusing. NBC's internal memo from last week explains it well:  read more »

The above chart from Colliers ABR says it all about the Manhattan office market as it enters 2008's final stretch. Vacancy rates, including for top-flight Class A space, continue to rise as asking rents remain flat. The Wall Street crisis, damaging as it is to one of Manhattan's prime office leasers, financial services, won't help matters in 2009.

The projected 80,000 to 90,000 in office-based job losses between now and the end of 2009 could be enough to drive the Manhattan office vacancy rate well into double-digit percentages. A new report from Colliers ABR predicts the rate could rise to somewhere between 12 and 13 percent, well above the September rate of 7.4 percent, as companies shed space after shedding employees.

But there's two things working in the market's favor (and the favor of landlords and landlord brokers):  read more »

A new CB Richard Ellis report shows a marked annual drop-off in Manhattan office leasing from August 2007 through August 2008.

Companies leased 2.29 million square feet of space in August 2007, and 1.06 million last month. The availability and vacancy rates understandably increased over the 12 months from August to August.

Why the drop-off? It doesn't have anything to do with the events the past two weeks in the financial services industry, the biggest leaser of the city's top-flight office space. (It's likely tied to the general decline in the national and local economies, and is also a product of furious office leasing in months past--there's just not that much space left to lease.)

The current Wall Street crisis, however, is likely to further curb the appetite for Manhattan office space. More on what pessimistic brokers have to say.

“We have seen on Wall Street the cycle of greed turn to fear," said John Powers, chairman of the New York Tri-State Region for CB Richard Ellis, at CoreNet's New York City Market Update luncheon this afternoon. "Now we’re seeing pain. It will be a while before we see hope. And that is the cycle.”

It wasn't the happy-go-luckiest of real estate luncheons today on the eighth floor of the Time Life Building.

As brokers dug into their filets of salmon, Marisa Di Natale, a senior economist at Moody's Economy.com, imparted the harsh truth as she saw it:

"We believe we are in a recession right now and that we have been in a recession since fourth quarter last year,” Ms.  read more »

Greg Hughes, chief financial officer for New York City's largest commercial landlord, SL Green, said this morning that Viacom, which has leases for 1.5 million square feet at 1515 Broadway, most of which expire in 2010, is likely to renew.

"We’re have ongoing negotiations with Viacom for what seems like five years now," Mr. Hughes said, while giving a presentation at the Merrill Lynch Global Real Estate Conference. "There is a renewal option that comes up that they have that they need to exercise in December of this year. I think if you talked to them they would tell you they like the building very much…"

"They’ll likely exercise their renewal and then there’ll be a spirited discussion over what fair market value reps," Mr.  read more »

The above clip, shot by The Observer's Azi Paybarah, shows Mayor Bloomberg yesterday answering questions about commercial development in a post-Lehman world.

"Keep in mind," the mayor said, "big developers look for downturns to start projects because that's when your cost of construction should decline, that's when you can get steel and cement delivered on time, that's when you can find labor; and then those buildings will come on stream when the cycle starts going up. You can't build at the top."

The weekend Wall Street crisis will affect New York real estate. Here's how:

Apartment sales ~ Manhattan recorded over 10,000 home sales in 2007, but sales numbers have been off throughout the city in 2008. In Manhattan in the second quarter, home sales were down 21.8 percent annually, according to a Miller Samuel-Douglas Elliman report. In Queens, 23.7 percent; and, in Brooklyn, over 43 percent. The Wall Street crisis, due to the inordinate influence of the Street on local apartment and townhouse sales, will likely drive the number of deals further downward as the year ends. This could give a hefty advantage to buyers.  read more »

French investment bank Natixis is nearing a roughly 270,000-square-foot lease at 277 Park Avenue. It will sublease the space from JPMorgan Chase, which is shedding it for a move to the old Bear Stearns headquarters at 383 Madison.

Natixis will be subleasing at just the right time, according to Real Estate Weekly: "The firm will pay rents in the $80s per square foot. Brokers say that Natixis likely would have had to pay rates over $100 per square foot had it signed a lease for space of the same size and quality before the current economic tumult began to tug on the Manhattan leasing market late last year."

In the Manhattan office market, the storyline since last summer has been one of decline measured by greater vacancy amounts and static rents. The narrative held coming out of this summer.

A new report from Colliers ABR shows a Manhattan office vacancy rate of 8.7 percent in August, essentially unchanged from July and 2 percentage points higher than in August 2007. The average asking rent was also basically the same in August as in July (and August 2007) at $65.89 a square foot.

There was no roaring out of the summertime into an especially active fall.  read more »

Leading city office landlord SL Green announced today it had leased 121,441 square feet of its 100 Park Avenue to financial firm BDO Siedman. The lease, which starts in January, is for 15 years and brings the 825,815-square-foot tower at 40th Street to 80 percent occupancy, according to a Business Wire release (which touted the lease as the 15th biggest in Manhattan so far this year).

Howard Ecker of Howard Ecker & Company represented BDO Seidman in the deal, while Cushman & Wakefield’s Paul Glickman, Tara Stacom, Mitti Liebersohn, Alexander Chudnoff, Diana Biasotti and Jonathan Tootell repped SL Green.

For perhaps the first time, commercial brokerage giant Cushman & Wakefield predicted unequivocably that Manhattan office rents would drop, in its just released second quarter investment sales report.

Among the report's sobering conclusions:

■ Year-over-year sales activity through 2Q08 down 59 percent at $13.8 billion

■ Foreign investors have replaced previous high leverage buyers

■ Manhattan vacancy increased 1 percent to 7.1 percent in the last quarter, yet rising rents reached a record high of $71.59 a square foot, up 21 percent from a year ago

■ As financial sector layoffs materialize, rents will decrease

■ Development pipeline limited due to a lack of construction financing

For the full report, see attached.

Guess attorneys aren't the cockroaches of the corporate world after all, able to survive cataclysms while their more fallible colleagues in finance and real estate fall.

Cadwalader, Wickersham & Taft will lay off 96 attorneys from its New York and London offices thanks to a shortage of real estate finance and securities work, according to a Bloomberg report:

``We're in the process of talking to lawyers here,'' Cadwalader Chairman Chris White said in an interview. He declined to comment on whether fired attorneys will receive severance pay through the end of the year, as the Wall Street Journal reported.

At least a dozen law firms have cut lawyers and staff since the U.  read more »

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Commercial brokers call it equilibrium: when the Manhattan office market's vacancy rate ascends to the 7 to 9 percent range, and the negotiation advantage tips toward tenants.

Manhattan may be there now.

A new report on the second quarter from Colliers ABR pegs the Manhattan vacancy rate at 8.7 percent by the end of June, and likely rising fast. That's an increase from 7.8 percent in the first quarter. For top-shelf Class A office space, the quarterly vacancy rate increase was even steeper: 5.7 percent to 7 percent.

The reasons? Rising layoffs among office-based employees amid a generally stagnant economy. From the report:

At long last the official employment numbers are catching up with the anecdotal evidence flying out of New York securities firms.  read more »

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The souring real estate market hasn't caused brokerages to skimp on the food with which they lure reporters to quarterly breakfasts and luncheons.

At the Cushman & Wakefield breakfast at Michael's last week, the eggs were scrambled to the perfect fluffiness level; the crepes were nearly transparent; and the fruit salad didn't just include the cheap fruit -- there were blackberries and blueberries, too.

Meanwhile, at this afternoon's CB Richard Ellis second-quarter luncheon at the firm's MetLife building offices, the red meat, roasted asparagus and bowtie pasta were bountiful.

The good news was less so.

Howard Fiddle and David Maurer-Hollaender, both vice chairmen at CBRE, said that Manhattan leasing activity is down, but not by much.  read more »

The New York Post's Keith J. Kelly speculates aloud on what it means for a Conde Nast magazine to be moved from the headquarters at 4 Times Square to 485 Lexington Avenue, where the publishing empire has auxilary office space:

Last year, House & Garden was shut down just a year after moving its offices into that building. This week it was Golf for Women.

"If any magazine gets moved into here, it probably means they are getting ready to shut down," said one source.

One more title and it's an official trend!

Over $13.8 billion in Manhattan investment sales closed or went under contract in the first six months of 2008, a precipitous drop from the $34 billion in sales volume done in the first six months last year. Nearly half of this 2008 volume came via foreign investors.

The numbers come from brokerage Cushman & Wakefield's latest quarterly Manhattan market report, released this morning during a breakfast at Midtown power eatery Michael's.

The dismal investment sales numbers--which cover building, property and portfolio sales--aren't a surprise, really. Nor is the increase in the amount of foreign investment (it accounted for maybe 12 to 15 percent of investment sales in previous six-month periods).  read more »

Office market vacancy rates are up significantly over last spring in Manhattan, according to a new report from brokerage Colliers ABR. The increases seem, at first, incremental; but they're actually quite significant for a market that last year had gotten used to month after month and quarter after quarter of steady vacancy rate drops as tenants leased more space at ever higher rents.

The vacancy rate for Midtown, for instance, the borough's top office submarket, increased from 6.4 percent in June 2007 to 8.2 percent this June. The vacancy rate for top-shelf, Class A towers in Midtown increased to 7.4 percent in June from 5.  read more »

The publisher of relentlessly cheery Sunday magazine Parade signed a 10-year lease renewal for 89,413 square feet of space at SL Green's 711 Third Avenue. The publisher occupies the entire sixth floor and parts of the seventh and 15th floors in the 20-story building at 44th street. The asking rent, according to brokerage CB Richard Ellis, which represented Parade on the deal, was $65 a square foot, about average for the area.

Gregory Tosko, Mary Ann Tighe and Ramneek Rikhy of CBRE represented Parade. SL Green handled the renewal in-house.

Release below:

CB RICHARD ELLIS ARRANGES 89,413-SQUARE-FOOT

PARADE PUBLICATIONS LEASE RENEWAL

New York, NY – June 30, 2008 – CB Richard Ellis announced today that it arranged a 10-year, 89,413-square-foot lease renewal at 711 Third Avenue on behalf of Parade Publications, Inc.  read more »

... Look at real estate in other American cities. And what better cities for comparison than the nation's second and third largest?

Tribune Company potentate Sam Zell is considering selling the Chicago Tribune Tower and the Times Mirror Square complex, home of the Los Angeles Times. He could get as much as $150 million for the Tribune Tower and $235 million for the Times Mirror compex, The Wall Street Journal reports.

A little perspective: Were the 950,000-square-foot Tribune Tower in Manhattan, it would likely fetch as much as $1,000 a square foot, even in this current, rather bearish market. That means Mr. Zell could get nearly $1 billion from its sale. In Chicago, he's lucky if he gets 15 percent of that.

Just sayin'.

It's a trend! Pfizer wants to sublease 750,000 square feet of office space, according to a report today in Crain's New York Business, joining a growing set of firms seeking to shed excess space in the slumping economy:

"The Royal Bank of Scotland is marketing about 140,000 square feet at 7 World Trade Center that it inherited when it bought ABN Amro. J.P. Morgan Chase & Co.’s purchase of Bear Stearns Cos. is also expected to put hundreds of thousands of square feet on the market. In addition, sources say Lehman Brothers is also trying to unload 400,000 square feet of space.

"Meanwhile, Goldman Sachs is preparing to sublease about 500,000 square feet at 77 Water St.  read more »

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Over 414,200 square feet of office space opened up for lease in Midtown in May, according to a new report from brokerage Newmark Knight Frank. Total availability in Midtown, the city's top office market, is now almost 19.4 million square feet, up annually 3.4 million feet.  read more »

NBC visited 7 World Trade Center on June 2, the most recent of more than one visit to Larry Silverstein’s gleaming downtown tower, whose top 10 floors are still available for lease. Sources say NBC was considering housing its new business operations center there.

“NBC has been back to 7 World Trade Center a number of times, with executives and different division heads poring over the building,” said a real estate insider, who, on a recent visit to the building, saw NBC representatives looking like “cats who swallowed the canary.”

Those “executives” included Jeff Zucker, the president and CEO of NBC Universal, according to another source.

A Silverstein spokesman said he would “not comment on nor confirm discussions with potential tenants.” But another broker familiar with NBC’s plans said the media giant has since moved on from 7 World Trade, and is now looking at SJP Properties’ under-construction 11 Times Square and properties along Eighth Avenue.  read more »

More top Midtown office space opened up in May as the Class A vacancy rate there rose for monthly and annually. The rate increased from 6.5 percent in April to 7.1 percent, according to a new report from Colliers ABR.

The ongoing uncertainty amid the financial services sector drove the Class A vacancy increase, according to the report. JPMorgan Chase chose not to renew a lease for 291,000 square feet at 345 Park Avenue; and Bank of America plans to vacate 116,000 square feet at 9 West 57th Street in anticipation of its relocation to One Bryant Park.  read more »

One Bryant Park, the Durst Organization's sparkling new skyscraper on Sixth Avenue, has just leased 7,300 square feet to a tenant who is clearly what real estate types would call "price insensitive."

Apex Capital Management, a private investment firm based in Hong Kong and New York, agreed to pay more than $160 per square foot for the lease on the 37th floor.In so doing, the group snapped up one of the last remaining spaces in the 54-story, green building anchored by Bank of America.  read more »

Al Gore's Generation Investment Management has finalized its lease inside Douglas Durst's One Bryant Park, the new office tower in Midtown that's among the nation's most environmentally friendly commercial buildings. (My colleague Eliot Brown broke the news of the pending lease in November.)

Generation, of which Mr. Gore is chairman, will relocate from Washington, D.C., into 5,500 square feet under the 10-year lease.  read more »