What does office space cost in New York?
The average asking rent for early 2017 was $82.62 a square
foot. The NER, or net effective rent (after free rent and landlord's construction costs), was $62.62 for the same period (CO
9/21/16). The answer to this is that every office, even
in the same buildings, ends up at a different price, but one thing is for certain: prices are going down! There
are about twenty prime Midtown "trophy" buildings which are currently asking a January 2015 average of $101.28 (TRD
1/21/15) a square foot (this is per year, rentable and not usable, with loss factors pf about 15%), with a total of
81 2013 transactions at this high level (REW 6/4/14), but the spaces leased were generally under 10,000 square feet, so these
deals are a small part of the business, albeit a much talked about segment.The spaces that actually command the highest rents
almost always feature Central Park views. The highest published price psf for 2016 is the proported deal at the 425 Park Avenue
renovation, for which Citadel has "agreed to pay $175.00 a square foot" (TRD 2/24/16) or $275.00 a square foot (CO
1/13/16) (the number keeps changing.. The average in the same area for "A" space is back up near to the 2008 high
of $86.26 per square foot, which seemingly ignores the area's 12% vacancy rates.... A recent deal of mine in the prime
Plaza District was for $73.00 a square foot, including a month's rent, and I have prime A Midtown building space for as low
as $49.00 a square foot, which includes work. That is pretty low! A few years back, istar Financial walked away
from $120 Sixth Avenue space, which they were unable to sublet at any price. The bottom line is that vacancies are increasing, and those seeking space are finally in a strong position to
negotiate for lower prices and to get more concessions, such as free rent and better renovations. Longstreet can get you the space that you need and the price you want
to pay. We can search your favorite building or block and can show you potential offices on an almost immediate
Office condos sell for an average of $784.13 a square foot...
Spring 2017 Manhattan office space stats
"Prime A" New York City ranks eleventh in the world in terms of office space costs, behind
London (2 districts), Hong Kong (2 D) , Beijing (2D), Moscow, New Delhi, Tokyo and Shanghai.
Overall Manhattan vacancy rate: 6.2%.
Lower Manhattan vacancy rate: 13.1%...not including the ten milion square feet about to
come on line at the World Trade Center site.
"A" vacancy rate: 11.2%
Midtown South Manhattan overall
vacancy rate: 9.4%
Lowest vacancy rates: Chelsea at 2%, and
SoHo and the Village under 1%...
Average Manhattan asking rent: $82.62 (CO 9/21/16)
Midtown "A" space
asking average: $83.54 (CO 5/4/16) (I think this is higher than the actual number)
Midtown South asking average: $70.79 (CO 3/22/17)....
$63.56 (CO 3/22/17)
Meatpacking: $115.79 !!! (REW 1/20/16)
Times Square Submarket: $85.33 (6/18/13 TCO) (This seems high to me)
Downtown asking average: $49.09 (CO 1/6/16)...with overall Downtown
vacancy at 11.5 % (CO 10/7/15) -- another list has it as $57.63 (REW 1/20/16)
John Powers of CB Richard Ellis recently estimated that there
is at least 30 million square feet of space available in midtown, (of approximately 222 million square feet). About 10 million
of that is sublet space, 7million of which is unmarketable. Office demand, according to a recent Studley report, is
at its lowest in two decades. I would say that the result of this is that excellent space could be had in the best midtown
locations in the mid $50's, which is space that would have been in the high $70's.
We deal directly with building
owners and with the brokers that represent them. Brokers that we have recently worked with include Cushman & Wakefield,
Savills Studley, CBRE, Newmark Grubb Knight Frank, Fisher Brothers, Jack Resnick & Sons, The Durst Organization, Rudin
Management...and literally hundreds of others. Nearly every space that is available in New York is listed on Co-Star, which
is a proprietary service that we subscribe to...and if a space is not listed there, chances are that we know about it through
personal contacts and through hitting the streets.
How far in advance should I look for office space?
This is a very common question with a difficult answer! In general,
after one has chosen a space to lease, negotiations can take up to a month. The drawing up of the lease can take the same
amount of time, with the landlord approvals then taking at least a few weeks--so the shortest amount of time you could have
a signed and approved lease is about three months. Usually Verizon and internet providers will then schedule installations
only after negotiations are finished, and then will take up to a month for an instillation appointment. If you were then to
do work, that would begin only after the lease commences as well, so plan on at least an additional month for simple
paint and carpet, two months for minor renovations and at least four months for major work (plus at least a month for
basic architectural plans). This all means that the least amount of time that one can move into a space after selection
is four months, with a more realistic time frame being six months.
What is the reason
that one leases rentable space and not usable?
One of the many frustrating things about New York City commercial real
estate is that you do not rent what you think you are leasing, meaning you sign up for "rentable" space rather than
"usable." This means that if you are paying for a 1,000 square foot office, it is probably closer to 800 square
feet (which means that particular building has a 20% loss factor). Every building has a different loss factor, and all measurements
are approved by The Real Estate Board of New York. Often times if you add up all of the rentable space it ends up being more
than the size of the entire building! The justification here is that you are paying for common space, such as the elevators,
halls, lobby, the cellar, etc. Other cities have a standard that essentially gives you what you pay for, but not in New York
City, where I am not aware of one commercial building that measures useable space this way.
2017 Investment property sale pricing
According to the January 20, 2016 Real Estate Weekly, Midtown investment sale
properties went for an average of $996 PSF. The September 28th, 2016 Commercial Observer has the average sale at $1,147.00
per square foot...Midtown S buildings went for $702 PSF, with Downtown buildings trading for $434 PSF. The (most recent!)
record sales per square foot for office properties in New York were the Jaunuary, 2015 trade of 837 Washington Street, which
is a 63,000 sf property, that went for $200 million, or $3,158 a square foot, and the Crown Building sale, 730 Fifth Avenue,
which traded for $4,490 per foot for the 400,000 square foot tower. The re-addressed 1.2 million rentable square foot 3 Bryant
Park sold late in 2015 for $1,800 per square foot, which was the biggest deal since the GM Building sold...1285 Sixth Avenue
sold to the Chinese for about $916.00 a square foor in June of 2016...The top sale in 2015 was the May deal for 11 Madison
Avenue, which traded for $2.6 billion for the 2.3 million square foot building. The most expensive office building sale in
2013 was 650 Madison Avenue, which sold for $1.35 billion, or about $2,200 a square foot. The highest sale on a per square
foot basis for a New York City office class A building in 2012 was $923, which was for the trophy Santander building at 45
East 53rd Street. It has 130,000 square feet and traded for $120 million. Other exceptionally high sales in the same year
were the purchase of 525 Broadway, a 45,000 square foot class B loft building, that closed for $1,900 a square foot and the
sale of 12 West 57th Street, which closed for $120 million, or $1,400 a square foot. 650 Madison Avenue traded for $2,100
per square foot in the fall of 2013 ($1.295 billion for 600,000 sf). In terms of reality, a good number to think in terms
of a realistic price per square foot would be the early 2015 sale of 281 Park Avenue South, which traded for $1,111 PSF. The
largest building sale in 2016 was for 787 Seventh Avenue, (1.7 million square feet, $1.9 billion / $590.00 a square foot).
A recent residential
development site sale shows a bit lower price per developmental square foot.....350 East 86th Street, a one story grocery
store building, sold for $100,000,000, or $434.00 a dsf CNYB 8/24/15).
In the fall of 2013, the average sale price, per square foot, for a hotel
property was $701, and for multifamily properties $472. For 2013 average price per square foot for the purchase of a class
A office building was $911.00 (10/8/13 CO). For all office buildings, the average sale price per square foot in 3Q13 was $693.00,
a 21% increase from 2012 (CO 11/5/13).
By the mid 2008's, prices for class "A" office buildings were as high as $1,566 per square
foot at 450 Park Avenue (which then traded for $1,700 in 2014) , $1,200 per square foot for Five Times Square, and $1,578
per square foot for the General Motors Building. One would think that those days would be long over, but in January, 2013,
a similar deal was announced to sell the Sony Building at 550 Madison Avenue for $1.1 billion, or over $1,300 a square foot,
which to this broker seems way too high. This could be compaired to the low sale of the AIG downtown buildings at 70 Pine
and 72 Wall Street (a total of 1.4 million square feet of office space), which sold for $105 per square foot in June
of 2009. Worldwide Plaza's sale at $375.00 a square foot was for almost a third of what Maclowe had paid for it just a few
years earlier. Sales volume has recently fallen 76%.
purchase a development site (often times an empty lot), the cost per buildable square foot (how much you are permitted to
build on that site) averaged in July of 2015 $511 per buildable foot(REW 7/8/15 ). This having been said, the 4/29/13 Crain's
has as the price for prime sites "commonly $700 to $800 a buildable square foot," with many sites in 2015 asking
more than $1,000 a square foot. To recoup this investment, a developer would have to sell a condominium for more than $3,000.00
a square foot, when $2,500 seems to be the limit for most developments.....
The Hotel Business
New York City had 58.3 million visitors in 2017 but
only has 115,369 hotel rooms....with average room rates being $273.00 (RD 2017 DB). Hotel properties, which were selling at record prices in 2009 ($1.4 million per room or "key"
for the Mandarin Oriental hotel in the Time Warner Center ), should keep going down in price. The average price per
key in 2016 was $500,9078. In December of 2016, the 618 room Stewart Hotel sold for $351,132 a room (CO 1/4/17). The
Elysee, a four star property on East 54th Street off of Park Avenue, traded for $55 million, or $550,000 per room, in the
winter of 2016 (REW 2/10/16). The most recent big sale was the Waldorf, in October of 2014, which traded for $1.9 billion,
or $1.4 million per room...with every one of them needing major renovation. No owner is going to make any money from this
deal in the months and years to come. The Hilton Garden Inn in Chelsea traded in the summer of 2016 for $405,000 per
room (REW 7/20/16). The 2015 sale of the Palace Hotel was for $885,588. per room...and the 563 key London Hotel sold for $382
million shortly thereafter, or $678,000 per room. The educated / smart benchmark price per room may be the October 2012 sale
of the 665 room Manhattan Hotel (formerly the Sheraton Manhattan), which traded for $275 million, or $413,533 a room. In
August of 2012, the Essex House on Central Park South sold for $375 million, or $736,738 a key--in 2005 the same property
had sold for $423 million, which means that a $48 million loss was taken. The 775 room Helmsley
Hotel on 42nd Street sold in April of 2011 for $570 million, or $735,483 a key. The more modest Holiday Inn Express at 15
West 45th Street also sold in March of 2011, for $354,000 a key. The Royalton and Morgan Hotels traded for $496,453 a
key. In October 2012, the Setai Fifth Avenue was sold for $229 million, or $1.070 million per room--again, way too much. The
Viceroy at 120 West 57th Street sold in September, 2013 for $148.5 million, or $615,000 per room. Finally, the Milford Plaza
was reported in April 2013 to have sold for $325 million, or $250,000 per room, which is a hotel sale that should actually
make some money for its new buyers. At the close of 2013, The Park Lane, which is arguably in the best hotel location in the
city, sold for $660 million, or $1.090 per key (income was said to be $20 million a year there for the Helmsleys....so not
a great return, but a better price than the over one billion dollars that the estate had wanted several years ago. The 300
room Standard, which traded in February , 2014 for $400 million, or $1.333 million per room...
Air rights, which is a complicated
concept, can go for as much as $600 a buildable square foot (Christ Church on Park Avenue) but may average about $200. In
2015, the developers of the Dream Hotel paid the owners of the Neil Simon theatre $450.00 a square foot for their air
rights (CO 8/5/15). Extell paid $475.00 a square foot for the Helen Hayes Theatre's air rights at 1710 Broadway in the fall
of 2016, with Howard Hughes' paying $438 at the same time for their South Street site (TRD 12/16).
Residential Condominium Prices per square foot
average price per square foot for a new residential (Manhattan) condominium in February of 2017 was $2,209 (RD 2017 DB). The
median price for all Manhattan apartments (co-ops and condos) was reported to be $900,000 (C 1/9/17( which is down quite
a bit from the previous year ($1.2 million REW 1/16/16), with the average price for a Manhattan apartment hitting $2.05 million
during the first quarter of 2016 (TRD 4/16). Co-ops are often much lower in price, and averaged at $1,178.00 a square foot.
The most expensive condos that have recently sold went for more than $8,000 psf (at One 57 and close
to that at 432 Park Avenue / the record sale for 2016 was PH 96 at 432 Park Avennue, which sold for $87.7 million, or $10,623
a square foot)).....The most expensive sales per square foot for a very limited number of apartments are approaching $10,000
(REW 1/11/17). 15 CPW #38A traded for $9,838 psf on 6/23/16. The highest deals per square foot at One 57 were realized for
the 82nd floor, which traded for $8,990 a square foot, and the PH, which sold for...$100 million, or $9,090 a square foot
(in January of 2015). Other benchmark sales have included 150 West 26th Street: $7,574, 15 CPW: $7,238, 25 Columbus Circle:
$5,526, 18 Gramercy Park: $5,072, 1 Bond Street: $4,966, 421 Hudson Street: $4,745, 100 CPS: $4,368, 400 West 12th Street:
$4,227 and at number ten... 132 East 65th Street: $4,164...212 Fifth is currently asking between $2,500 to $4,500 a square
foot, which is probably a good range for comparison...(REW 9/16/15).
Residential Rental Buildings
In 2016, the average price for a rental apartment in Manhattan was $3,999 (REW 9/14/16). The
average "luxury" rental in February of 2016 went for an astounding $9,962 per month (TRD 4/16). There is currently
an excess of inventory, according to some rental brokers. although overall vacany rates are at 1.42%. The average studio rental
was $2,675. For a one bedroom: $3,350. For a two bedroom: $4,647. For a three bedroom: $5,500. For NEW Developments,
the average studio rental (January 2017) was $3,200, for a 1 bedroom $4,062, for a 2 bedroom $6,283 and for a 3 bedroom $14,667)
(TRD 1/17). As long as rent control and rent stabilization remain, these high rental prices will be unlikely to go down.
The Manhattan Top Manhattan
1: Move - ins have begun at 432 Park Avenue. It is taller
than the Empire State Building, at 1,380 square feet. Number 2 is just across the street, at 425 Park Avenue (56th Street),
which is being redeveloped into a 600,000 square foot office building, and its owners have already claimed to have gotten
$275 / $300 a square foot for office space..... 3: 3 Greenwich Street AKA 3 World Trade Center should be complete by 2018.
4: The $15 billion Hudson Yards project had its first opening at Ten Hudson Yards, known by some as The Coach Building, which
was completed in June of 2016. The balance of the project will be mixed-use, with office and hotels proposed. 30 Hudson Yards
will be the site's tallest, coming in at 1,296 feet high. 5: Twenty Times Square, a 1.3 million square foot office tower,
on the 42nd Street Port Authority Bus Terminal, has seen no progress. It seems to be mothballed in search of a tenant. 6:
15 Penn Plaza, a 2.8 million square foot office tower, is proposed for the site of the currently operating Pennsylvania Hotel.
7: 740 Eighth Avenue will be a 900,000 square foot office building / possibly hotel and is still in the planning stages...8:
The 1,514 foot tall One Vanderbilt is on the way to being New York's third tallest tower. 9: 217 West 57th Street will be
1,550 feet high and will have a Nordstrom's at its base. 10: Watch for 111 West 57th Street and 220 Central Park South and
225 West 57th (1,550 feet high), which will be mega-tall residential towers...
Average 2017 US commercial asking rents....
Manhattan: $71.50, Washington DC: $49.60, San Francisco: $44.70, Fairfield
County CT: $33.79, USA Average: $21.70
The Midtown Manhattan
office space market has a total of 240 million square feet, which is the largest office space district in the world. The total
amount of space for all of Manhattan is 394.6 million square feet.
Manhattan Parking Spaces
In March of 2017 a garage package went on
sale with spaces going for $65, 326. The Commerical Observer (3/1/17) reported that spaces can sell for up to $175,000...which
is no surprise. Parking spaces rent from $350 up to $1,500 per month in prime residential neighborhoods. The city limits the
number of new garage spaces that can be built / included in new buildings, which is why spaces cost so much.
& Associates Inc Licensed Real Estate Brokers and Consultants Equal housing / office
and retail space for all 59 East 54th Street, Suite 64, New York, NY 10022 212-980-6285 WalterLDeane@aol.com