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Weekly Market Report - January 9, 2024


Financial Services Tenants Make Up 80% of All Top-Dollar Deals


Office vacancy rates in major US cities have reached 19.6%, up from 18.8% a year earlier, according to Moody's Analytics. This is slightly above previous records of 19.3% set in 1986 and 1991 and the highest number since 1979. The office market's current malaise is rooted in the office-market downturn of the '80s and '90s, which followed years of overbuilding and shifting work habits. The glut of office buildings that couldn't find tenants during the recession in 1990 is a contributing factor to the higher vacancy rates in the US than in Europe or Asia.

The overbuilt South is the hardest hit, with Houston, Dallas, and Austin having the highest office-vacancy rates. Companies have also started ditching spacious private offices for open floors and cubicles, resulting in a gradual shift toward smaller offices. The Covid-19 pandemic has accelerated this shift, as companies realize they need even less space per employee due to remote work.



It has been reported that the Manhattan office market is not dead or stagnant, with the top tier being "impervious" to lower end issues. The survey of Manhattan office leases signed for $100-and-up per square foot in 2023 showed that availability on the prime corridor of Park Avenue was just 9.4% at year's end, compared to overall Manhattan availability of 20%. The remaining space on the boulevard is going fast, with PJT Partners expanding at SL Green's 280 Park Ave. and Stonepeak Partners signing at SLG's 245 Park. The reports are that the higher number of deals in the "$100-plus club" - 191 deals, including some laboratory and bio-medical leases.


Food delivery service occupying 115K sf after converting to direct deal

DoorDash has doubled its office space in the Flatiron District, adding over 57,000 square feet to its 200 Fifth Avenue location. The food delivery company is converting the sublease into a direct deal with the landlord, Boston Properties, to occupy 115,000 square feet. JPMorgan Global Alternatives is the majority owner of the Fifth Avenue building, while Boston Properties purchased a 27% minority stake in the building for $280 million. The asking rent for the space is unclear, but data shows the average asking rent in Midtown South during the fourth quarter was $81.35 per square foot. Other tenants include Grey Advertising, Tiffany & Company, and Eataly. DoorDash's expansion brings the building to 100% occupancy, and the landlords completed $135 million in capital upgrades before BXP's arrival.


Players Association joins McGraw-Hill, Cohen Ziffer at Midtown office

The Major League Baseball Players Association (MLBPA) is moving to Paramount Group's 1325 Sixth Avenue in Midtown Manhattan for a 15-year lease. The union, led by Tony Clark, is moving from Kato International's Tower 49 to the 34-story building, which is close to the National Basketball Players Association. The new location is also a five-minute walk from MLBPA headquarters and the New York City offices of Major League Baseball.

The MLBPA will join law firm Cohen Ziffer Frenchman & McKenna and publisher McGraw-Hill Education at 1325 Sixth Avenue. The move comes after Paramount Group, a real estate investment trust, slashed its dividend by 55% in mid-2017, resulting in a decrease in its stock by 0.1 percent. Leasing activity in the Manhattan office market rose by 27% from Q3 to Q4.


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