NEW YORK – Jan. 19, 2017 – Cushman & Wakefield today released fourth quarter statistics for the Manhattan office leasing market that show year-end new leasing activity totaled 26.3 million square feet (msf). The figure represents a solid leasing year for Manhattan as overall asking rents rose 1.7% to $72.82-per-square-foot (psf). Overall class-A asking rents increased 2.2% to $78.43 psf, while class-B rents decreased by 1.0% to $60.11 psf.
“2016 represented another healthy year for the Manhattan office market, and due to solid fundamentals, we expect momentum to carry over into 2017,” said John Santora, Vice Chairman, President, New York Tri-State Region.
Midtown and Midtown South asking rents rose 2.3% and 1.7%, respectively, from the previous year with asking rents in Midtown closing the year at $78.39 psf and Midtown South at $70.86 psf. Downtown asking rents dipped slightly from the previous year, down 0.5% to $59.30 psf.
Manhattan’s vacancy rate closed the year at 9.3%, a 0.8% increase from the previous year. Midtown vacancy sits at 9.6%, Midtown South’s at 6.7%, while Downtown’s vacancy rate increased to 10.2% due to new space that entered the market in the neighborhood.
Overall absorption for the year registered nearly 2.6 msf in 2016 due to positive absorption in Midtown and Midtown South; Midtown accounted for 87% of Manhattan’s positive absorption with 2.2 msf.
Richard Bernstein, Executive Vice Chairman, who led the team responsible for securing a 631,025 sf renewal and expansion lease for Penguin Random House at 1745 Broadway, expects that potential deregulation and job growth will positively impact the market in 2017.
“In terms of overall leasing activity, this year slightly surpassed the 10 year average for new leasing with more than 26 million square feet of new leasing activity. There’s a cautious optimism that the market will continue to grow in 2017,” said Mr. Bernstein.
Ken McCarthy, Principal Economist at Cushman & Wakefield, cautions that while it is premature to forecast the impact the presidency of Donald Trump will have on the commercial real estate industry, especially in New York City, the general outlines of expected policies are likely to lead to a stronger national economy in 2017 and 2018. Additionally, Mr. McCarthy stated that while New York City outpaced the country in employment growth, 2016 is the year the New York City economy mirrored the rest of the country. He expects that tax cuts and the anticipated deregulation of the financial services sector will lead to stronger job growth in 2017.
For the retail market, while rising availability rates and declining asking rents defined the year, 15% more deals were completed compared to 2015.
“While the expansion of online shopping has been notable, consumers still crave the brick and mortar experience, especially when it comes to food. Food related retail has been one of the key drivers of the sector,” said Cushman & Wakefield Executive Director, Steven Soutendijk. “We anticipate that 2017 will bring an uptick in activity as developers and landlords continue to court unique food operators.”
Robert Knakal, Chairman, New York Investment Sales and Douglas Harmon, Chairman, Capital Markets, together presented an overview of New York City’s investment sales market, with Mr. Knakal focusing on the outer boroughs and multi-family properties and Mr. Harmon focusing on institutional investment in New York City.
Following record-breaking years in 2014 and 2015, the New York City investment sales market dipped in 2016, but in a historical context, still recorded a strong year.
“Current market conditions are reminiscent of those during the recession in the early 2000s when volumes dropped but values continued to rise. We see more optimism in the market today that we have seen in about 16 months,” said. Mr. Knakal
“Cushman & Wakefield will have the opportunity to showcase the strength of its global platform in the year ahead, providing real value to clients in New York City and beyond,” said Mr. Harmon. “In an expected period of cautious optimism, the firm is positioned to be nimble and quickly adapt to market conditions. As an anonymous author once said, ‘if nothing ever changed, there would be no butterflies’.”
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 43,000 employees in more than 60 countries help investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $5 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.