Manhattan’s office leasing market finished in 2019 with more leasing volume since 2001. Total leasing activity increased for the fourth year in a row to 42.97 million, which is 2.9 percent year-over-year and 28.4 percent above the 10-year average. Asking rents dipped to $78.78 in the fourth quarter from $79.77 in the third quarter. Downtown leasing volume increased almost 70 percent year-over-year, totaling 10.7 million square feet. That was the highest total this century, surpassing 2000’s totally of 10.04 million square feet. The asking rents hit a new record of $64.64 per square foot. Midtown South had its most active year since 2001 with 16.41 million square feet, which is a 14.5 percent increase. The overall asking rent is $76.72 per square feet. Leasing volume in Midtown hit a six year low of 15.85 million square feet, down 25 percent from 2018. TAMI and financial services were the biggest leasers of the fourth quarter. Morgan Stanley renewed at 1 Penn Plaza for 1.2 million square feet across 22 floors. The Manhattan availability rate went up 20 basis points quarter-to-quarter to 12 percent as 10 blocks of at least 100k square feet came on the market.
Chestnut Holdings, which owns 49 W. 27th Street, is threatening WeWork that they are no longer wanted in their building. WeWork leased over 40,000 sf in January 2019, and the owner claims the company violated the terms of its lease by “initiating a corporate reorganization during the summer that replaced a financial guarantee for the lease with a new holding company.” WeWork was never granted permissions to do that, and they were almost $30,000 behind in rent and other charges. WeWork sued Chestnut in October to block them from kicking them out. Last month, a state judge placed a temporary injunction halting the eviction. In court documents, WeWork provided claims that they paid all the money it owed.
The office market ended the decade on a high, however there were some lows. We started on a happy note with Amazon setting up its headquarters in Long Island City, and WeWork was valued at $47 billion closed on the first big deal of the year: The $850 million purchase of the Lord & Taylor flagship. In February, Amazon pulled out of Long Island City after residents protested. The Chrysler Building was valued at $900 million over a decade ago, but it only sold for $150 million early this year. The original selling price was even lower than that at $50 million, but the price went up as two firms fought for it. Hudson Yards brought NYC back on a high when 30 Hudson Yards was completed making the Far West Side a “vibrant office submarket”. Eight two percent of that building was already leased by the time it was opened to the public. Allianz and Related Companies bought WarnerMedia’s 1.5 million-square-foot office condo at Hudson Yards for $2.2 billion. In May, Google purchased the Milk Building for $592 million and leased the entire 1.3 million-square-foot St. John’s Terminal building. In September, WeWork crumbled. They had to shelf its IPO and fire the former CEO Adam Neumann, and the company fell to be worth $8 billion. We started with the loss of Amazon, but in December, Amazon signed a lease for 335,000 sf at SL Green’s 410 Tenth Avenue.
Last month, King Street Properties and GFP Real Estate broke ground for a new life sciences lab in Long Island City. Innolabs, located at 45-18 Court Square, will provide over 267k square feet of lab and office space for New York scientists. Along with the office and lab space, the building has close access to seven subway lines, bike storage, a café, showers, and professional spaces to host industry events. The new lab will help promote the life sciences industry in Long Island City’s emerging district.
After being held up by the Trump administration, New York State is taking the lead on expanding Penn Station. The state will be acquiring an entire block in Manhattan to add eight new tracks, increase the capacity for trains by 40 percent, and accommodate an additional 175k daily passengers. The block is south of the current station – from Seventh Avenue to Eighth Avenue between West 30th and West 31st streets. State officials and some real estate owners on the block have been in talks about the acquisition of the properties. This expansion will connect to the Farley post office building, which will be completed by the end of this year. These two expansions will relieve congestion and create a gateway to the heart of the city. Penn South is said to cost about $5.9 billion and the planning process will take two and a half years.
Last month, an architect was killed by falling façade from the building at 729 Seventh Avenue. The city issued a violation for the façade eight months ago, and the owner paid a penalty, but nothing changed. Now, the Department of Buildings (DOB) is stepping up. The DOB doubled the number of inspectors and hired 12 new members. Immediately after the incident, DOB carried out an emergency sweep of buildings in the city with similar open violations and found 220 out of over 1,000 buildings were deemed unsafe. Property owners with buildings greater than six stories in height can expect more frequent and thorough inspections. When a building is found to have unsafe façade, the owners will not only face potential enforcement actions, but they will also receive additional re-inspections from DOB to ensure that safety measures have been installed and maintained. DOB will conduct follow up inspections 60 days of every Class 1 façade violation issued. If the owner fails to implement the safety measures, city contractors will be brought in at the owner’s expense. DOB will do 90 days inspections after the initial Class 1 façade violation and there will be recurring inspections every 90 days to ensure the buildings are complying to DOB’s orders. Buildings that haven’t received a façade violation will also be chosen at random for building inspections.