Renewals dominate second quarter deals as
Manhattan maintains position as business core
The New York City office market started the year in full force, with a fruitful first quarter that saw various high-profile leases signed.
The second quarter of 2019 kept that momentum going, and office leasing activity remained strong.
According to a recent Savills report, office leasing volume in NYC totaled 9.9 million square feet in Q2, most of it concentrated, of course, in Manhattan.
The success of Hudson Yards is fueling demand for quality office space in Midtown, and companies are willing to pay a premium to attract top talent. The average asking rent for NYC office space reached $78.31 per square foot in Q2, according to the report. Rents for Class A office space are significantly pricier, closing the quarter at $90.86 per square foot.
The availability rate dropped down to 10.6 percent, yet the demand remains high, leading to higher prices and intense competition for available space.
Metro Manhattan’s analysis of leasing during the second quarter found that Manhattan is the undisputed business core of the city, with just one Brooklyn deal making its list.
Half of the deals on the brokerage firm’s list were renewals; which it said signals the commitment that companies have to Midtown Manhattan and the market’s continued appeal. Check out the list below:.
McCann’s 450, 000 s/f renewal at 622 3rd Avenue was the largest office lease of the quarter. In June, McCann Worldgroup extended its current lease for another 15 years. The lease was set to expire in 2021. The ad agency has been operating out of the 39-story Grand Central Plaza since 2000. According to the NY Post, the asking rent was $70 psf, well below the Midtown Manhattan average of $87 psf. JLL represented the tenant in the lease negotiations, while the landlord, Cohen Brothers Realty, was represented in-house by senior vice president Marc Horowitz.
EmblemHealth signed a 440,000 s/f renewal at 55 Water Street. The insurance provider was represented by a Colliers International team while a CBRE team represented the landlord, New Water Street Corp., part of the Retirement System of Alabama. The four-million-quare-feet building is the largest office building in the city based on floor area. It has been the home of EmblemHealth since 2003.
NYC Human Resources Administration also renewed its 342,000 s/f lease in Downtown Brooklyn. The Administration extended its current lease at Clipper Equities’ 250 Livingston Street for another 10 years. The new agreement will start in August 2020, when the current lease expires, and will see the city eventually paying $16.9 million per year for the space, according to Bisnow. The landlord expects this lease to add roughly $5 million to the property’s annual net operating income, based on current expense levels. The 12-story building, nestled between Hoyt and Bond Streets, is also home to the Department of Environmental Protection, and the two government agencies take up most of the office portion.
Tech Giant Justworks committed to 275,000 s/f at 55 Water Street a month after EmblemHealth renewed its lease there. Justworks was previously located at the Starrett-Lehigh Building in Chelsea. 55 Water’s 65,000 s/f floorplates, below-market asking rents and the elevated public park make it an appealing option for office-using tenants.
Long-time anchor tenant Colgate-Palmolive renewed its 242,000 s/f lease at 300 Park Avenue. The company will continue to operate its global headquarters at the Flatiron District building, extending its current lease, which was set to expire in 2023. Even though the company has downsized its office presence from 312,000 s/f its commitment was enough to make landlord Tishman Speyer scrap demolition plans for the 26-story building. Tishman had been considering building a new office tower at the site, to take advantage of the Midtown East rezoning that allows developers to build taller projects.
While BMO Capital Markets didn’t sign a lease renewal to keep its Midtown Manhattan office space, it didn’t move very far either. The investment bank signed a 215,000 s/f lease at 151 West 42nd Street, also known as 4 Times Square. The bank is moving across the street from its former location at 3 Times Square. It will take over the vacant space left by Conde Nast, which moved to One World Trade Center, as well as a portion of the space occupied by Skadden, which will move to One Manhattan West in Hudson Yards. BMO will become the largest tenant at the tower owned by the Durst Organization, taking up floors 29 through 33. Bloomberg reports that BMO will be paying $105 per square foot for the upper floors and $85 per square foot for the lower floors. By comparison, Conde Nast paid roughly $50 per square foot for the space prior to its departure in 2014.
Coworking giant WeWork continued its flurry of office leases in the year’s second quarter. However, this time it might use the space to house its own employees instead of setting it up as a shared office hub. The company inked a deal for 212,387 s/f at RXR Realty’s 620 Sixth Avenue in Flatiron – right around the corner from the We Company headquarters at 115 West 18th Street. WeWork will take over the space previously occupied by Spotify, which moved to 4 World Trade Center, and Mediaocean, which is moving to 120 Broadway. The deal marked the 8th lease WeWork announced in the city so far this summer.
First Republic Bank became the latest tenant to join the Hudson Yards office roster, signing a 211,52 s/f, 25-year lease with SL Green at 460 West 34th Street. The bank will occupy part of the ground and mezzanine floors, to feature both corporate offices and retail bank space.
SL Green purchased a majority interest in the building in May 2019, and will embark on a large-scale redevelopment of the 20-story tower. The Class A office building is conveniently located directly across from the office towers at Hudson Yards and Manhattan West, occupying a full block front of Tenth Avenue.
AllianceBernstein became one of the biggest names to make the move to Hudson Yards this past quarter. The company will join Pfizer at The Spiral, a 65-story office tower currently under development at 66 Hudson Boulevard. AllianceBernstein will move into its new 189,000 s/f offices in January 2025, taking over floors 25 through 28 in a 20-year lease. The Spiral is being developed by Tishman Speyer on a full block stretching from West 34th to West 35th Streets and from Tenth Avenue to the Bella Abzug Park. The building’s anchor tenant will be Pfizer, which will take over 800,000 square feet of office space for its global headquarters in 2022.
In April, CBS announced it was staying put at the 15-story 28 East 28th Street building for another 15 years. The company occupies 164,000 s/f of office space on floors 8 through 10, as well as a small sub-concourse area. According to Globe Street, CBS will be paying roughly $90 per square foot in monthly rent for its space near Madison Square Park. A Cushman & Wakefield team represented CBS in the negotiations, while building owners George Comfort & Sons, Jamestown Properties and Loeb Partners Real Estate were represented in-house.