Leasing activity outpaces 2016's total
The Manhattan office market continued to benefit from the increasing demand for new construction and substantial fully renovated properties, registering eight transactions over 100,000 SF in the fourth quarter of 2017. As a result, leasing activity surpassed 28 million SF, ahead of 2016’s leasing totals. On a submarket level, Midtown continued to witness the strongest performance, attributing to over 600,000 SF of positive net absorption, registering five transactions over 100,000 SF. The Downtown market, which outpaced 2016’s leasing total through the first three quarters of 2017, continued to attract large users this quarter and recorded one transaction over 100,000 SF. While Midtown South has cooled down through the first three quarters of 2017, it witnessed a resurgence in the fourth quarter, recording two transactions over 100,000 SF and posting over 250,000 SF of positive net absorption.
Rents remain stable in active market
The average asking rent across Manhattan ended at $73.89 PSF at year-end 2017, up nominally 1% year-over-year. Midtown ended 2017 at $79.65 PSF. While Midtown had relatively minimal movement in asking rents, Penn Plaza was up 3% due to the addition of 170,000 SF at 55 Hudson Yards, which was priced between $105 to $130 PSF, ending the quarter at $65.46 PSF. Columbus Circle was down 2% quarter-over-quarter due to MongoDB’s 106,000 SF lease at 1633 Broadway, which was priced in the $80’s PSF. Downtown ended 2017 at $64.78 PSF, up 2% quarter-over-quarter driven by the addition of a large block of space in the World Trade Center submarket, which was priced at a premium. Midtown South ended 2017 at $71.70 PSF, down 2% quarter-over-quarter driven by Flatiron Health’s 107,000 SF lease, which was priced upward of $90 PSF in the Hudson Square submarket.
Transaction volume down from one year ago
2017’s total office sale volume ended at $12.9 billion, with an average of $740 PSF. Total sale volume is up 90% from last quarter, but down 7% year-over-year. Major transactions recorded this quarter include the partial interest sale of 825 Eighth Avenue, purchased by a joint venture of SL Green and RXR Realty for an approximate value of $840 million. Manhattan’s cap rate remained stable at 4.5%, which has been hovering at 4.3%-4.5% over the past several years.