New York City Office Market Report, Second Quarter 2013

New York City Office Market Report, Second Quarter 2013

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Q2-2013 New York City Office Market Report, Second 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 87 31,566,249 7.6% 3.4% 11.0% $61.87 1,052,150 Grand Central 123 52,163,333 13.7% 2.8% 16.5% $61.75 - Murray Hill 65 12,030,439 7.6% 3.5% 11.1% $46.96 - Penn Plaza / Garment District 154 48,577,150 11.1% 1.8% 12.9% $45.81 1,800,000 Plaza District 311 82,983,443 9.8% 2.8% 12.6% $68.37 - Times Square 113 44,424,102 9.9% 1.4% 11.3% $68.61 717,000 UN Plaza 17 3,677,533 2.6% 0.1% 2.7% $61.31 - MIDTOWN TOTAL 882 274,072,024 10.3% 2.4% 12.8% $61.49 3,569,150 MIDTOWN SOUTH Chelsea 157 23,446,381 9.3% 1.0% 10.3% $54.20 106,844 Gramercy Park 137 22,018,289 7.4% 1.2% 8.6% $59.12 421,000 Greenwich Village 45 4,873,984 5.2% 1.1% 6.3% $52.50 400,000 Hudson Square 32 9,387,224 6.6% 2.5% 9.1% $55.64 - SoHo 121 6,496,858 6.2% 0.8% 7.0% $58.92 46,000 MIDTOWN SOUTH 492 66,222,736 7.7% 1.2% 8.9% $5630 973,844 TOTAL DOWNTOWN City Hall 62 7,169,861 14.2% 0.4% 14.6% $42.71 - Financial District 59 39,912,788 13.6% 2.6% 16.2% $41.46 - Insurance District 34 10,489,506 13.6% 0.9% 14.5% $37.11 - Tribeca 27 7,513,325 5.1% 2.7% 7.8% $49.35 - World Trade Center 34 24,664,719 20.1% 2.8% 22.9% $39.35 8,744,570 DOWNTOWN TOTAL 216 89,750,199 14.7% 2.3% 17.0% $40.36 8,744,570 Midtown Total 882 275,422,249 10.3% 2.4% 12.8% $61.49 3.569.150 Midtown South Total 492 66,222,736 7.7% 1.2% 8.9% $56.30 973.844 Downtown Total 216 89,750,199 14.7% 2.3% 17.0% $40.36 8.744.570 Manhattan 1,580 428,855,008 10.8% 2.2% 13.1% $53.58 13.287.564

Manhattan Overview OVERVIEW: The Manhattan office transaction volume for Q2 ended strongly with more than 6.2 million SF. After two positive quarters of net absorption in Q4 2012 and Q1 2013, this quarter, Manhattan watched it hit a huge bump, dropping to (591,077) SF. There was a spike in construction from 10,583,624 SF in Q1 to now 13,287,564 SF. Asking rents slightly increased; however, overall vacancy continued to remain consistent throughout Manhattan. The relative lack of leasing activity is largely a result of financial services firms delaying leasing decisions due to continuing concerns over the European debt crisis and the U.S. tax deficit and regulatory policies. Now, almost a 1000 year later, the affects of Hurricane Sandy continue to take a Net Absorption (sf) huge plunge into NYC Real Estate. Many landlords are still facing challenges going forward to secure their properties 500 and many of these changes may result in higher rents. This sector comprises approximately a quarter of Manhattan s 0 total office tenancy, and is the driving market force for large blocks of space in Midtown and Downtown. -500 Leasing activity was dominated by a large lease renewal taking place in Midtown. This transaction was for 595,000-1000 SF at 425 Lexington Avenue. The Tenant involved in the renewal was Simpson Thacher & Bartlett. Larger leases to -1500 follow were well above 100,000 SF. These included a lease by L Oreal USA for 402,000 SF located at Hudson Yards and a lease by Metropolitan Pavillion for 250,000 SF located at 639 West 46th Street ; both leases took place in Midtown as Total Avg Rate ($/sf/yr) well. $54.00 New York City s labor statistics present a positive picture for the city. The unemployment rate has decreased, ending at 8.2% in Q2. The proposed expansion of the Chelsea Market $52.00 has been approved. This project is predicted to create more than 1,200 long-term jobs as well as 600 construction jobs. This project will also allow for a positive economic boost for $50.00 NYC. Manhattan is the toughest real estate market in the world $48.00 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 location 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 NYC Unemployment Rate offer. 10% Investment sales activity continues to be dominated by 9% the Midtown South market in Q2, totaling well above $900 million in sales. Although Midtown South ranked number 8% one, the top two sales transactions took place in Midtown. The purchase of the Milford Plaza Hotel was the number one 7% investment sales transaction for Q2 totaling to $325 million. From watching investment sales gradually taking a downfall, 6% we are now seeing a positive light, where transactions have been remaining consistent. TRENDS: Vacancy Net Absorption Construction Asking Rents Unemployment Rate 14% 13% 12% 11% Overall Vacancy (%)

Vacancy Net Absorption Midtown Overview New York continues to watch closely as the average asking rate for Midtown slightly increases each quarter. For Q2, Midtown ended up with anverage asking rate of $61.49 with a previous Q2 rate Construction from 2012 of $59.79. Construction is up this quarter, with about 3.6 million SF under construciton in Midtown. Midtown leasing activity ended the Second Quarter with excitement, having ten leases that were above 100,000 SF. Midtown closed with the most lease transactions above 100,000 SF, totaling approximately 2.3 million SF. The largest lease for Midtown was a renewal for Simpson Thacher & Bartlett located at 425 Lexington Avenue for 595,000 SF. The two largest to follow were for 402,000 Asking Rents SF of space at the new Hudson Yards for L Oreal USA and 250,000 SF for Metropolitan Pavillion at 639 West 46th Street in Times Square. The largest sale transaction in Midtown for Q2 was Deusche Asset and Wealth Management s purchase of the Milford Plaza Hotel for a total of $325 million. RFR Holdings and Kensico Properties transaction ranked as the second largest sale for Midtown. $261,500,000 was paid for the purchase of 350 Madison Avenue. The next largest transaction to follow was a Private Investor s purchase of 295 Madison Avenue for 300,000 SF at the price of $200 million. 13% 12% 11% Overall Vacancy (%) 800 600 400 200 0-200 -400-600 -800 Net Absorption (sf) $62.00 $61.50 $61.00 $60.50 $60.00 $59.50 $59.00 $58.50 $58.00 $57.50 Total Avg Rate ($/sf/yr) Significant Leasing Activity Tenant: Address: Size: Submarket: Simpson Thacher & Bartlett 425 Lexington Avenue 595,000 SF Grand Central L Oreal USA Hudson Yards 402,000 SF Penn Plaza Metropolitan Pavillion 639 West 46th Street 250,000 SF Tmes Square Patterson Belknap 1133 Avenue of the Americas 200,000 SF Times Square Yahoo 229 West 43rd Street 176,000 SF Times Square Significant Building Sales Address: Size: Price:* Price (PSF):* Buyer: Seller: Milford Plaza Hotel N/A $325,000,000 N/A Deusche Asset Management Rockpoint Fund III 350 Madison Avenue 394,000 $261,500,000 $663.71 RFR Holdings Kensico Properties 295 Madison Avenue 300,000 $200,000,000 $666.67 Private Investor Westbrook Partners 567 Seventh Avenue 4,149 $7,250,000 $1,747.41 Private Investor Private Investor

Midtown South Overview Midtown South, usually finishing strong, has experienced a slight decline this quarter with an overall market size of about 1.2 million SF. Net absorption has continued to decline ending Q2 with (429,295) SF. The submarket s overall vacancy remained flat. Average asking rents consistently rise each quarter, going from $52.70 to $56.30. The Chelsea district continues to remain one of the more active districts in this submarket. Joining the Chelsea district in popular leasing activity this quarter is Greenwich Village. Vacancy Net Absorption AppNexus signed a lease in Midtown South allowing it to take on the largest amount of SF for the quarter. The lease covers 220,000 SF at 28-40 West 23rd Street in Chelsea. Other significant leases that took place in Chelsea were Mediaocean signing a lease for 88,400 SF and BuzzFeed signing at 200 Fifth Avenue for 68,791 SF. Construction Midtown South s largest sale transaction was completed by Clarion Partners in the purchase of 100-104 Fifth Avenue, totaling 277,412 SF for the price of $230 million or $829.09 PSF. A Private Investor purchased 27 Grand Street for $85,000,000 as the second largest sale. Another major deal for Midtown South includes the purchase of The James Hotel by Prudential Real Estate Investors from Brack Capital Real Estate. This transaction closed at $83,400,000. Asking Rents Overall Vacanacy % Net Absorption (in thousands SF) Total Avg Rate ($/SF/yr) 10% Overall Vacancy (%) 500 400 $54.00 $52.00 Total Avg Rate ($/sf/yr) 300 $50.00 8% 200 $48.00 100 $46.00 6% 0-100 -200 $44.00 $42.00 $40.00 Significant Leasing Activity Tenant: Address: Size: Submarket: AppNexus 28-40 West 23rd Street 220,000 SF Chelsea Facebook 770 Broadway 100,000 SF Greenwich Village Mediaocean 620 Avenue of the Americas 88,400 SF Chelsea New York Media, LLC 1 Hudson Square 80,500 SF Hudson Square BuzzFeed 200 Fifth Avenue 68,791 SF Chelsea Significant Building Sales Address: Size: Price:* Price (PSF):* Buyer: Seller: 100-104 Fifth Avenue 277,412 $230,000,000 $829.09 Clarion Partners Kaufman Organization 27 Grand Street N/A $85,000,000 N/A Private Investor Brack Capital Real Estate The James Hotel N/A $83,400,000 N/A Prudential Brack Capital Real Estate

Downtown Overview Downtown s average asking rent has continued to remain flat at $40.36 keeping rents well above the $35.62 SF rate reported just three years ago. The overall market size has dramatically decreased and net absorption continues to remain positive going on for its eighth consecutive quarter. The largest lease for this submarket was signed by Nyack College of 166,385 SF at 2 Washington Street. Other major leases included a signing by Conde Nast for 222 Broadway for 80,000 SF of space and Green Ivy School for 40 Wall Street for 80,000 SF of space. Leases to follow involved a lease signed by YMCA Retirement Fund for 120 Broadway for 52,000 SF and First Investors Management Company for 40 Wall Street for 36,490 SF. Three of the leases took place in the Financial District. 18% 16% Overall Vacanacy % Overall Vacancy (%) Looking into the investment sales for Downtown, the largest transaction that took place was for 2 Rector Street for 466,000 SF. This transaction totaled $140,000,000 or $300 PSF. A Private Investor s purchase of 360-362 Broadway was the second largest transaction in this submarket. The property totaled 26,723 SF valued at $23 million or $860 PSF. 14% Vacancy Net Absorption (in thousands SF) Total Avg Rate ($/SF/yr) Total Avg Rate ($/sf/yr) 350 300 $40.00 $39.50 Net Absorption 250 $39.00 200 150 100 50 0 $38.50 $38.00 $37.50 $37.00 Construction Significant Leasing Activity Tenant: Address: Size: Submarket: Nyack College 2 Washington Street 166,385 SF World Trade Center Conde Nast 222 Broadway 80,000 SF Insurance District Green Ivy School 40 Wall Street 80,000 SF Financial District YMCA Retirement Fund 120 Broadway 52,000 SF Financial District First Investors Management Company 40 Wall Street 36,490 SF Financial District Significant Building Sales Address: Size: Price:* Price (PSF):* Buyer: Seller: 2 Rector Street 466,000 $140,000,000 $300.43 CCIM and Kushner Properties Savanna 360-362 Broadway 26,723 $23,000,000 $860.68 Private Investor Private Investor Asking Rents

Summary 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. Glossary Midtown 12.8% Vacancy Rate $61.49 SF/YR Avg. Rental Midtown South 8.9% Vacancy Rate $56.30 SF/YR Avg. Rental Downtown 17.0% Vacancy Rate $40.36 SF/YR Avg. Rental 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 multitenant and single-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.

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