Strong activity marks third quarter in Manhattan.
Wall Street's rocky third quarter, buffeted by losses in Russia and in emerging markets and scandal in Washington, culminated in the August 27th stock market correction. Large New York-based financial services firms, including Banker Trust, Chase, Citibank and merger partner Travelers Group, Merrill Lynch, and Goldman Sachs will see dramatic year-end earnings drops. Prospects of targeted layoffs loom for both the fourth quarter and the first quarter of 1999. While Wall Street has clamped down on debt for investment financing, the excellent Manhattan leasing market fundamentals are so far unshaken.
Leasing activity for the third quarter was 9.7 million square feet (msf), down slightly from the third quarter 1997 total of 9.9 msf. Activity for the year-to-date remains ahead of last year, 26.1 msf versus 25 msf. Six new leases of at least 200,000 square feet (sf), three in Midtown, one in Midtown South, and two Downtown, accounted for 3.3 msf or 34 percent of leasing activity for the quarter.
The downside to the Manhattan market was in space added, due either to corporate movement within Manhattan or consolidation. Almost 6.5 msf of space was added during the third quarter, 66 percent of it in Midtown. With these additions, absorption for the year slowed, but was still a very strong 7.3 msf.
Year-to-date leasing activity in Midtown reached 14.1 msf, slightly less than during the same period last year, when it leaped to 14.5 msf. For the quarter, leasing stood at 4.9 msf versus 5.3 msf in the third quarter of 1997. Major Midtown leases include Debevoise & Plimpton taking 414,032 square feet at 919 Third Ave; Time Inc. leasing 220,893 square feet at 135 West 50th Street; and Skadden Arps signing a lease for 189,000 square feet of back office space at 1450 Broadway.
Leasing activity in Midtown South was down for the third quarter and for the year versus 1997. Year-to-date leasing stood at 3.4 msf versus 3.7 msf last year. For the third quarter of 1998, 1.3 msf was leased versus 1.6 msf last year. The largest leases in Midtown South included CCH Legal Information Services, taking 204,000 square feet at 111 Eighth Avenue, and Deutsch Advertising, which leased 88,000 square feet also at 111 Eighth Avenue. With these two leases, this block-through, 2.3 msf building is now 98 percent occupied. Other major leases for the quarter include Integrex taking 40,000 square feet at 85-95 University Place, and American Lawyer Publishing leasing 37,500 square feet at 105 Madison Avenue. Midtown South absorption for the year-to-date was a positive 1.3 msf.
Downtown Manhattan, the hottest market in New York over the last few quarters, continued its streak with the announcement of several major leases. In August, the MTA agreed to a 49-year net lease of 1.6 msf at Two Broadway, relocating from Midtown. In another major deal, Goldman Sachs continued its expansion by leasing 640,000 square feet at 180 Maiden Lane. This lease included several floors now occupied by CNA Insurance, which is relocating to 40 Wall Street. Goldman Sachs also expanded its holdings at Financial square, where it took an additional 68,000 square feet for a total of 295,000 square feet. Other major leases included Leefe Bruyette & Woods leasing 80,000 square feet at Two World Trade Center, and Skidmore Owings & Merrill taking 59,000 square feet at 14 Wall Street.
Even with these large leases, absorption for the Downtown market was negative for the quarter at 446,229 square feet. This was primarily due to the addition of several large spaces to the market, including spaces within six months of availability. They included 233 Broadway, which added 357,000 square feet to the market with Venator's consolidation, and Two New York Plaza, where both the Marsh & McLennan space and the CIBC space are available for some 503,000 square feet. Downtown absorption is still positive for the year at 3.1 msf.
Asking rents continue to climb to record levels. Midtown direct weighted average asking rents rose to $37.88 from $32.77 one year ago, 116 percent jump. Midtown Class A direct weighted average asking rents increased to $45.76 from $39.10. Midtown South direct weighted average asking rents climbed to $22.57 from $18.62 last year. The Downtown direct weighted average asking rents jumped from $25.55 one year ago to $29.77, matching Midtown's increase of 16 percent.
New York City's unemployment rate did fall sharply in August to 7.3 percent from 8.1 percent in July, and the private sector has added a record 87,000 jobs over the last 12 months. However the nervous global economic situation and earnings declines among several of New York's largest employers and taxpayers portend a period of uncertainty ahead.
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|Title Annotation:||Third Quarter Review; 1998 real estate leasing activity in New York, New York|
|Publication:||Real Estate Weekly|
|Date:||Oct 7, 1998|
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