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Weekly Market Report - July 23, 2019

WeWork Owner Cashes Out

Co-founder of WeWork, Adam Neumann cashed out more than $700 million from the company ahead of its public offering through a mix of stock sales and debt. People have said that this is an unusually large amount of money and other startup founders wait for the IPO to monetize their holdings. Since 2014, Neumann has sold shares of the company in most investment rounds. He is WeWork’s largest shareholder, and he has sold some of his stake in the company and borrowed against some of his holdings. Since the company was founded nine years ago, Neumann has invested in real estate, spending almost $80 million for at least five homes, as well as other investments include commercial properties, stakes in startups, and he has given away more than $100 million to unnamed recipients. This past January, WeWork was valued at $47 billion, and it filed for initial public offerings late last year. It plans to move ahead with the listing either later this year or early next year.


Google’s New Campus

Last week, Google signed a lease for a 1.3 million SF office building at the redeveloped St. Johns Terminal building in Hudson Square at 550 Washington Street. Owner Oxford Properties are in the first phase of its redevelopment of the High Line freight terminal. William Floyd, director of Public Policy, said this space will be great for Google to grow into with its New York workforce. They are looking forward to be working with Oxford and the local community. The Terminal project will also be a part of Google’s new campus, which includes offices at 315 and 245 Hudson Street. Google will occupy five floors topped by a rooftop garden and café at 315 Hudson Street. In February, Google bought the Chelsea Market building across from its HQ at 111 Eighth Avenue for $2.4 billion.


10-Year-Low to Manhattan’s Sales

Manhattan, which is one of the world’s largest real estate investment markets, just made 76 sales during the second quarter in 2019, and its on its way to suffering its worst market in almost 10 years. Avison Young reported that 2Q 2019 investment sales in Manhattan topped $4.8 billion, which $2.2 billion of that came from the sale of 30 Hudson Yards office condo by Warner Media in April. The market has reached an “inflection point”, according to Avison Young, from the sweeping rent law passing in June and Amazon’s departure from the city.


Tech Industry Fuels NYC’s Real Estate Market

Tech companies, such as Facebook and Google, are taking New York City by storm and adding millions of SF in office space and creating thousands of jobs. This is after Amazon axed its plan to move to Long Island City in Queens. As well as those two companies, Uber is looking for large office space at the Farley building. NYC is emerging as an East Coast hub for technology because “of the size of its labor force, its extensive transportation infrastructure, and the cultural and entertainment activities.” Amazon’s departure sent the city into shock with some saying that with the company leaving, it may cause other tech companies to not expand here as well. However, social media, e-commerce, and ride-hailing companies have been growing. They are willing to spend the big money to rent high-end Manhattan real estate. Also, tech sector jobs have increased at a faster clip than the city’s overall job growth with a 9.6% increase between 2009 and 2018. These types of companies have leased 74% more space in the first half of 2019 than they did last year.


2Q 2019 Market Report

Midtown:

· 8.1 million SF, a historical high, leased surpassing the 4Q in 2018

· 29.4% increase from the 1Q and 47.8% higher than the 10-year quarterly average

· 9 deals greater than 100k SF were signed during the 2Q, led my Time Warner’s 1.5 million SF sale at 30 Hudson Yards

· Asking rents fell $.14/SF quarter over quarter to $82.27/SF but went up $.26/SF year after year.

Downtown:

· 2Q outpaced 1Q and made the first half of 2019 the busiest of the market cycle

· 2.8 million SF was leased, bringing year-to-date volume to 5.1 million SF

· Downtown leasing velocity is up 56% from this time last year, compared to a 13.2% increase in Midtown and a 10.9% decrease in Midtown South

· Largest transaction was EmblemHealth, Inc. with 493,114 SF renewal at 55 Water Street

Manhattan:

· Leasing velocity reached a record level for the second time in the past three quarters with 13.7 million SF, which is 40.1% higher than the 10-year average of 9.8 million SF

· More than 1,000 transactions were completed this quarter, 45.7% more deals were signed than the 4Q of 2018

· Asking rents were up to $76.95/SF, highest rents in five quarters and second-highest in the cycle

· Availability rate decreased to 11.7%, dipping below 12% for the first time in 10 years

· Financial companies signed 1.5 million SF across 16 submarkets and coworking providers leased 924,689 SF across 27 deals in 2Q

· WeWork signed three of the top five coworking deals, taking a combined 335,225 SF

Midtown South:

· Leasing velocity reached 2.8 million SF, almost doubling the 1Q and is 12.3% above the long-term average of 2.5 million SF

· Availability rate dropped to 8%

· Flatiron Health signed the largest deal, expanding at One SoHo Square for 248,220 SF

· Asking rents are at $76.09/SF, an increase of $.95/SF from last quarter

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