CBRE Group, Inc., released today its mid-year 2016 findings on the New York City office leasing, retail and investment property markets, along with its second-quarter 2016 Office MarketView reports for Manhattan and Brooklyn.
“Availability has tracked within 80 basis points of the current 11.1% for the past five-and-a-half-years. At this level, landlords and tenants have an even hand in negotiations,” said Paul Myers, executive vice president, CBRE. “We have not seen a radical shift in year-to-year pricing since 2008 or 2009.”
Ken Meyerson, vice chairman, CBRE Consulting, says that while the geopolitical and economic climates have given rise to some uncertainty, market fundamentals remain solid. “Leasing velocity is strong—and there is very little sublease space on the market,” said Meyerson. “New York City employment is still growing and most of our clients are expanding. Even flat rents at these levels still indicate strong fundamentals in the city’s overall real estate market.”
In assessing Manhattan’s retail market, David LaPierre, vice chairman, CBRE Retail, said New York City continues to be “the place in our country where retailers dare to expand their vision of how to reach their client base in different, more interactive ways.” He adds, “Recent openings of concepts from major brands, like Samsung in the Meatpacking District and Cadillac in Hudson Square, have shown that brick-and-mortar strategies for non-traditional brands are a part of the next wave of retail.”
Travis Yuengst, sales director, says, “Manhattan tenants are continuing to relocate to Brooklyn. However, both inbound and organic demand across the borough needs to catch up with supply.” CBRE’s Brooklyn MarketView focuses on the Brooklyn Navy Yard, which is seeing its largest expansion since the 1940s, with about $700 million invested in major developments. Other new development highlights across the borough’s submarkets include the massive 623,000-sq.-ft. office and retail development on the Red Hook waterfront designed by Foster + Partners, “Red Hoek Point.”
On a broader spectrum, Manhattan real estate continues to see high demand from the global investment community, according to William Shanahan, vice chairman, CBRE Investment Properties. “New York City’s continuing strong employment growth, healthy economic outlook and positive business environment make it one of the most highly sought-after markets for global investment.”
CBRE Second Quarter 2016 Office MarketView Highlights:
Midtown – Leasing activity totaled 3.73 million sq. ft. in Q2 2016, 2% below its five-year quarterly average. Quarterly leasing activity is down 32% compared to Q2 2015. The availability rate rose 10 basis points (bps) from Q1 2016 and 90 bps from one year ago. Quarterly net absorption registered negative 300,000 sq. ft. The average asking rent was virtually unchanged quarter-over-quarter and up 4% year-over-year. Sublease availability currently stands at 1.8%, with an average asking rent of $63.45 per sq. ft., up 3% year-over-year.
Midtown South – Leasing activity totaled 1.03 million sq. ft. in Q2 2016, 21% below its five-year quarterly average. Quarterly leasing activity was down 37% compared to Q2 2015. The availability rate increased 30 bps over the past three months and 20 bps from one year ago. Quarterly net absorption registered negative 251,000 sq. ft. The average asking rent fell 2% year-over-year and nominally increased quarter-over-quarter. Sublease availability increased 30 bps to 2.1% quarter-over-quarter, with an average asking rent that increased 4% over the same period to $53.39 per sq. ft.
Downtown – Leasing activity totaled 1.1 million sq. ft. in Q2 2016, 19% below its five-year quarterly average. Downtown experienced a 24% jump in leasing activity compared to Q2 2015, along with an 11% rise from last quarter. The availability rate fell 50 bps from one year ago, ending the quarter at 11.5%. Downtown was the only Manhattan market to record positive year-to-date net absorption, at 574,000 sq. ft. Downtown asking rents crept higher in Q2 2016, to an all-time quarterly high of $57.47. Sublease availability rose slightly quarter-over-quarter, to 1.6%, with an average asking rent that remained relatively unchanged at $45.31 per sq. ft.
Brooklyn – Brooklyn’s average asking rent increased this quarter to $37.58 per sq. ft., a 15% gain from Q2 2015’s $32.76 per sq. ft. and a 1% uptick quarter-over-quarter from $37.28 per sq. ft. The South Brooklyn and Williamsburg/Greenpoint submarkets drove the quarterly increase, both growing 7% quarter-over-quarter. Brooklyn’s overall availability rate is currently 17.5%, up 130 bps quarter-over-quarter from 16.2%. This increase in availability was largely driven by space additions in Williamsburg/Greenpoint and South Brooklyn.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
