RFR Moving to 477 Madison
RFR announced the acquisition of 477 Madison Avenue, 325k SF, 24-story office building with 11k SF street-level retail. They launched a re-invention of the building with a upgraded facade, new windows and storefronts, landscaped terraces with glass balcony railings, increased retail visibility, and new mechanical systems. The lobby will exhibit Jeff Koons’ Bicycle Rack sculpture and paintings, as well as direct access to a new tenant amenity space that will “enhance the workplace experience.” The building was built in 1953 and renovated in 2016. Floors range from 5k to 18k SF.
Job Market Pushes Rents to New Highs
Manhattan office rents have been pushed to new limits as new office development has started and the booming job market. In Manhattan, the asking rent average of $77.82 per SF, which is up 4.9 percent from this time last year. Leasing during the first half of 2019 was 20.26 million SF, a 13 percent increase year over year. Like in 2018, a healthy job market and steady economic growth has led to strong leasing activity. While finance tenants are the top leasers in terms of square footage, the creative industries accounted for 39 percent of the leases this year so far. And that percentage is going to expand, according to the report, with class A space having a vacancy rent of 7.2 percent. Despite new developments in Midtown West and Lower Manhattan, the market has remained underserved overall due to the “advanced age” of much of the office inventory, compared to new competitors in the borough as well as in other global cities.
Office Leasing in Manhattan
· Midtown office leasing slowed down, totaling $1.25 million SF, which is a 32 percent decrease from the month before. The availability rate dropped to 10.6 percent, while the average asking rent is now $87.89 per SF. The largest deal in Midtown was for Time Warner Cable and they renewed 106,176 F at 1633 Broadway.
· Midtown South continued to rise with 750K SF, which is a 10 percent increase from April. The availability rate dropped to 10.1 percent, and the average asking rent fell to $83.56 per SF. The largest deal here – and in Manhattan – was at RXR Realty’s 620 Sixth Avenue with WeWork picking up 212,937 SF.
· Lower Manhattan totaled 460k SF in May, which was a slight increase from last month. The availability rate dropped to 13.2 percent and the average asking rent climbed to $62.74 per SF. The largest deal went to Knotel, which tripled its square footage at KBS Capital Partners and Savanna’s 110 William Street with 79,285 SF.
Cubicles Will Shrink as Municipal Workforce Rises
New York City has over 305K municipal workers – and more are coming. To make this much needed room, the city’s Department of Citywide Administrative Services changed its space standards by cutting workstation sizes. What use to be 6 ft. by 8 ft. and 6 ft. by 10 ft. are now 6 ft. by 6 ft. More communal spaces and spaces for private phone calls have been added. This change is a part of the DCAS’s project, which they launched in 2018, where all city-owned space and leased space will be measured. So far, they have measured about 3 million SF, where there is a total of 37 million SF. In fiscal year 2019, this project helped the city cut over $2.5 million in rental costs, and DCAS expects to save $3.68 million in fiscal year 2020. Over the next five years, the agency hopes to save close to $15 million on leased space it doesn’t need.