New York City Office Market Report, First Quarter 2013

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New York City Office Market Report,

First Quarter 2013

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Q1 - 2013

New York City Office Market Report,

First Quarter 2013

OFFICE MARKET # BLDGS. TOTAL RBA DIRECT SUBLET TOTAL TOTAL AVERAGE UNDER (SF) AVAILABLE (%) AVAILABLE (%) AVAILABLE (%) RATE ($/SF/YR) CONSTRUCTION (SF)

MIDTOWN

Columbus Circle 88 31,272,819 6.7% 5.0% 11.7% $57.31 1,052,150

Grand Central 123 51,865,135 11.9% 3.2% 15.1% $60.78 -

Murray Hill 65 12,011,232 5.9% 2.0% 7.9% $41.62 -

Penn Plaza / Garment District 151 48,213,487 11.4% 1.9% 13.3% $44.53

Plaza District 313 82,830,967 9.7% 2.7% 12.4% $70.81 - Times Square 114 44,322,444 10.2% 2.0% 12.2% $63.37 717,000 UN Plaza 17 3,555,940 3.5% 0.1% 3.6% $50.79 -

MIDTOWN TOTAL

882 274,072,024 9.9% 2.7% 12.6% $60.01 1,769,150

MIDTOWN SOUTH

Chelsea 156 23,449,265 8.0% 0.8% 8.8% $49.89 106,844 Gramercy Park 136 21,849,532 6.6% 1.0% 7.6% $54.66 -Greenwich Village 47 4,843,558 11.9% 3.3% 15.2% $51.32 400,000 Hudson Square 32 9,328,366 5.4% 1.6% 7.0% $52.69 - SoHo 120 6,500,671 5.7% 1.6% 7.3% $57.38 42,000

MIDTOWN SOUTH

491 65,971,392 7.2% 1.2% 8.5% $52.70 548,844

TOTAL

DOWNTOWN

City Hall 61 6,029,622 4.7% 0.4% 5.1% $39.47 - Financial District 59 39,944,504 14.8% 1.8% 16.6% $40.16 - Insurance District 36 1,305,762 10.5% 0.7% 11.2% $37.18 - Tribeca 27 7,513,325 5.1% 3.0% 8.1% $47.49 -

World Trade Center 34 24,533,674 20.7% 2.0% 22.7% $38.66 8,265,630

DOWNTOWN TOTAL

217 88,811,592 14.4% 1.7% 16.9% $39.25 8,265,630

Midtown Total 882 274,072,024 9.9% 2.7% 12.6% $60.01 1,769,150

Midtown South Total 491 65,971,392 7.2% 1.2% 8.5% $52.70 548,844

Downtown Total 217 88,811,592 14.5% 1.7% 16.2% $39.85 8,265,630

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In the first quarter of 2012, Manhattan was surprised to see the decline of overall asking rents in Midtown. A decline has not been seen since Q1 2010. Then Manhattan watched closely as the price rose from $58.97, ending the year at $59.79. Now, a year later, NYC ends Q1 with an average asking rent of $60.01.

Midtown leasing activity ended 2012 with a grave disappointment, having zero leases that were above 100,000 SF; however, 2013 started off with a boom. Midtown closed Q1 with the most lease trans-actions above 100,000 SF, totaling approximately 1.2 million SF. The largest lease for Midtown was a renewal for Macy’s at 11 Penn Plaza for 646,000 SF. The two largest to follow were for 230,000 SF of office space at 11 Times Square for Microsoft and 157,000 SF for Univision Communications Inc. at 605 Third Avenue.

The largest sale transaction in Midtown for Q1 was a Private Investor’s purchase of 232-236 East 59th Street for a total of $34 million. East End Capital and Kushner Companies’ transaction ranked as the second largest sale for Midtown. $95,000,000 was paid for the purchase of 321 West 44th Street. The next largest transaction to follow was a Private Investor’s purchase of 920 Broadway for 204,000 SF at the price of $87.5 million.

Significant Leasing Activity

Tenant: Address: Size: Submarket:

Macy’s (renewal) 11 Penn Plaza 646,000 SF Penn Plaza

Microsoft 11 Times Square 230,000 SF Times Square

Univision Communications Inc. 605 Third Avenue 157,000 SF Grand Central Jefferies Group Inc. 520 Madison Avenue 133,000 SF Plaza District Hp Girlswear/BB Active 100 West 33rd Street 61,916 SF Penn Plaza

Significant Building Sales

Address: Size: Price:* Price (PSF):* Buyer: Seller:

232-236 East 59th Street 47,000 $34,000,000 $723.40 Private Investor 232 Battaglia Realty, LLC 321 West 44th Street 228,268 $95,000,000 $416.20 East End Capital Kushner Companies

920 Broadway / 9 East 38th Street 204,000 $87,500,000 $429 Private Investor Yeshiva University

311-319 West 43rd Street N/A $62,400,000 N/A Atlas Capital Zubarry Associates

v

Manhattan

Overview

OVERVIEW:

The Manhattan office transaction volume for Q1 ended

with more than 3.6 million SF. After a dramatic decrease

in Q3 2012, NYC’s net absorption continued to stay

posi-tive throughout Q4 2012 and Q1 2013 at 702,647 SF. There

was a spike in construction from 10,445,280 ending Q1 at

10,583,624. Asking rents and overall vacancy continue to

remain consistent throughout Manhattan.

The relative lack of leasing activity is largely a result of

finan-cial services firms delaying leasing decisions due to

continu-ing concerns over the European debt crisis and the U.S. tax,

deficit and regulatory policies. Hurricane Sandy has also

taken a huge plunge into NYC Real Estate. Many landlords

are facing challenges going forward to secure their

proper-ties and many of these changes may result in higher rents.

This sector comprises approximately a quarter of

Manhat-tan’s total office tenancy, and is the driving market force for

large blocks of space in Midtown and Downtown.

Leasing activity was dominated by a large lease renewal

tak-ing place in Midtown. This transaction was for 646,000 SF at

11 Penn Plaza. The Tenant involved in the renewal

was Macy’s. Larger leases to follow were well above 100,000

SF. These included a lease by Microsoft for 230,000 SF

lo-cated at 11 Times Square and a lease by Harper Collins for

180,000 SF located at 195 Broadway; both leases were for

office space.

New York City’s labor statistics present a mixed picture for

the city. The unemployment rate has slightly increased,

end-ing at 9.9% in Q1. However, the proposed expansion of

Chel-sea Market has been approved. This project is predicted to

create more than 1,200 long-term jobs as well as 600

con-struction jobs. This project will also allow for a positive

eco-nomic boost for NYC.

Manhattan is the toughest real estate market in the world

and a lot of it is from its retail success. The constant arrival

of tourists has pushed retail sales in the city far higher than in

the rest of the state and country. New York City has the

loca-tion and the drive to improve its economy. The market is and

will remain fiercely competitive for the next few years. This

is due to longer leases and not enough inventories to offer.

Investment sales activity was dominated by the Midtown

South market in Q1. Totaling well above $700 million in

sales, there were three in Midtown South that stood out; 450

West 15th Street, 550 Washington Street and 24 & 28 West

25th Street. Midtown and Downtown’s largest sales pulled a

combined total of approximately $400 million. From

watch-TRENDS:

Vacancy

Net Absorption

Construction

Asking Rents

Unemployment Rate

11% 12% 13% 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Overall Vacancy (%)

Overall Vacanacy %

Total Avg Rate ($/SF/yr)

Net Absorption (in thousands SF)

NYC Unemployment Rate (%)

-1500 -1000 -500 0 500 1000 1500 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 $48.00 $50.00 $52.00 $54.00 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13

Total Avg Rate ($/sf/yr)

6% 7% 8% 9% 10% 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12

NYC Unemployment Rate

Midtown

Overview

Vacancy

Net Absorption

Construction

Asking Rents

Overall Vacanacy %

Net Absorption (in thousands SF)

Total Avg Rate ($/SF/yr)

11% 12% 13% 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Overall Vacancy (%) -800 -600 -400 -200 0 200 400 600 800 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 $58.40 $58.60 $58.80 $59.00 $59.20 $59.40 $59.60 $59.80 $60.00 $60.20 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13

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Downtown

Overview

24 & 28 West 25th Street 250,000 $115,000,000 $460 Private Investor Yeshiva University

6% 8% 10% 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Overall Vacancy (%) -200 -100 0 100 200 300 400 500 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 $40.00 $42.00 $44.00 $46.00 $48.00 $50.00 $52.00 $54.00 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13

Significant Leasing Activity

Tenant: Address: Size: Submarket:

Adidas 435 Hudson Street 152,200 SF Hudson Square

Google Chelsea Market 90,000 SF Chelsea

SAE Institute 218 West 18th Street 27,000 SF Chelsea

Michael Kors 520 Broadway 15,000 SF SoHo

Rebecca Minkoff 16 West 22nd Street 13,000 SF Chelsea

Significant Building Sales

Address: Size: Price:* Price (PSF):* Buyer: Seller:

450 West 15th Street 325,000 $284,000,000 $874 Jamestown Properties Stellar Management 550 Washington Street 1,281,000 $250,000,000 $195.16 Fortress Investment Group Eugene Grant

Midtown South, always finishing strong, has experienced a slight upsurge this

quarter with an overall market size of 65,971,392 SF. Net absorption has remained

the exact same since Q4 holding at (87,706) SF. The submarket’s overall vacancy

remained flat. Average asking rents continued to slightly rise, going from $52.01

to $52.70. The SoHo district still remains one of the more active districts in this

submarket; however, three of the largest lease deals took place in Chelsea.

Adidas signed a lease in Midtown South allowing it to take on the largest

amount of SF for the quarter. The lease covers 152,200 SF at 435

Hudson Street in Hudson Square. Other significant leases were in

Chelsea, where Google signed a lease in the Chelsea

Market for 90,000 SF. SAE Institute, a school focusing on the

careers in the audio industry, signed a lease for 27,000 SF at 218

West 18th Street.

Midtown South’s largest sale transaction was completed by

Jamestown Properties in the purchase of 450 West 15th

Street, totaling 325,000 SF for the price of $284 million

or $874 PSF. Fortress Investment Group purchased

550 Washington Street for $250,000,000 or $195 PSF.

Another major deal for Midtown South includes the

purchase of 24 & 28 West 25th Street by a Private

Investor from Yeshiva University. This transaction

was for 250,000 SF for a total of $115 million or

$460 PSF.

Midtown South

Overview

Vacancy

Net Absorption

Construction

Asking Rents

Overall Vacanacy %

Net Absorption (in thousands SF)

Net Absorption (in thousands

SF)

Total Avg Rate ($/SF/yr)

Significant Leasing Activity

Tenant: Address: Size: Submarket: Harper Collins 195 Broadway 180,000 SF World Trade Center Transatlantic Reinsurance Company 1 Liberty Plaza 134,000 SF World Trade Center Liberty Mutual 55 Water Street 120,000 SF Financial District GFK Market Research 1 World Financial Center 75,000 SF Financial District American Arbitration Associates 120 Broadway 53,514 SF Financial District

Significant Building Sales

Address: Size: Price:* Price (PSF):* Buyer: Seller: 13-17 Laight Street 80,000 $56,000,000 $700 Mazda Realty Associates Private Investor 26-130 Delancy Street 22,875 $21,000,000 $918 Private Investor Private Investor

Downtown’s average asking rent has continued to remain flat at $39.85,

keeping rents well above the $35.62 SF rate reported just three years

ago. The overall market size has remained steady as well at a total of

88,811,592 SF. Downtown’s net absorption continues to remain positive

going on for its seventh consecutive quarter.

The largest lease for this submarket was signed by Harper Collins of

180,000 SF at 195 Broadway. Other major leases included a signing by

Transatlantic Reinsurance Company for 1 Liberty Plaza for 134,000 SF of

space and Liberty Mutual for 55 Water Street for 120,000 SF of space.

Leases to follow involved a lease signed by GFK Market Research for 1

World Financial Center for 75,000 SF and American Arbitration Associates

for 120 Broadway for 53,514 SF. Three of the leases took place in the

Financial District.

Looking into the investment sales for Downtown, the largest transaction

that took place was for 13-17 Laight Street for 80,000 SF. This transaction

totaled $56,000,000 or $700 PSF. A Private Investor’s purchase of

126-130 Delancy Street was the second largest transaction in this submarket.

The property totaled 22,875 SF valued at $21 million or $918 PSF.

14% 16% 18% 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Overall Vacancy (%) 0 50 100 150 200 250 300 350 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 $37.00 $37.50 $38.00 $38.50 $39.00 $39.50 $40.00 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13

Vacancy

Net Absorption

Construction

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Over 350 Offices

Covering the World

Methodology

We have divided Manhattan into three markets: Midtown, Midtown South and Downtown. These markets

have been separated into the following submarkets: Columbus Circle, Murray Hill, UN Plaza, Times Square,

Grand Central, Greenwich Village, Hudson Square, Soho, Tribeca, Plaza, Penn Plaza, Chelsea, Gramercy

Park, Financial/World Trade Center and Insurance/City Hall.

Summary

Glossary

Average Asking Rental Rate –

Quoted asking rental

rates, given on a per-square-foot per-year basis and

provided as a weighted average by the amount of

square footage available for direct vacancy space.

Direct Vacancy –

Space currently available in the

market for lease directly with the landlord or building

owner.

Market Size –

Includes all existing and under

construction office buildings (office, office condo, office

loft, office medical, all classes and all sizes, both

multi-tenant and single-multi-tenant, including owner-occupied

buildings) within each market.

Net Absorption –

Net Absorption measures the total

amount of square feet leased over a period of time

minus the space that is vacated during the same period.

Overall Market Vacancy –

Direct and sublease space

available for lease in the market divided by the market

size.

Overall Vacancy –

All available lease space, either direct

or sublease.

SF/PSF –

Square foot/per square foot, used as a unit of

measurement.

Sublease –

Arrangement in which a tenant leases rental

property to another, and the tenant becomes the

landlord to the subtenant.

Sublease Vacancy –

Space currently available in the

market for sublease with an existing tenant within a

building acting as the landlord.

QTD –

Quarter to date. The latest information available.

YTD –

Year to Date. The latest information available.

Brokerage Services

Corporate Services Acquisition/Disposition

Leasing Agency/Landlord Representation Tenant/Buyer Representation

Investment Services

Auction/Accelerated Marketing Programs Sale-Leaseback

Net Lease Transactions

Market Reports & Opinions of Value

Technology Services

CLAS™ Project & Portfolio Administration & Analysis REALTrac™ Online Transaction Management

Asset Services

Asset Management Property Management

Corporate Facilities Management Build-to-Suit/Development Services

Financial & Investment Services

Asset Optimization Program Capital Markets

Acquisition/Disposition Investment Services Mortgage Brokerage Structured Lease Finance 1031 Exchange Services Trade Credits

Advisory Services

International Advisory Distribution Logistics Due Diligence Management Feasibility Analysis

Lease & Utility Audits Lease Administration Location Benefits Analysis Move Management

Property Valuation & Tax Consulting Relocation Studies

Site Location Modeling Six Sigma Consulting Strategic Planning

Specialty Practices

NAI Global Life Science Group NAI Global Multifamily Group

Build on the power of our network.

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415 Madison Avenue New York NY 10017 tel +1 212 405 2500 fax +1 212 207 8011 www.nainyc.com www.naiglobal.com

Midtown

•12.6% Vacancy Rate

• $60.01 SF/YR Avg. Rental

Downtown

• $39.85 SF/YR Avg. Rental

Midtown South

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