Leasing chugged along at a steady pace with all areas of Manhattan getting their share of the transactions.
According to a new JLL report compiled by Cynthia Wasserberger, for the first time, Midtown South buildings signed tenants at rents north of $100 per square foot.
Minkoff’s 51 Astor Pl. signed four deals over $100 per foot for a total of 63,096 feet; Samsung’s 56,000-foot lease for the entire 837 Washington St. had a starting rent of $125 per foot, while Anchorage Capital’s renewal at 610 Broadway at Houston St. entered the $100 club with its 27,601 square feet.
Infor’s 10,000-foot lease along Ladies Mile at 635 Ave. of the Americas also made this rarified club.
While Midtown South is still the favored nation for the Tech Advertising Media and Internet or TAMI tenants, rising rents have sent them south to the Financial District and East to Brooklyn and Queens where startups have also found a niche.
According to Jason Muss, principal of Muss Development, there is a shortage of office space in Queens. “We have 1 million feet in Queens and it is virtually all full,” Muss said. But rents in the borough are not high enough to support new construction that must obtain $75 per foot to $90-per-foot rents to be cost effective.
That is leading to the redevelopment of numerous former industrial buildings in both Queens and Brooklyn into incubator space for artists and TAMIs, along with entrepreneurial small food and light alternative manufacturers and importers.
Times Square has also taken on the mantle of the TAMI world while fashion is following Conde Nast and fleeing to the Financial District shores near Lady Liberty.
Hudson Yards is taking shape as 10 Hudson Yards rises, Neiman Marcus agreed to open a 250,000-square-foot store in the retail podium, and portions of the park and the No. 7 train extension near an opening day.
“For us any progress solidifies the area,” said Oskar Brecher, director of development and executive vice president, The Monian Group which is preparing to develop 3 Hudson Blvd.
“It’s so established we don’t have to convince people to move there,” Brecher said of the 1,050 foot tall office tower. Dan Kaplan of FxFowle designed the building to pivot towards the sun and its massive 50,000-foot floor plates back onto the park and the new subway entrance.
Nearby, JPMorgan Chase leased 150,000 feet at 5 Manhattan West, also known as 450 W. 33rd St.; Skadden Arps finally signed a term sheet for roughly 500,000 square feet at the new 1 Manhattan West; and numerous sites changed hands as developers jockeyed for sites or flipped them for fast profits.
According to Bruce Mosler, global head of brokerage for Cushman & Wakefield who represents Manhattan West and 75 Rockefeller Plaza among other projects and tenants, last year’s Manhattan leasing totaled around 32 million square feet.
“That is extraordinary,” Mosler said, noting that at least 2 million square feet was leased each month except for October when a sudden stock market drop stalled decisions until it was clear the bull market was still chugging.
During the year, many large law firms like Skadden renewed or signed new leases said Frank Doyle, vice chairman, JLL. “The market is very, very healthy right now.”
These law firms included White & Case signing to move to 489,495 feet at 1221 Ave. of the Americas; Weil Gotshal & Manges remaining in 390,000 feet at 767 Fifth Ave. and Neuberger Berman leasing 402,000 square feet in a move to 1290 Ave. of the Americas.
The largest deal was completed in February when Time Warner sold its offices at Columbus Center to Related through Eastdil Secured and promptly leased the 943,438 square feet back again through Savills Studley until its new tower at Related’s Hudson Yards is complete.
Still, according to Greg Kraut, principal of Avison Young, the number of large blocks continues to decrease, from 101 at the end of 2012, to 63 at the end of 2014. “Large blocks in New York City are one of the major indicators of the strength or weakness of the market,” he said.
But there are still up and coming towers that are not yet counted in the statistics, and new blocks will become available as companies relocate.
Brian Waterman, vice chairman of Newmark Grubb Knight Frank, is working with the Wolfson family which has several 100,000 foot blocks during the next few years at One State Street, including at the top of the building. Rents will be in the high $50s per foot.
“We will have ability to create outdoor space on the roof that is potentially interesting to tenants,” Waterman said, as infrastructure and other improvements will also be made.
He says their clients used to look in Brooklyn and downtown because of necessity and cheaper rents. Now, he says, they look because they want to be downtown. “It also offers a radically different working and living environment,” said Waterman. “It has been an interesting dynamic and change in the marketplace.”
His colleague, Billy Cohen, a principal of Newmark Grubb Knight Frank, said “The only tenants out there are TAMIs and they don’t want to be in their father’s office building.” That has led them to downtown, the edges of Times Square and Midtown South where Cohen leases and is running out of space at the Empire State Building.
“They want something with a cool factor and downtown has taken on a cool factor,” said Cohen. “A lot of it is the ease of commutation from Brooklyn.”
As more and more office buildings hang out the `No Vacancy’ signs, Doyle believes those that are creative will try to get space back to relet at higher rents.
“This time there are many converging industries doing well so building owners can feel more comfortable renting,” said Eric Yarbro, executive managing director, Colliers International. “This cycle looks a lot better and they are certainly looking at 2015 and future availabilities and deciding whether or not they should keep rents flat or bump them up a notch.”
The Tristate President of JLL, Peter Riguardi, says while there is now an uptick in the market, they are somewhat guarded. “We still want to see more job growth in the financial services sector,” he said.
Peter Hennessy, tristate president of DTZ, which just purchased Cassidy Turley, also sees warning signs in the economy. While financial services grew by 3,000 jobs, Hennessey said they accounted for just 25 percent of the leasing over the last three years when in the past they were more than a third of the market.
Still boutique financial firms of less than 25,000 feet are recasting leases early in order to secure logical expansion space, such as another portion of their own floor. According to Robert Emden, senior managing director of Newmark Grubb Knight Frank, these deals are negotiated as “blends and extends” so a new rent is blended with the old rent as the lease term is extended.
That kind of growth on steroids by the larger financial firms, coupled with a tangle of TAMIs, would also help Riguardi fill 1 million square feet at One Chase Manhattan Plaza which was relaunched this week as 28 Liberty by its new Fosun International ownership 28 Liberty.
“All the buildings that have rented have redeveloped lobbies and infrastructure and it’s one of the drivers that help tenants make decisions,” explained Waterman. “You need to do those things as it’s a positive sell when a tenant walks in.”
Other owners are also giving their buildings infrastructure and beauty boosts.
Downtown’s glass tower at 180 Maiden Lane sold earlier in January for $470 million to Clarion Partners with MHP Real Estate Services and will be getting amenity and infrastructure upgrades as it has 800,000 square feet to be rented through MHP with a Cushman & Wakefield team.
Leon Charney is rebranding 1441 Broadway, which runs along Broadway, W. 41st and Seventh Ave. as Ten Times Square. He is also adding LED signage and wrapping a clear glass façade on the first two floors for retailers.
Across the street, Leslie Himmel, principal of Himmel + Meringoff Properties is repositioning 1460 Broadway at W. 41st St. after buying a stake from The Swig Company.
The building will have 180,000 feet to lease when Skadden Arps’s back offices relocate into 4 Times Square until its new tower at 1 Manhattan West is completed.
The top of the building overlooks Bryant Park and Dan Shannon of Moed de Armas & Shannon Architects has designed the redo.
“Everything inside will be new and have a really, really stunning lobby that is a combination of marble and artwork,” she said.
The Durst Organization will be repositioning 4 Times Square for its life after Conde Nast and Skadden Arps. There is already about 800,000 square feet available and many floors have terraces that are being made usable.
Further south, Durst is developing the brand new boutique 855 Sixth Ave. at W. 31st St. that will have just under 100,000 square feet of offices, many with double height floors, and a giant terrace on the sixth floor.
“Someone can create a unique environment for themselves and go into a brand new office building in Midtown South,” said Eric Engelhardt, vice president of Durst. The asking rent is $78 per foot. There is also 50,000 square feet of retail being leased through RKF as well as a separate residential rental next door to the west.
But politics and worries about safety are beginning to concern the industry. “No one likes to see what we are having with the police and it will have an effect on the markets,” Riguardi believes of the current rift between Mayor de Blasio and city police which is leading to fewer arrests and police deaths.
The police believe the mayor’s criticisms created an atmosphere that encouraged the assassination of two police officers, causing them to literally turn their backs on him, and lose confidence in Commissioner Bratton who has not defended them to the mayor.
“New York has been banking on a market that has been safe and secure and you can’t play politics with that,” worried Riguardi. “Those guys and gals work very hard and they make mistakes but you have to support them.”
