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Office Sales in Manhattan Drop 12% Y-o-Y in Q4 2019

Manhattan office sales dropped 12% year-over-year (Y-o-Y), with total volume dipping under $2.8 billion. Quarter-over-quarter, Manhattan sales decreased by more than $1 billion, despite gaining traction in Q3.

Highlights:

  • Year-over-year, the average price per square foot increased to $875.
  • About 3.3 million square feet of office space was traded in Q4 2019, down 17% compared to the previous year.
  • Overall office asking rents increased Y-o-Y to an average of $84.95 per square foot to end the quarter.
  • The $875 million sale of 330 Madison Avenue was the largest office deal in the borough in Q4.

Read the full breakdown of the report below.

Manhattan Office Sales Decrease 12% Y-o-Y

Manhattan office sales were down more than $380 million, decreasing 12% Y-o-Y. Nevertheless, approximately $2.8 billion in office properties changed hands in Q4 2019 with an average price per square foot of $875.

Specifically, nearly 3.3 million square feet of office space was sold in the last three months of 2019—a 17% decline compared to the same time period last year; however, quarter-over-quarter numbers were up 5.7%.

Specifically, nearly 3.3 million square feet of office space was sold in the last three months of 2019—a 17% decline compared to the same time period last year; however, quarter-over-quarter numbers were up 5.7%.

 

Q4 Closed Most Office Deals in 2019

A total of 13 office deals were sealed in Manhattan in the fourth quarter of 2019. The largest of these was the sale of 330 Madison Avenue in Midtown, which Munich Re purchased from Abu Dhabi Investment Authority for $875 million in December.

Other major deals include the $365 million sale of 589 5th Avenue and the $270 million sale of 175 Water Street.

Class A+ Office Space Closes Q4 with $106.30 Asking Price

Asking rents increased across all office types last quarter. For full-service office leases, asking rents reached an average of $84.95 per square foot across the board, up 2.7% since September. However, Class B office spaces enjoyed the largest increase in rents; they rose 5% to $65.29 per square foot.

 

Class A+ asking rents rose 3.6% since the end of September—finishing at $106.30 per square foot—while Class A office spaces increased 2.7% to $75.06 per square foot by the end of the year. Rents for Class C office type spaces increased 2.3%.

Office Vacancy Hits 7.8% to Close Out 2019

Overall office vacancy closed Q4 at 7.8%, up from 7.1% during the previous quarter. The most notable increase in occupancy was seen in Class C office spaces, where occupancy reached 94.2%.

Similarly, Class A+ properties went from 5.4% to 6.6% vacancy, while vacancy for Class A office spaces increased from 8.6% to 8.9%. Class B offices reached a 92.5% occupancy rate.

One Manhattan West Comes Online in Q4, 2.9 Million Square Feet to Be Delivered in Q1

Two office projects were completed in Manhattan in October 2019. One of the two was One Manhattan West, a two-million-square-foot high-rise in Chelsea. Brookfield Properties owns the building and leasing is handled by Cushman & Wakefield.

The other development is 35 Hudson Yards, a 557,000-square-foot tower also located in Chelsea; the trophy building, which has 72 floors and a Class A+ rating, is owned and managed by Related Companies.

Deliveries in the current quarter include the 1.1-million-square-foot David H. Koch Center for Cancer Care, which was just completed in January. Other large projects due in Q1 are Pier 57 in February and 25 Park Row, Trinity Commons and The Malt House in March.

Smaller office developments pending in Q1 include 330 East 62nd Street, 60 Charlton Street, The Warehouse and 44 Union Square.

Methodology

For this report, we used detailed Yardi Matrix data to analyze all office transactions with price tags equal to or exceeding $5 million that closed in Manhattan during the fourth quarter of 2019.

Our sales analysis—based on data recorded through January 10, 2020—includes completed office buildings equal to or larger than 50,000 square feet that changed owners during the quarter. In the case of mixed-use assets, only properties featuring more than 50% office space were taken into account.

Portfolio deals were evaluated as single transactions; distressed sales were excluded altogether.

To ensure the trends and comparisons presented in our analysis were valid, we excluded portfolio, partial interest and ground lease deals from our calculation of the average price per square foot.

Lease rate, vacancy and coworking space data refers to buildings equal to or larger than 25,000 square feet. Lease rates listed were averaged to the asking full-service-equivalent rents per square foot for spaces recorded in Yardi Matrix as “available” through January 10.While every effort was made to ensure the timeliness and accuracy of the information presented in this report, the information is provided “as is” and neither COMMERCIALCafé nor Yardi Matrix can guarantee that the information provided is complete.

Robert Demeter

Robert Demeter

Robert is a copywriter at CommercialCafe and brings 3+ years of experience in commercial real estate. He previously worked as a copywriter at PropertyShark, as a senior associate editor at Commercial Property Executive and Multi-Housing News, and also wrote monthly market reports at Yardi Matrix.