alliance for downtown new york real estate market q1_2012.pdfhousehold names and businesses from a...

ALLIANCE FOR DOWNTOWN NEW YORK

Q1 2012

COMMERCIAL OFFICE MARKET

TOP TEN LEASES SIGNED Q1 2012Source: CoStar, Downtown Alliance

LOWER MANHATTAN LEASING ACTIVITY (sf)Source: CBRE

-2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Q1 Year End

1 million

2 million

3 million

4 million

5 million

6 million

7 million

8 million

Leasing ActivityLower Manhattan led the Manhattan business districts in leasing during Q1 2012 with 987,000 square feet of deals done, a 35% increase year-over-year. Meanwhile, Midtown’s year-to-date leasing dropped 39% over Q1 2011, while Midtown South decreased 12%.

Household names and businesses from a diverse set of industries signed notable deals south of Chambers Street this quarter. Condé Nast signed a 133,000-square-foot expansion deal at 1 World Trade Center, in addition to last year’s 1 million square-foot lease. Investment Technology Group (ITG) completed a 16-year deal for 132,092 square feet at 1 Liberty Plaza, relocating from Midtown. Pace University also signed a 49,200-square-foot lease at 140 William Street. Omnicom, Priceline, and the National Futures Association expanded, and the New York Life Insurance Company renewed at 120 Broadway.

Relocations were prominent among the top leases in Q1 2012. In addition to ITG, nine other tenants signed leases to move their businesses south of Chambers Street, including

1

Tenant Name Building Address SF Leased Transaction Type IndustryThe Condé Nast Publications 1 World Trade Center 133,000 Expansion Creative Services

Investment Technology Group, Inc. 1 Liberty Plaza 132,092 Relocation Technology

Pace University 140 William Street 49,200 Direct Education

OdysseyRe Holdings Corp 100 William Street 41,854 Direct FIRE

New York Life Insurance Company 120 Broadway 38,529 Renewal FIRE

Omnicom 195 Broadway 36,300 Expansion Creative Services

Research Foundation of SUNY 61 Broadway 23,750 Direct Education

National Futures Association 120 Broadway 21,902 Renewal/Expansion Professional Services

Priceline 100 William Street 18,094 Expansion Technology

Janney Montgomery Scott, Inc. 1 Whitehall Street 17,882 Direct FIRE

the New York City Opera and Digital First Media. Relocations totaled 219,000 square feet, or about 22% of total leasing this quarter, and most tenants were in Creative Services or Technology. In total, 350 companies have relocated to Lower Manhattan since 2005.

LOWER MANHATTAN REAL ESTATE MARKET OVERVIEW

TOTAL VACANCYSource: Cushman & Wakefield

Midtown South and San Francisco. 1

RentsLower Manhattan’s overall average asking rents were stable in Q1 2012 at $40.18 per square foot, up 1% over last quarter and 2% over last year. Class A asking rents showed slow but steady growth, increasing 2% over last quarter and 5% over last year to reach $45.24 this quarter.

The taking rent index (which shows taking rents as a percentage of asking rents) also continued to improve along with asking rents, showing real growth in rents. It was 88.3% in Q1 2012, nearly one percentage point increase from last quarter.

1 Source of vacancy: Cushman & Wakefield

2

RELOCATIONS Q1 2012Source: CoStar, Downtown Alliance

Tenant Name Building Address SF Leased Previous Location SectorInvestment Technology Group, Inc. 1 Liberty Plaza 132,092 Midtown TechnologyLactalis American Group 77 Water Street 16,400 Midtown OtherIpreo 65 Broadway 16,000 Midtown TechnologyThe Harry Fox Agency 40 Wall Street 15,353 Midtown South Professional ServicesNew York City Opera 75 Broad Street 14,049 Midtown Creative ServicesDigital First Media 5 Hanover Square 9,850 Midtown Creative ServicesGoldstein Hill & West Architects 11 Broadway 8,500 Midtown South Creative ServicesEye Mall Media 48 Wall Street 4,770 Midtown Creative ServicesGotham Holdings 75 Maiden Lane 1,702 Midtown FIREArgent Software 100 Wall Street 400 Midtown Technology

In other leasing news, Morgan Stanley finalized negotiations during Q1 2012 and signed a lease for 1.2 million square feet at 1 New York Plaza in April. The transaction is the largest lease for a single building in New York since 2008.

VacancyDespite a slow quarter of leasing, Lower Manhattan’s vacancy rate dropped to 9.2% from 9.5% last quarter and 10.5% last year. Sublease vacancy was stable at just 1.0%.

Meanwhile, Midtown vacancy continued to increase, ending the quarter at 9.9%, up from 9.6% last quarter and 10.3% last year. Sublease vacancy is 1.7%.

Lower Manhattan maintained its position as the third lowest vacancy rate nationwide. It fell just behind

2%

4%

6%

8%

10%

12%

14%

16%

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Lower Manhattan Midtown Midtown South

YEAR-OVER-YEAR CHANGE IN RENTS,Q1 2011-Q1 2012

0%

5%

10%

15%

20%

25%

30%

35%

Lower Manhattan Midtown Midtown South

Class A Overall

Source: Cushman & Wakefield

Note: Data not available for Midtown South Q1-Q2 2004


3

In Midtown, year-over-year increases trended similarly to Lower Manhattan. Overall asking rents in Q1 2012 were $66.68 per square foot, and Class A rents were $71.22 per square foot. Both rental rates represent a 2% increase over last quarter and 6% increase over last year.

Meanwhile, limited availability and increasing demand pushed rents higher in Midtown South. That market saw the greatest pace of improvement, with overall asking rents at $48.45 per square foot in Q1 2012, up 6% from last quarter and 11% from last year. Class A rents reached $67.52, just $3.70 per square foot shy of Class A rates in Midtown.

Those changes continue to enhance Lower Manhattan’s competitive advantage in pricing. Lower Manhattan offers a $26.50 per square foot difference over Midtown’s overall asking rents and $8.27 per square foot over Midtown South.

SalesThree sales closed during the first quarter. GB Lodging Group closed on the Temple Court Building at 5 Beekman Street for $64 million or about $500 per square foot. Their plans include renovating the building into a 297-room Thompson brand boutique hotel with 90 residential units. It is expected to be completed in 2014.

The Federal Reserve Bank of New York purchased 33 Maiden Lane from Invesco for $207.5 million or $376 per square foot. The Fed has been a major tenant in the building, occupying 360,300 per square foot or more than 60% of the building since January 1999.

The McSam Hotel Group sold the vacant development site at 50 Trinity Street to Trinity NYC Hotel, LLC, for $15 million, or $193 per buildable square foot.

Bank of America finalized negotiations during Q1 2012 to sell 222 Broadway to a joint venture of L&L Holding and Beacon Capital Partners. The sale closed early in Q2 2012 at $230 million, or $304 per square foot. The building is currently 99% leased, with Merrill Lynch occupying the majority of the space.

OVERALL AVERAGE ASKING RENTSSource: Cushman & Wakefield

CLASS A AVERAGE ASKING RENTSSource: Cushman & Wakefield

$30

$40

$50

$60

$70

$80

$90

$100

Q3 Q1 Q3 Q4 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

20052004 2006 2007 2008 2009 2010 2011 2012Lower Manhattan Midtown Midtown South

$20

$30

$40

$50

$60

$70

$80

$90

$100

Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

20052004 2006 2007 2008 2009 2010 2011 2012

Lower Manhattan Midtown Midtown South

TAKING RENT INDEXSource: CBRE

70%

75%

80%

85%

90%

95%

100%

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

2007 2008 2009 2010 2011 2012


RESIDENTIAL MARKETDevelopment and InventoryToday, Lower Manhattan has an estimated 57,000 residents, and 28,775 residential units in 315 mixed-use and residential buildings.

Construction continues with 874 units in nine buildings scheduled for completion by 2014, including New York by Gehry at 8 Spruce Street. The 76-story building partially opened for occupancy in March 2011, and though the building is still under construction, over 600 units of the 903 total units are leased, and 570 are occupied. Meanwhile, Metro Loft Management neared completion on the 418-unit condo conversion at 116 John Street. The building is scheduled to begin leasing in May for occupancy in June.

Metro Loft also announced its acquisition of 70 Pine Street and plans to convert the 66-story historic Art Deco building. Two plans are under consideration: Under one plan, a 300-room hotel would be on the lower floors with 700 residential rental units above. Alternatively, Metro Loft would convert the entire building to a 970-unit residential building.

Rental MarketOver 880 units were added to the active listings in Q1 2012, a 5% drop over last quarter’s 935 (the highest in the past year) and 28% increase over last year. Much of this is attributed to the completion and active listing of new development projects. Despite the increase in inventory, Lower Manhattan apartments spent an average of 40 days on market, on par with the Manhattan average of 41 days.2

2 Source of active listing and days on market: Miller Samuel, Inc.

Meanwhile, Lower Manhattan’s rental market remained tight with a vacancy rate of just 1.3%.

Pricing was stable during Q1 2012, the down season in the residential market when rents usually dip. Lower Manhattan’s average rents were $3,866, up 1% from last quarter and 2% from last year. One-, two-, and three-bedroom units trended similarly, while studio apartments showed a remarkable 10% increase over last quarter and 8% increase over last year.3

Lower Manhattan continues to garner higher rents than the Manhattan-wide average, which ended the quarter at $3,382. Manhattan-wide average rents trended similarly, increasing 1% over last quarter and 5% year-over-year.

3 Source of vacancy and rents: CitiHabitats

VACANCYSource: Citi-Habitats

0.2%

0.4%

0.6%

0.8%

1%

1.2%

1.4%

1.6%

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2010 2011 2012

Lower Manhattan Manhattan

4

RESIDENTIAL DEVELOPMENT AND POPULATION GROWTHSource: Alliance for Downtown New York

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

units population

Projected


Sales Market (Combined Condos and Co-ops)Lower Manhattan’s residential sales market trended similarly to Manhattan-wide averages, showing year-over-year improvement, and dipping as the market enters the annual slow season.

Lower Manhattan averaged $1,029 per square foot in Q1 2012, up 7.5% over last year but down 7% over last quarter. That average price per square foot remained close to Manhattan’s average. The Manhattan-wide average of $1,086 per square foot is an increase of 6% over last year and a 3% drop over last quarter.

Despite year-over-year improvements in pricing per square foot, a drop in the average size of apartments (from about 1,200 square feet last quarter and last year to 1,076 square feet this quarter) resulted in a decrease in the average sales price. In Q1 2012, Lower Manhattan averaged $1,107,187 per apartment, down 4% from last year and 18% from last quarter.

A total 106 sales transacted south of Chambers Street during Q1 2012, which is stable year-over-year, but down a sharp 12% from last quarter. Over 30% of Q1 2012 sales were in four buildings: 40 Broad Street, 99 John Street, 123 Washington Street, and 333 Rector Place.

Meanwhile, the average days on market increased to 173 this quarter, the highest in the last year and 16% over Q1 2012. The Manhattan-wide average showed a greater year-over-year increase (20%), ending the quarter at 152 days on market.

5

AVERAGE SALES PRICE ($ PER SQUARE FOOT)Source: Miller Samuel, Inc.

$700

$900

$1,100

$1,300

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12

ManhattanLower Manhattan

AVERAGE DAYS ON MARKET Source: Miller Samuel, Inc.

90

110

130

150

170

190

Q1 11 Q2 11 Q3 11 Q4 11 Q1 12

Lower Manhattan Manhattan

LOWER MANHATTAN AVERAGE RENTSSource: Citi-Habitats

MANHATTAN-WIDE AVERAGE RENTSSource: Citi-Habitats

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Studio 1 BR 2 BR 3 BR2010 2011 2012

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

StudioStudio 1 BR 2 BR 3 BR2010 2011 2012


HOTEL MARKET

HOTELS UNDER CONSTRUCTIONSource: Downtown Alliance

Hotel Location Floors Rooms Year Open Owner/ Developer

Holiday Inn 99 Washington Street 44 350 2013 McSam Hotel Group

Independent hotel 24-26 John Street 21 95 2013 Duc Construction Corp

Aloft Hotel 49 Ann Street 18 113 2013 107 West Broadway Realty Corp

Marriott 30 Fletcher Street 32 200 2014 Lam Group

Homewood Suites 33 Beekman Street 32 270 2014 McSam Hotel Group

Development and InventoryThis quarter, the Conrad New York, formerly the Embassy Suites Hotel, reopened with 463 rooms after a year of renovations. This all-suite hotel is the first New York address of the global luxury brand of Hilton Worldwide. With this opening, Lower Manhattan has 18 hotels and 4,092 rooms—triple the number of hotels that existed pre-9/11 and 78% more rooms.

That growth continues with five additional hotels under construction scheduled for completion by 2014, three of which commenced in Q1 2012. At 99 Washington Street, the McSam Hotel Group broke ground on what will be the tallest Holiday Inn in the world, at 52 stories. Excavations began for an 18-story Aloft Hotel at 49 Ann Street, and a 32-story Homewood Suites at 33 Beekman Street. Those projects will bring the inventory to 5,120 rooms in 23 hotels.

Beyond that, another ten hotels are planned for construction, including a Four Seasons at 99 Church Street, a boutique hotel at the Battery Maritime Building, and a Four Points by Sheraton at 217 Pearl Street by the Lam Group. Additionally, Hidrock Realty and Robert Finvarb Cos. announced the acquisition of 133 Greenwich Street, with

CONRAD NEW YORKSource: Conrad New York

6

plans to develop a 28-story hotel slated to open in 2015. GB Lodging Group also closed on the Temple Court Building at 5 Beekman Street with plans to develop a 297-room boutique hotel to open in 2014. In addition, a joint venture of Crown Acquisitions, the Carlyle Group, and Highgate Holding are in pre-construction on the conversion of 170 Broadway to a 200-room hotel.

Occupancy Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q-o-Q Y-o-YLower Manhattan 65% 85% 81% 80% 74% -8% 13%New York City 72% 85% 86% 84% 73% -12% 2%

Average Daily Room Rate (ADR) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q-o-Q Y-o-YLower Manhattan $231 $285 $308 $307 $239 -22% 3%

New York City $214 $231 $245 $283 $198 -30% -8%

ADR & OCCUPANCYSource: Downtown Alliance, NYC & Company


RETAIL MARKETTwenty-one new restaurants, stores, and storefront services opened this quarter in Lower Manhattan, including:

• Two new restaurants by Danny Meyer, the North End Grill and Blue Smoke, in Battery Park City

• J&R Jr., a new 15,000 square foot baby and child emporium, adjacent to its namesake, the longtime Lower Manhattan anchor for electronics at 1 Park Row

• Atrio, a Mediterranean-inspired restaurant in the lobby of the newly opened Conrad New York

• Affina Beauty & Spa, offering a selection of beauty and wellness services, at 125 Church Street

• Beans and Greens, a new cafe featuring Stumptown Coffee and organic dairy and greens, at 245 Murray Street

In other retail news, Aldo signed a lease during Q1 2012 and began work to open a new 6,000-square-foot Lower

Manhattan flagship store at 181 Broadway spanning the basement, ground and second floors. Harry’s Italian will also open its second Lower Manhattan location soon at 230 Murray Street in Battery Park City.

Visit WWW.DOWNTOWNNY.COM/RESEARCH for additional publications on the Lower Manhattan real estate market and economy.

Documents include a complete list of residential and hotel developments, available retail spaces and a summary of leasing incentives.

If you have questions or require additional information, please contact [email protected].

HOTEL OCCUPANCY RATES AVERAGE DAILY ROOM RATES

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

95.0%

100.0%

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012Lower Manhattan New York City

$170

$190

$210

$230

$250

$270

$290

$310

$330

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012

Lower Manhattan New York City

Source: Downtown Alliance, NYC & Company

Occupancy and Room RatesLower Manhattan and the citywide average trended similarly in Q1 2012—the down season in tourism—dropping considerably over last quarter but showing modest improvement over last year. Lower Manhattan’s average daily room rate (ADR) was $239, a 22% drop over last quarter and 3% increase over last year. The district’s ADR was considerably higher than the citywide figure of

AFFINA BEAUTY & SPA

Source: Downtown Alliance, NYC & Company

$198, which dropped 30% over last quarter and increased 2% over last year.

Meanwhile, the average occupancy rate among Lower Manhattan hotels was 74% in Q1 2012, up considerably from 65% in Q1 2011, but down from 80% last quarter. The current occupancy rate was on par with the citywide average of 73%, which was a slight increase over 72% last year, and a significant drop over 86% last quarter.