Americas Research

Manhattan Manhattan Class A asking rates

Monthly Update $100.00

May-08 May-09 May-10

May 2010 $80.00

$60.00
Leasing wrap up
$40.00

Midtown Manhattan
$20.00
Midtown’s Class A vacancy rate improved during the month, dropping to
13.4 percent, from 13.9 percent in April. It was last year at this time that
$0.00
the rate reached a peak of 15.0 percent. The Class A rate remained in
Midtown Midtown South Downtown Manhattan
the 14.5 to 15.0 percent range throughout much of last summer and
into early fall. The drop in the vacancy rate came amid the leasing
of 400,000 square feet at 11 Times Square. The much anticipated
transaction by Proskauer Rose, LLP was the first lease in Manhattan’s
Capital markets snapshot
newest office tower. (Continued on page 2.)

Improving fundamentals and the lack of available product has

Manhattan Class A vacancy rates
resulted in pent up demand for New York City commercial real estate,
May-08 May-09 May-10 particularly for core properties with low leasing risk.
15.0%

Sales volume year-to-date is $3.9 billion, already surpassing the 2009

annual total of $3.5 billion. Annualized sales volume is 80.1 percent
10.0%
below the 2007 historical peak of $48 billion and 87 percent below the
2004-2008 five-year average.

5.0%
Thus far 2010 has witnessed much greater than anticipated
improvements in debt liquidity, equity liquidity and New York City
0.0% employment and office market fundamentals. This has led to a
Midtown Midtown South Downtown Manhattan surge in domestic and foreign capital seeking New York City real
estate, accompanied by cap rate compression and more optimistic
underwriting. Investor’s selectively are starting to sell again, contrasting
the 2009 market which was characterized by lender driven sales or
owner-occupants raising capital. (Continued on page 2.)
 Pulse • Manhattan Monthly Update • May 2010 2

Leasing wrap up

(Continued from page 1.) Class A average asking moved slightly higher
in May, finishing at $64.41per square foot, up from $64.32 in April.
Year-over-year rates are off by more than 15.0 percent. Rates are likely
to remain in the $64.00 per square foot range throughout the second
quarter. The increase in the rents is largely a result of less expensive
space being leased, but rents for space at the highest end of the
market have been slowly increasing.
Class A average rents were up slightly during the month, finishing at
$39.26 per square foot, from $38.99 in April. Year-over-year Class A
average asking rents are off by 17.0 percent and by more than 28.0
percent during May 2008. Rents are likely to remain in $39.00 per
square foot range for the foreseeable future.

Midtown South Manhattan Capital markets snapshot

Not unlike Midtown, Midtown South’s vacancy rate also showed
improvement during the month. The overall vacancy rate moved to 10.3
percent, down from 10.6 percent in April.
For the second consecutive month there was a major lease signed
in the Chelsea submarket. Last month, Tiffany & Company leased
260,000 square feet at 200 Fifth Avenue, while in May 32BJ SEIU
announced plans to relocate to 620 Avenue of the Americas. The
property services union will be moving from 101 Avenue of the
Americas to 245,000 square feet at the new address.
Average asking rents remained soft during the month with an overall
rate of $43.08 per square foot, down from $43.24 in April. Average
asking rates for Class A space are off by more than 27.0 percent from
peak levels in 2008 and have fallen by 20.0 percent since last May.
For Class A space rents remain high in Greenwich Village due to new
product at 450 West 14th Street.
(Continued from page 1.) Recent Midtown transactions include the sale
of 600 Lexington Avenue at a price of $636 per square foot, a 5.3% cap
rate, and the recapitalization of 340 Madison Avenue based on a price
of $687 per square foot, a reported 6.2% cap rate.
Many economists believe 4Q 2009 signaled the end of the recession in
the United States, and expect the real estate sector to bottom this year.
As such, both global and domestic investors are eager to put capital to
work, and are frustrated by the dearth of available investment property.
Despite strong demand and a handful of recent benchmark sales,
many potential sellers are still holding on to property amid some market
uncertainty and concern regarding Greece’s debt crisis and Europe’s
economic instability.

Downtown Manhattan
Downtown’s Class A vacancy rate appears to have stabilized after rising
sharply during the first quarter. Finishing at 9.3 percent in May, the rate
is down slightly from the previous month when it measured 9.4 percent.
While the rate had risen steadily during the first quarter, no significant
blocks of space have been placed on the market during the past few
months. Activity is still lagging when compared to Midtown but there
was a bright spot as Kenyon & Kenyon announced that they signed a
renewal and expansion deal at One Broadway for just under 200,000
square feet.
 Pulse • Manhattan Monthly Update • May 2010 3

Submarket statistics Class A Class B Overall

Inventory Vacancy Asking Inventory Vacancy Asking Inventory Vacancy Asking
rate rent rate rent rate rent
Midtown
Columbus Circle 15,443,053 16.2% $57.21 8,590,070 9.4% $52.25 24,033,123 13.8% $56.30
Grand Central 33,592,558 15.2% $57.12 34,392,306 12.2% $47.21 67,984,864 13.7% $52.81
Penn Plaza/Garment 8,445,574 9.9% $47.27 34,111,006 14.6% $44.97 42,556,580 13.7% $45.32
Plaza District 78,737,923 13.6% $69.34 19,215,897 11.0% $54.60 97,953,820 13.1% $67.35
Times Square 27,187,709 9.7% $71.41 10,337,915 15.7% $52.78 37,525,624 11.4% $64.46
Total 163,406,817 13.4% $64.41 106,647,194 12.9% $48.30 270,054,011 13.2% $58.58
Midtown South
Chelsea 5,003,734 14.3% $42.71 15,958,385 10.2% $39.55 20,962,119 11.2% $40.56
Gramercy Park 6,519,374 3.6% $38.09 16,142,641 11.1% $42.83 22,662,015 9.0% $42.22
Greenwich Village 1,382,200 9.2% $65.54 3,623,302 10.8% $39.60 5,005,502 10.4% $46.91
Hudson Square 1,715,528 17.9% $52.16 6,268,082 10.1% $43.00 7,983,610 11.8% $46.19
Soho 144,000 0.0% $0.00 4,496,734 10.8% $49.66 4,640,734 10.5% $49.66
Total 14,764,836 9.4% $46.27 46,489,144 10.6% $42.08 61,253,980 10.3% $43.08
Downtown
City Hall/Insurance 7,653,938 6.3% $34.49 10,807,683 10.8% $35.17 18,461,621 8.9% $34.95
Financial District 32,938,904 12.1% $37.62 9,676,488 20.1% $33.07 42,615,392 13.9% $36.11
World Trade Center 20,688,827 6.3% $46.00 14,584,933 19.5% $37.74 35,273,760 11.8% $40.36
Total 61,281,669 9.4% $39.26 35,069,104 17.0% $35.71 96,350,773 12.2% $37.47
Total Manhattan 239,453,322 12.1% $58.61 188,205,442 13.1% $43.88 427,658,764 12.5% $52.17

Closed leasing transactions

Size (s.f.) Tenant Address Submarket Type
406,000 Proskauer Rose, LLP 11 Times Square Times Square New Lease
245,000 32BJ SEIU 620 Avenue of the Americas Chelsea New Lease
199,240 Kenyon & Kenyon One Broadway World Trade Center Renewal
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