Leasing velocity has slowed in Manhattan and is kicking up in Brooklyn and Queens. More deals are coming as mega-tenants with future expirations weigh their options.
“We feel good about the pipeline,” says Peter Riguardi, tri- state president of JLL.
Leasing activity so far has still proved the third best since 2002. “There was some positive momentum to start the year and some rent growth,” says Richard Persichetti, vice president of research, Cushman & Wakefield.
And April brought an uptick in smaller deals after the stock-plagued first quarter.
But Arthur Mirante, tri-state president of Avison Young, who is pitching the 1.8 million square-foot 3 Hudson Blvd., says: “The [larger] deals will solidify the market.” How large do they go? Publishing giant McGraw-Hill renewed its 900,000 square-foot lease at 55 Water St.
With 30 tenants over 250,000 square feet and a dozen over 500,000 square feet in the market, brokers with large availabilities feel good despite nearly 20 million square feet of offices coming between now and 2020.
The largest corporate users are in old structures and move to new projects to easily get today’s technology. “You can’t retrofit an old building unless you move out, gut it, improve it and move back,” says Larry Silverstein, chairman of Silverstein Properties, who has space for lease at Two, Three and Four World Trade Center.
JLL’s agency, the 2.2 million-square-foot 28 Liberty, has 1 million square feet available. “We have multiple proposals and leases out,” adds Riguardi.
Tenants are looking at “everything,” including the outer boroughs. Back-office spaces now tend to be in pre-war and industrial rather than glass and steel.
Facebook signed for 200,000 square feet at the prewar 225 Park Ave. South just a year after it snagged 270,000 square feet at 770 Broadway, another classic.
J. Crew will move its Madewell division from 770 Broadway to 60,000 feet at The Factory in Long Island City.
Time Inc. moved from Midtown to Brookfield Place but sent a digital group to Industry City in Brooklyn.
That borough will have 9.6 million square feet in 26 different options ready between now and 2020.
“When tenants come to Brooklyn, they have expectations,” says Joe Cirone, senior director, Cushman & Wakefield. “They are not looking for ho-hum commodity space.”
He represents the Pioneer Building at 41 Flatbush Ave., which is getting $31 million in improvements. Rents run from the $50s to $60s per foot.
Improvements at Savanna’s 95 Evergreen, the 165,000-square-foot former Schlitz Brewery, will finish up this summer. There are some 35-foot-high ceilings, catwalks and skylights. “Anyone that walks into it is floored,” says Cirone. Rents range from the $40s to the high $50s per foot.
Rudin Management and Boston Properties are building Dock 72 at the Brooklyn Navy Yard, where WeWork has leased. Another 475,000 square feet is being marketed by Cirone of C&W with the CBRE team of Sasha Zarba and Freddie Fackelmayer.
“We are getting inquiries from European companies that are looking for their first offices in the U.S. — and only want to be in Brooklyn,” said Cirone.
But Brooklyn is not alone in attracting tenants.
“I think Long Island City is a growing opportunity,” observes Jimmy Kuhn, president, Newmark Grubb Knight Frank (NGKF).
The Factory at 30-30 47th Ave. in Long Island City is a home for fashion and creative tenants, says agent Brian Waterman, vice chairman of NGKF, as Macy’s, Ralph Lauren, J. Crew and others have leased. Food concepts are coming, too.
In Midtown, Waterman represents Park Avenue Tower at 65 E. 55 St., where tenants are excited about the coming amenities center at its base.
Nearby 527 Madison signed two leases that moved quickly through negotiation and execution, says Keith Purcell, vice president, Mitsui Fudosan America. Tenants are asking for upcoming luxurious pre-builts and a 2,000-square-foot outdoor terrace. Rents run from the mid-$70s to over $100 per foot.
This area, known as the Plaza District, is the traditional home of boutique financial firms. But they are now looking at locations like the Meatpacking District, where upcoming projects at 860 Washington and 61 Ninth Ave. will fit their laundry lists.
These tenants have location as their No. 1, “then light, air and views,” says Evan Margolin, executive managing director, Savills Studley.
Robert Emden, executive managing director of NGKF, says clients are also asking about Hudson Yards.
“The market is becoming more of a tenant’s market,” Emden opines.
Those offering concessions are doing so on a neighborhood and building-by-building basis, says Alan Wildes, executive director of Cushman & Wakefield.
