2Q16 NGKF NY Office Market Overview

2Q16

NEW YORK CITY OFFICE MARKET OVERVIEW

Todd P. Hershman Associate Director

212.359.8520

[email protected]

2

TABLE OF CONTENTS

21 Manhattan Development Overview

22 Commercial Development Pipeline

23 Commercial Development Horizon Map

24 World Trade Center Development Overview

25 Far West Side Development Overview

26 Midtown East Development Overview

27 Boutique Development Overview

6 Manhattan Office Market Overview

7 Leasing Activity by Market

8 Top Transactions 2Q16

9 Industries Driving Leasing

10 Manhattan Submarket Comparison

11 Asking Rent Trends

12 Taking Rent Trends

13 Taking Rent Corridor and Submarket Comparisons

14 Net Effective Rent Trends

15 Concessions Analysis: Work Amount

16 Concessions Analysis: Free Rent

17 Triple-Digit Taking Rent Assets

18 Manhattan Top-Tier Trends

19 Midtown South Top-Tier Trends

20 Enhancing Image: Lobby Renovation Analysis

28 Brooklyn and Long Island City

Office Market Analysis

29 Brooklyn Office Development in the Pipeline Map

30 Brooklyn’s Changing Inventory

31 Brooklyn Market Trends: Overall

32 Brooklyn Market Trends: Prime

33 Brooklyn Submarket Snapshot

34 Asking Rent Comparison

35 Long Island City Trends

36 Long Island City Submarket Snapshot

3 Introduction

4 Executive Summary

5 NYC Market Perceptions: Broker Opinion Poll

3

2Q16

INTRODUCTION

4

Second quarter Manhattan leasing outpaced the 10-year quarterly average,

as renewal activity counterbalanced a drop in tenant relocations. A strong

quarter for Midtown outpaced below-average leasing for Midtown South and

Downtown.

FIRE and health care tenants drove top deals in the second quarter. TAMI

leasing was muted relative to recent quarters.

Asking and net effective rents continued to climb, with Midtown South

outpacing growth in Midtown and Downtown. Several Midtown South

submarkets are now priced competitively with Midtown.

Downtown asking and taking rents reached a historic high during second

quarter 2016, as the FIRE and TAMI sectors solidified their presence in the

market.

Availability held steady from the prior quarter and the prior year. However,

new construction combined with shadow space and future large-block lease

expirations are expected to push the availability rate up.

Property owners have increasingly considered strategies to enhance their

building’s competitive advantage ahead of large-block availabilities

anticipated in Midtown.

Over 15 million square feet of development projects in Manhattan are

scheduled for completion by 2020. Another 14 million square feet are in the

pipeline.

The financial sector and

renewals drove second

quarter leasing, while

pricing and other market

fundamentals held

steady.

EXECUTIVE SUMMARY

5

12% Other

47% Positive:

It will drive

additional

investment to

New York City

14% Negative: It will

create lasting

uncertainty in the

market

28% Negligible:

New York City’s

economy is not

entangled with the

U.K.

Broker Opinion Poll: A Survey of NGKF Brokers

NEW YORK CITY MARKET PERCEPTIONS

1. WHAT CAN WE EXPECT IN LEASING OVER THE NEXT YEAR? 2. WHAT IMPACT WILL BREXIT HAVE ON NEW YORK CITY’S COMMERCIAL

REAL ESTATE MARKET?

3. WHICH OF THE FOLLOWING ATTRIBUTES HAS THE GREATEST

IMPACT ON A BUILDING’S COMPETITIVENESS IN ATTRACTING

TENANTS?

2%

52%

0%

46%

0% 10% 20% 30% 40% 50% 60%

Other

Slow-Down

Improvement

Stability

Additional Comments:

• Negligible, as there will be a transition period of some length. If corporate tax

reduction here is effected, there should be a positive impact on U.S. companies.

With the initial uncertainty there should be an inflow of foreign capital seeking

relative safety.

• Positive to capital markets, negative to leasing.

• Slight positive with some financial institutions expanding.

• Long-term money will buy "cheap" properties in London. This will cool slightly the

NYC market.

0%

10%

20%

30%

40%

50%

60%

70%

80%

Amenities Location Stable andConsistentOwnership

Lobby andBuilding

Aesthetics

6

2Q16

MANHATTAN OFFICE MARKET OVERVIEW

7

Source: Newmark Grubb Knight Frank Research

Manhattan (MSF) Midtown (MSF)

Midtown South (MSF) Downtown (MSF)

Relocation activity kept Manhattan leasing stable

compared to the prior year and ten-year

average.

Key

Takeaway

19.2 MSF

0

5

10

15

20

25

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

Relocations Renewals Average First Half Velocity

3.3 MSF

0

1

2

3

4

5

6

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6


5.6 MSF

0

1

2

3

4

5

6

7

8

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6


10.4 MSF

0

2

4

6

8

10

12

14

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6


First Half Leasing

LEASING ACTIVITY BY MARKET

8


• Seven of the top 10 transactions

were FIRE tenants, and two were

health care. None were TAMI.

• 60% of the top 10 deals were

renewals.

• Nine of the top 10 transactions

occurred in Midtown.

Company Address Market SF Lease Type Industry

UBS 1285 Avenue of the Americas Midtown 890,861 Renewal FIRE

NYU Langone Medical Center 222 East 41st Street Midtown 389,522 Direct New Health Care

PricewaterhouseCoopers 90 Park Avenue Midtown 240,605 Direct New FIRE

Visiting Nurse Services of New

York 220 East 42nd Street Midtown 237,434 Direct New Health Care

D.E. Shaw 1166 Avenue of the Americas Midtown 195,375 Renewal FIRE

Credit Suisse 11 Madison Avenue Midtown South 186,396 Renewal FIRE

Alston & Bird 90 Park Avenue Midtown 122,525 Renewal Professional

Services

Merrill Lynch 75 Rockefeller Plaza Midtown 122,418 Direct New FIRE

New York Life Insurance

Company 420 Lexington Avenue Midtown 114,709

Renewal &

Expansion FIRE

Wells Fargo Capital Finance 100 Park Avenue Midtown 103,000 Renewal FIRE

FIRE = Finance, Insurance, and Real Estate

TAMI = Tech, Advertising, Media, and Information

2Q16 Manhattan

TOP TRANSACTIONS

9

FIRE 50%

FIRE 21%

FIRE 47%

Prof Svcs 12%

Prof Svcs 12%

Prof Svcs 14%

TAMI 20%

TAMI 54%

TAMI 28%

Apparel & Retail, 2%



Other 16%

Other 10%

Other 8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Midtown Midtown South Downtown

2Q16 Leasing by Industry

INDUSTRIES DRIVING DEMAND

FIRE activity gained momentum while leasing

among TAMI industries dropped in comparison

to recent years.

Key

Takeaway

16

%

27

% 29

%

26

%

35

%

30

%

34

%

45

%

0%

10%

20%

30%

40%

50%

2013 2014 2015 2016 YTD

TAMI FIRE

FIRE versus TAMI Leasing Activity


10


Availability

Rate

Average Asking

Rent ($/SF)

MANHATTAN 11.1% $76.25

Midtown 11.5% $82.54

Eastside 9.3% $74.09

Far West Side 13.8% $83.19

Grand Central 15.5% $77.59

Murray Hill 10.4% $61.60

Park Avenue 11.3% $103.24

Penn Station 8.5% $64.52

Plaza District 14.2% $110.57

Sixth Ave/Rock Ctr. 11.1% $88.07

Times Square 10.6% $81.82

Times Square South 10.4% $62.18

Westside 9.0% $70.34

Midtown South 7.8% $71.98

Chelsea 7.6% $65.47

East Village 0.8% $60.78

Flatiron/Union Square 7.9% $71.07

Hudson Square/Meatpacking 10.7% $83.96

Soho/Noho 4.9% $70.22

Downtown 12.4% $61.85

Downtown East 11.3% $57.18

Downtown West 13.1% $67.73

Tribeca/City Hall 16.3% $61.26

MANHATTAN SUBMARKET COMPARISON

Asking Rent Growth Since 2010

49%

64%

59%

60%

200%

67%

120%

97%

67%

69%

44%

49%

69%

82%

57%

50%

50%

100%

57%

Tribeca/City Hall

Downtown West

Downtown East

Soho/Noho

Hudson Square/Meatpacking

Flatiron/Union Square

East Village

Chelsea

Westside

Times Square South

Times Square

Sixth Ave/Rock Ctr.

Plaza District

Penn Station

Park Avenue

Murray Hill

Grand Central

Far West Side

Eastside

Midtown South submarkets and the Far West

Side have seen the greatest growth in rental

rates during this market cycle.

Key

Takeaway

11


$89.02

$57.02

$82.54

$58.93

$40.76

$71.98

$51.56

$39.28

$61.85

$25

$35

$45

$55

$65

$75

$85

$95

2Q05 2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16


Average Asking Rent by Market ($/SF)

ASKING RENT TRENDS

Average Annual Change

Since Trough (2010)

MT 6.4%

MTS 10.1%

DT 7.9%

Change since 2015

MT 6.8%

MTS 7.6%

DT 8.8%

Year-over-year asking rent growth continued

generally on pace with rent growth over the last

six years.

Key

Takeaway

12


$75.18

$54.01

$74.48

$53.07

$38.05

$68.38

$44.26

$34.70

$52.31

$25

$35

$45

$55

$65

$75

$85

$95

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD


*Midtown 2016 YTD average impacted on a weighted basis by Citadel deal at 425 Park. Including that deal, the average is pushed to $80.74/SF.

Average Annual Change

Since Trough (2009-2010)

MT 4.7%

MTS 8.7%

DT 7.1%

Change Since 2015

MT 5.4%

MTS 2.7%

DT 3.1%

Average Annual Taking Rent by Market ($/SF)

TAKING RENT TRENDS

Midtown South and Downtown lead taking rent

growth in the recovery, but recently that growth

has slowed. Meanwhile, Midtown has picked up.

Key

Takeaway

13


By Submarket Market Average Base

Taking Rent ($/SF)

Park Avenue MT $117.20

Plaza District MT $98.18

Far West Side MT $81.83

Hudson Square/

Meatpacking MTS $81.29

Sixth Ave/Rock Ctr. MT $78.94

Westside MT $72.05

Eastside MT $68.05

Penn Station MT $67.78

Grand Central MT $66.64

Chelsea MTS $65.11

Flatiron/Union Square MTS $64.48

Times Square South MT $62.25

Downtown West DT $60.74

Times Square MT $59.80

Downtown East DT $49.65

By Corridor Market Average Base

Taking Rent ($/SF)

Park Avenue MT $109.99

Upper Fifth Avenue

(47th - 65th Streets) MT $105.85

Broadway MTS $83.28

Avenue of the

Americas MT $77.37

Madison Avenue MT $76.13

Lexington Avenue MT $76.02

Eighth Avenue MTS $69.63

East 40s MT $69.00

Park Avenue South MTS $68.70

Fifth Avenue MTS $67.31

West 40s MT $66.98

Lower Fifth Avenue

(32nd - 47th Streets) MT $66.07

Third Avenue MT $66.07

Madison Avenue MTS $65.30

Broadway MT $63.84

West 20s MTS $63.23

East 20s MTS $60.69

Broadway DT $53.65

Water Street DT $51.71

Midtown

Midtown South

Downtown

FLATIRON/ UNION

SQUARE CHELSEA

EAST VILLAGE NOHO/

SOHO

HUDSON SQUARE/

MEATPACKING

TRIBECA/ CITY HALL

DOWNTOWN EAST

DOWNTOWN WEST

EASTSIDE

GRAND CENTRAL

MURRAY HILL

FAR WEST SIDE

WESTSIDE

TIMES SQUARE SOUTH

PENN STATION

PARK AVE

PLAZA DISTRICT

SIXTH AVE/

ROCK CTR

UNION SQUARE

TIMES SQUARE

CITY HALL

PENN STATION

PORT AUTHORITY

G.C. STATION

CENTRAL PARK

41ST ST

30TH ST

32ND ST

14TH ST

6T

H A

VE

*Park Avenue Submarket and Corridor averages are impacted on a

weighted basis by Citadel deal at 425 Park.

Average taking rents for direct deals with +5-year terms

TAKING RENT CORRIDOR AND SUBMARKET COMPARISONS

The Far West Side and Hudson Square/

Meatpacking captured higher taking rents than

Sixth Avenue and six other Midtown submarkets.

Key

Takeaway

14


$41.91

$63.16

$61.56

$30

$35

$40

$45

$50

$55

$60

$65

$70

2010 2011 2012 2013 2014 2015 2016 YTD

Downtown Midtown Midtown South

*Midtown 2016 YTD average NER impacted on a weighted basis by Citadel deal at 425 Park. Including that deal, the average is pushed to $68.24SF.

25%

18%

11%

0%

5%

10%

15%

20%

25%

30%

2010 2011 2012 2013 2014 2015 2016 YTD

Downtown Midtown Midtown South

Difference Between Taking Rent and NER NER Rent Trends

Average net effective rents for direct deals with +5-year terms

NET EFFECTIVE RENT TRENDS

Net effective rent growth slowed in the first half

of 2016. Meanwhile, the delta between Midtown

South and Downtown has nearly evaporated.

Key

Takeaway

Downtown property

owners boosted

concessions to

land large tenants

relocating from other

markets.

As conditions

improved and taking

rents increased, Midtown

owners pulled back on

concessions.

With large-block

availabilities expected

in Midtown, owners again

increased concessions.

15

$68.44

$70.00

$72.50

$76.15

$79.38

$83.39

$84.70

$96.05

$60.00

$62.50

$66.99

$63.08


Chelsea

Downtown East


Eastside

Penn Station

Sixth Ave/Rock Ctr.

Times Square South

Westside

Park Avenue

Grand Central

Plaza District

Downtown Midtown South Midtown


2016 YTD Average Work Amount ($/SF)

3%

4%

5%

5%

14%

17%

22%

28%

3%

5%

18%

-6% Downtown East

Times Square South


Eastside


Sixth Ave/Rock Ctr.

Westside

Park Avenue

Penn Station

Chelsea

Plaza District

Grand Central


Percent Change Year Over Year

Work amount for direct deals with +10-year terms, +10K SF

CONCESSIONS ANALYSIS

Work allowances have jumped in most

submarkets, particularly in Midtown.

Key

Takeaway

16

7

8

9

9

9

9

10

10

10

7

9

10

8

Times Square


Downtown East

Eastside

Westside

Grand Central

Plaza District

Sixth Ave/Rock Ctr.

Chelsea


Park Avenue

Penn Station

Times Square South



2016 YTD Free Rent (Months)

-18%

-13%

-11%

-11%

11%

11%

13%

-13%

13%

Sixth Ave/Rock Ctr.

Times Square


Westside

Eastside

Downtown East

Grand Central


Park Avenue

Penn Station

Times Square South

Chelsea

Plaza District


No Change

No Change

No Change

No Change

Percent Change Year Over Year

Free rent for direct deals with +10-year terms, +10K SF

CONCESSIONS ANALYSIS

Free rent has been more stable than work

allowances over the last year.

Key

Takeaway

17

15

39

34

11 8

16 17 21 20

26 26

11

17

15

3

4

7 8

8 12

15

0

10

20

30

40

50

60

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

1Q-2Q 3Q-4Q


Buildings with $100+ Taking Rents

In 2016 YTD

Park Avenue

667 Madison Avenue

277 Park Avenue

280 Park Avenue

350 Park Avenue

375 Park Avenue

425 Park Avenue

450 Park Avenue

499 Park Avenue

601 Lexington Avenue

Plaza District

10 East 53rd Street

437 Madison Avenue

650 Madison Avenue

660 Madison Avenue

712 Fifth Avenue

767 Fifth Avenue

Sixth Avenue/Rockefeller Center

1095 Avenue of the Americas



Times Square South

7 Bryant Park

Westside

888 Seventh Avenue

250 West 55th Street

Chelsea

111 Eighth Avenue

Hudson Square/ Meatpacking

404 West 14th Street

860 Washington Street

Soho/Noho

770 Broadway

Number of buildings that signed $100+ taking rents each year

TRIPLE-DIGIT TAKING RENT ASSETS

The number of buildings that achieved triple-digit

rents remained on par with the same time last

year.

Key

Takeaway

18


34

74

58

10 17

38

24

38 31

46

19

7

16

26

6

9

16

13

22

19

9

15

11

29

18

3 1 1 1 3 7

3 4

4

12

8

3 2 4 8 6

11 13

5

0

25

50

75

100

Transactions with taking rents over $100/SF

MANHATTAN TOP-TIER TRENDS

Transactions Under 20K SF: Transactions Over 20K SF: Relocations Renewals and Expansions Relocations Renewals and Expansions

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

Most triple-digit deals are relocations under

20,000 square feet. Large relocations make up

the smallest share of top-market transactions.

Key

Takeaway

19


1 6 9 2

1 5

14

24

43

60

36

2

2

3

4

8

5

11

6

6 4 1 2 3

9

35

21

14

0

6 1

3

5

5

10

14

3

0

10

20

30

40

50

60

70

80

Transactions with taking rents over $60/SF

MIDTOWN SOUTH TOP-TIER TRENDS

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Like Midtown, smaller relocations make up the

majority of top-of-the-market transactions in

Midtown South.

Key

Takeaway

Transactions Under 20K SF: Transactions Over 20K SF: Relocations Renewals and Expansions Relocations Renewals and Expansions

20

Impact of Lobby Renovations for Select Class A Midtown Buildings

ENHANCING IMAGE: LOBBY RENOVATION ANALYSIS

Additional Lobby Renovations

in the Pipeline



575 Fifth Avenue

12 East 49th Street

65 East 55th Street

237 Park Avenue

399 Park Avenue

605 Third Avenue

Average Taking Rent

Pre-Renovation $62.28/SF

Lobby Renovation

Completed 2013-2015

Average Taking Rent

Post-Renovation $73.58/SF

Percent Change +18.1% (+27.3% when adjusted for floor)

21

2Q16

MANHATTAN DEVELOPMENT OVERVIEW

22

Manhattan (MSF)

COMMERCIAL DEVELOPMENT PIPELINE


The delivery of 10 Hudson Yards marked the

first building to open of a total 16.75M SF of new

construction planned at the Far West Side.

Key

Takeaway

0

2

4

6

8

10

12

14

16

198

0

198

1

198

2

198

3

198

4

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

201

9

202

0

TB

D

New

Construction

85.0 MSF

Expected

Delivery

15.4 MSF

Potential

Delivery

13.7 MSF

2014 837 Washington Street 1 WTC

2015 7 Bryant Park 430 West 15th Street 2016 10 Hudson Yards 860 Washington Street 855 Avenue of the Americas 432 Park Avenue 89 Bowery

2017 390 Madison Avenue 540 West 26th Street 512 West 22nd Street 76 Eleventh Avenue 2 Pike Street 2018 300 Lafayette Street 3 WTC 425 Park Avenue 55 Hudson Yards 61 Ninth Avenue 40 Tenth Avenue 414 West 15th Street

2019 1 Manhattan West 30 Hudson Yards 3 Hudson Boulevard 106 West 56th Street 2020 One Vanderbilt Avenue TBD 50 Hudson Yards 2 WTC 2 Manhattan West 66 Hudson Boulevard 15 Penn Plaza 438 Eleventh Avenue 75 Ninth Avenue 44 Union Square East

3Q14 MANHATTAN DEVELOPMENT UPDATE

4b

4a

5

1

3c

3d

3a

3b

2

MANHATTAN

WEST

4a

4b

55 HUDSON

YARDS

1

450 WEST

33rd

STREET

2

1 2

3

4

Memorial

2 WTC

WTC

Transportation

Hub

WORLD TRADE CENTER

AND DOWNTOWN

FAR WEST SIDE

3 HUDSON

BOULEVARD

5

7 BRYANT PARK

ONE

VANDERBILT

AVENUE

425 PARK

AVENUE

390 MADISON

AVENUE

1 WTC

3b

3a

Retail space 3c

3d

10, 30 & 50

HUDSON YARDS

4 WTC 3 WTC

6 66 HUDSON

BOULEVARD

6

MIDTOWN EAST

24

INFRASTRUCTURE AND AMENITIES

Fulton Center Retail at

Brookfield Place

WTC

Transportation

Hub

Westfield World

Trade Retail

2014 2015 2016 2016

Completed Completed Completed Completed

1 2

3

4

5 6 7 8

5

6

7

8


WORLD TRADE CENTER

PORT AUTHORITY

OF NY/NJ, DURST SILVERSTEIN PROPERTIES

1 World

Trade Center

2 World

Trade Center

3 World

Trade Center

4 World

Trade Center

3,000,000 SF 2,800,000 SF 2,500,000 SF 2,300,000 SF

4Q 2014 TBD 2018 4Q 2013

Completed Planned Under Construction Completed

104 stories 88 stories 80 stories 72 stories

Signed Condé Nast,

Moody’s, High 5

Games, xAd, and

others

Seeking an

anchor tenant Signed GroupM

Signed MediaMath,

Morningstar, IEX, and

public sector tenants

1 2 3 4

World Trade Center

DEVELOPMENT OVERVIEW

25

INFRASTRUCTURE AND AMENITIES

7 Train Extension

to 34th Street

East Platform

Over Rail Yards

15 Hudson Yards:

Residential

35 Hudson Yards:

Residential,

Hotel, Retail

Completed 2018 TBD TBD

Under Construction Under Construction Planned Mixed-use

development possible

1 8 7 6 5 4 3 2


9

1

2

3

4

7 8

5

6

9

Far West Side


FAR WEST SIDE

THE RELATED

COMPANIES

BROOKFIELD

PROPERTIES, QIA

MITSUI FUDOSAN,

OXFORD,

RELATED

THE RELATED

COMPANIES

BROOKFIELD

PROPERTIES, QIA

BROOKFIELD

PROPERTIES, QIA

MOINIAN

GROUP

TISHMAN

SPEYER

THE RELATED

COMPANIES

10 Hudson

Yards

450 W 33rdSt /

5 Manhattan

West

55 Hudson

Yards

30 Hudson

Yards

1 Manhattan

West

2 Manhattan

West

3 Hudson

Boulevard

66 Hudson

Boulevard

50 Hudson

Yards

1,700,000 SF 1,800,000 SF 1,300,000 SF 2,600,000 SF 2,100,000 SF 2,100,000 SF 1,800,000 SF 2,850,000 SF 2,300,000 SF

2016 2016 (Renovation) 2018 2019 2019 TBD TBD TBD TBD

Completed Under Renovation Under Construction Under Construction Under Construction Planned Planned Planned Planned

52 stories 16 stories 50 stories 90 stories 67 stories 67 stories 66 stories 70 stories 62 stories

Tenants include

Coach, L’Oréal,

BCG, SAP, Vayner

Media

Tenants include

Chase Digital Media,

Markit Group

Signed Boies,

Schiller & Flexner

Tenants include

Time Warner, HBO,

CNN, KKR

Signed

Skadden Arps

Mixed-use

development

possible

Mixed-use

development

possible

Project in early

stages of planning

Project in early

stages of planning

1 2 5 6 4 3 9 7 8

26

1 2 3 4

EAST MIDTOWN REZONING

The Vanderbilt

Corridor

Greater

East Midtown

The City approved rezoning of the Vanderbilt Corridor

including zoning applications for One Vanderbilt. The

initiative will increase the potential for office

development in exchange for public improvements and

TDRs.

The City is also exploring a more comprehensive

rezoning of Greater East Midtown. A stakeholder

committee developed a set of principles that will shape

the rezoning effort.

The City approved zoning applications

(ULURP) in May 2015.

Stakeholder committee recommendations

released in 2015. Rezoning expected to

begin in 2016.

Source: Newmark Grubb Knight Frank Research, NYC Department of City Planning

Fifth

Ave

nu

e

37th Street

Se

co

nd

Ave

nu

e

1

4

2

59th Street

3

Midtown East


MIDTOWN EAST

BANK OF CHINA L&L HOLDING, RREEF L&L HOLDING

COMPANY SL GREEN

7 Bryant

Park

390 Madison

Avenue

425 Park

Avenue

One Vanderbilt

Avenue

473,000 SF 843,710 SF 670,000 SF 1,800,000 SF

2015 2017 2018 2020

Completed Under Renovation Under Construction Planned

28 stories 32 stories 47 stories 65 stories

Signed Bank of China

and Schroeders

L&L will restack the

building to alter height and

bulk

Signed Citadel

Signed TD Bank.

Demolition has

commenced

27

Rendering

not yet

available


Rendering

not yet

available

Rendering

not yet

available

Boutique Development


BOUTIQUE DEVELOPMENT

ROMANOFF EQUITIES CIM GROUP WING FUNG GROUP HFZ CAPITAL THE RELATED

COMPANIES

VORNADO REALTY

TRUST, ALBANESE

ORGANIZATION

860 Washington

Street

432 Park

Avenue 89 Bowery

76 Eleventh

Avenue

300 Lafayette

Street

512 West

22nd Street

Midtown South Midtown Midtown South Midtown South Midtown South Midtown South

120,413 SF 71,000 SF 23,831 SF 242,750 SF 81,000 SF 170,000 SF

2016 2016 2016 2017 2017 2017

Under Construction Under Construction Under Construction Under Construction Under Construction Under Construction

10 stories 6 stories 9 stories 3 stories 7 stories 11 stories

BOUTIQUE DEVELOPMENT

SAVANNA YEUNG REAL ESTATE VORNADO REALTY TRUST LM LEGACY GROUP AURORA, WILLIAM

GOTTLIEB REAL ESTATE SAVANNA, ATOM ASSETS

540 West

26th Street 2 Pike Street 61 Ninth Avenue

414 West

15th Street 40 Tenth Avenue 106 West 56th Street

Midtown South Midtown South Midtown South Midtown South Midtown South Midtown

128,367 SF 93,000 SF 167,170 SF 144,273 SF 116,205 SF 90,000 SF

2017 2017 2018 2018 2018 2019

Planned Planned Planned Under Construction Planned Planned

9 stories 14 stories 10 stories 18 stories 12 stories 26 stories

28

2Q16

BROOKLYN AND LONG ISLAND CITY OFFICE MARKET ANALYSIS

29

Rendering

not yet

available

Rendering

not yet

available

Submarket

Owner/

Developer

Building

Address

Size (SF)

Year Open

Project Type

Status

Submarket

Owner/

Developer

Building

Address

Size (SF)

Year Open

Project Type

Status


New Construction and Repositioned Buildings

BROOKLYN OFFICE DEVELOPMENT PIPELINE

DUMBO DOWNTOWN BROOKLYN NAVY YARDS

Triangle

Assets

Cibrano

Family

Jehovah

Witnesses

JEMB Realty

Corp

Tishman

Speyer

Quinian Dev

Group, BLT

Brooklyn Navy Yard Development

Corp.

Boston

Prop, Rudin

Mgt

Westbrook

Partners, RXR

Madison

Realty Capital

10 Jay

Street

80 Hudson

Avenue

25-30

Columbia

Heights

420 Albee

Square

422 Fulton

Street

41 Flatbush

Avenue

GMC

Building 128

Building

77

Building

3

Dock

72

47 Hall

Street

29 Ryerson

Street

206,000 90,285 750,000 400,000 TBD 270,910 215,000 1,100,000 700,000 675,000 650,000 215,000

2016 2016 2018 2018 TBD 2016 2016 2017 2017 2018 TBD TBD

New

Construction Redevelop Redevelop

New

Construction Redevelop Redevelop Redevelop Redevelop Redevelop

New

Construction Redevelop Redevelop

Underway Underway Planned Proposed Planned Underway Underway Underway Planned Proposed Planned Proposed

SUNSET PARK RED HOOK WILLIAMSBURG BUSHWICK

Jamestown,

Belvedere Cap,

Angelo Gordon

Madison

Realty

Capital

Thor

Equities PWR

Estate

Four

Heritage

Equity

Two Trees

Management

Cayuga

Capital

Normandy,

Royalton,

Sciame

Heritage

Equity

Savanna,

Hornig

Capital

Lincoln

Property

Group

Industry City

32nd - 41st St.

Whale Square

14 53rd St.

280 Richards

Street

160 Van

Brunt Street

68 Ferris

Street

25 Kent

Avenue

Domino Sugar

Factory

Phase 1

87 Wythe

Avenue

333 Johnson

Avenue

215 N. Moore

Street

95 Evergreen

Avenue

455 Jefferson

Street

6,000,000 405,416 300,000 111,565 1,200,000 400,000 380,000 100,000 285,000 170,000 165,000 122,700

In phases

starting 2015 2016 TBD 2016 2020 2018 TBD 2017 2017 2017 2016 2016

Redevelop Redevelop New

Construction Redevelop

New

Construction

New

Construction Redevelop

New

Construction Redevelop Redevelop Redevelop Redevelop

Underway Underway Proposed Completed Proposed Proposed Planned Planned Planned Planned Completed Underway

30

DOWNTOWN

BROOKLYN

SUNSET

PARK DUMBO

WILLIAMSBURG/

BUSHWICK NAVY YARD

2013 Inventory (SF) 15,985,404 6,000,000 3,254,111 1,532,155 1,698,330

Current Inventory (SF) 16,104,268 6,405,416 3,908,181 1,615,245 2,875,330

Projected Inventory (SF) Through 2018

16,504,268 6,405,416 4,658,181 3,270,245 4,415,330

Inventory Differential

(SF) 2013-2018

518,864 405,416 1,404,070 1,738,090 2,717,000

3.2%

SF DIFFERENCE

2013-2018

6.8%

SF DIFFERENCE

2013-2018

43.1%

SF DIFFERENCE

2013-2018

113.4%

SF DIFFERENCE

2013-2018


160.0%

SF DIFFERENCE

2013-2018

Impact of New Construction and Repositioned Buildings

BROOKLYN’S CHANGING INVENTORY

31


Overall Average Asking Rent and Availability

BROOKLYN MARKET TRENDS

Average asking rents ended 2Q16 at

$39.95/SF, up 14.3% year-over-year.

This growth was driven by the

addition of newly repositioned prime

buildings over the last 12 months,

including 55 Water Street, 10 Jay

Street, and 95 Evergreen Avenue.

The spike in availability since the

start of 2013 is due to the

introduction of office supply in Sunset

Park and the Navy Yards, along with

newly repositioned buildings in

Downtown Brooklyn, Dumbo, and

Williamsburg/ Bushwick.

0%

2%

4%

6%

8%

10%

12%

14%

16%

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16

Average Asking Rent (Price/SF) Availability (%)

Across Brooklyn, new inventory continued to

push asking rents and availability up.

Key

Takeaway

32


Prime Assets Average Asking Rent and Availability

BROOKLYN MARKET TRENDS

Average asking rents for Brooklyn

Prime assets rose to $54.21/SF in

2Q16, up 27% year-over-year.

The availability rate jumped 710

basis points over the last 24 months,

driven by new construction and

repositioned buildings introduced as

new office inventory.

0%

2%

4%

6%

8%

10%

12%

14%

16%

$0

$10

$20

$30

$40

$50

$60

2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16


Brooklyn Prime assets saw much steeper

increases in average asking rent and availability

than the overall market.

Key

Takeaway

33


Greenpoint

Williamsburg

Bushwick

Bedford

Stuyvesant

Clinton

Hill Fort

Greene

Navy

Yard DUMBO

Cypress

Hills

East

New York Brownsville

Crown

Heights

East

Flatbush

Canarsie

Prospect

Heights Park

Slope

Red

Hook

Prospect

Park Lefferts

Gardens Sunset Park

Windsor

Terrace

Bay

Ridge Dyker

Heights

Fort

Hamilton Bensonhurst

Bath

Beach

Gravesend

Coney

Island

Sea

Gate

Brighton

Beach

Manhattan

Beach

Sheepshead

Bay Gerritsen

Beach

BK

Marine Park Barren

Island

Mill

Basin

Bergen

Beach Marine

Park

Flatlands

Midwood

Borough

Park Flatbush

Kensington

Prospect

Park

South

Jamaica Bay

Upper New York

Bay

Lower New York

Bay

Cobble Hill

BK Heights

Prime Assets are Class A and newly repositioned space. Standard Assets are all other office

inventory.

BROOKLYN SUBMARKET SNAPSHOT

Total Inventory: 16,104,268 SF

Availability Rate: 4.8%

Average Asking Rent, Prime Assets:

$48.26/SF

Average Asking Rent, Standard

Assets: $40.98/SF

YTD Absorption: -146,166 SF

DOWNTOWN BROOKLYN



Direct Average Asking Rent, Prime

Assets: $52.67/SF


WILLIAMSBURG / BUSHWICK


Direct Average Asking Rent:

$37.00/SF

Developers of Dock 72 (new supply

due in 2018) are asking top Brooklyn

rents, which will push the submarket

average up when added to the

market.

BROOKLYN NAVY YARD


Direct Average Asking Rent:

$27.50/SF

SUNSET PARK



Average Asking Rent, Prime Assets:

$57.62/SF

Average Asking Rent, Standard

Assets: $34.74/SF


DUMBO

34

$27.50

$37.00 $38.15

$48.26

$52.67

$57.62

$61.85

$71.98

$82.54

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Sunset ParkPrime

Brooklyn Navy YardPrime

Long Island CityPrime

Downtown BrooklynPrime

Williamsburg /Bushwick

Prime

DumboPrime

DowntownManhattan

Overall

Midtown SouthOverall

MidtownOverall


Average Asking Rents ($/SF)

ASKING RENT COMPARISON

Prime Assets are Class A and newly repositioned space.

Prime assets in Dumbo and Williamsburg

continue to compete with Manhattan, while

Sunset Park remains the most affordable option.

Key

Takeaway

35


Overall Average Asking Rent and Availability

LONG ISLAND CITY TRENDS

Asking rents reached new heights in

2Q16, rising to $37.66/SF, a 2.6%

increase from last quarter.

Fashion tenants drove 2Q16 leasing;

Madewell took 59,680 SF at the

Factory Building, and Eloquii took

10,807 SF at 37-18 Northern

Boulevard.

The availability rate rose to 13.9%,

driven by space hitting the market at

30-30 Northern Boulevard, 47-37

Austell Place, and the Falchi

Building.

0%

4%

8%

12%

16%

20%

$10

$15

$20

$25

$30

$35

$40

2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16


Despite Long Island City’s relative affordability to

Manhattan and most of Brooklyn, asking rents

reached a new all-time high in 2Q16.

Key

Takeaway

36

Astoria

Factory District

Hunter’s Point/ LIC Waterfront




Average Asking Rent, Prime Assets: $35.86/SF

Average Asking Rent, Standard Assets:

$26.42/SF


ASTORIA





$30.00/SF


THE FACTORY DISTRICT





$29.55/SF


HUNTERS POINT/LIC WATERFRONT

Prime Assets are Class A and newly repositioned

space. Standard Assets are all other office inventory.

LONG ISLAND CITY SUBMARKET SNAPSHOT

www.ngkf.com

New York City

HEADQUARTERS

125 Park Avenue

New York, NY 10017

212.372.2000

Todd P. Hershman

Associate Director

212.359.8520

[email protected]

Jonathan Mazur

Managing Director, Research

212.372.2154

[email protected]

Stephanie Jennings

Tri-State Director, Research

212.372.2099

[email protected]

All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Grubb Knight Frank (NGKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NGKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient’s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.

Newmark Grubb Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our

data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents.

Newmark Grubb Knight Frank Research Reports are also available at www.ngkf.com/research

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2Q16 NGKF NY Office Market Overview

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