Manhattan Office Leasing Activity Held Strong in Q3
The Manhattan office leasing market continues to show signs of strength via positive net absorption figures and double-digit percent increases over last year. Total leasing activity of 7.4 million square feet in the third quarter of 2017 outperformed the five-year quarterly average by 12%, and took total Manhattan office leasing activity for the first nine months of 2017 to 21.1 million square feet, a 24% increase, year-to- date, on 2016. The strongest indicator of the market’s strength so far this year was the 1.45 million square feet of positive net absorption registered last quarter. The Midtown market, in particular, posted more than 1 million square feet of positive absorption for the first time since the second quarter of 2015. Midtown also saw 4.84 million square feet of leasing in the third quarter, which constituted a 19% increase on the five-year average.Asking rents in Midtown stood at $80.54 per square foot, flat from the previous quarter but down 1% from the same period last year.
Lord & Taylor Building Will Become WeWork Headquarters
The declining retail industry has forced retail landmarks like the Lord & Taylor building on Fifth Avenue to sell or rent their space to other, more profitable institutions.Hudson’s Bay, the company that owns Lord & Taylor, announced recently that it is selling off their flagship store to WeWork, who will use the space for their global headquarters. Lord & Taylor will rent out about a quarter of the building, where it will operate a pared-down department store. The redesign is expected to come after Christmas of 2018. This $850 million sale is an indication of a major shift in what tenants want. Millennial tenants especially now prioritize office space over shopping space. As Lord & Taylor struggles to find its footing in the e-commerce age, WeWork is capitalizing on the needs of the new economy.
(Photo: Lord & Taylor)
New York Developer Treads in Unusual Neighborhoods
Taconic Investment Partners has a history of redeveloping buildings in neighborhoods that traditionally don’t host offices and attracting established companies as tenants. Their current project is 1.9 million-square- foot Essex Crossing project, which in 2020 is expected to deliver about 350,000 square feet of office space to the Lower East Side, a neighborhood that currently isn’t an office destination. Perhaps the company’s most well-known property repositioning was 111 Eighth Ave., a 2.9 million-square- foot Chelsea building which was bought by Google in 2010 for $1.9 billion after Taconic’s overhaul. Taconic’s strategy is the knowledge that while companies like being near other firms in the same industry for recruiting purposes and a certain environment, there are large employers who are willing to go beyond the usual office neighborhoods if they can establish and brand their own location in a cool office space.
(Photo: Taconic Investment Partners)
Biggest Brooklyn Deals of Q3
The Jehovah’s Witnesses’ massive selloff of its remaining Brooklyn properties dominated the biggest deals in Brooklyn during the third quarter of 2017. The religious organization sold its former hotel at 90 Sands Street for $135 million and sold its apartment building at 97 Columbia Heights for $58 million. Other notable deals include 459 Smith Street, the 166,000-square- foot lot containing more than 330,000 buildable square feet which sold for approximately $48 million and is being considered for a mixed-use project with hotel, office and retail space, 561 Pacific Street, which has 6,657 square feet of ground floor commercial space and sold for approximately $36 million,and the Atlantic Stamp Building, which has 3,544 square feet of street level retail space and sold for $19 million.
(Photo: 90 Sands Street, Brookyln. By a.pitch on Flickr)
This news update is brought to you by David Reich, a New York-based Corporate Real Estate Advisor whose team has over 40 years of experience representing tenants in New York City for all their office space needs. To learn more, visit www.leaseofficesnyc.com