Market Reports

Passive House Construction Can Help NYC Developers Save on Emissions Costs

by Alex Patton February 12, 2020

Recently, New York City passed the Climate Mobilization Act bill as a way to counter climate change. If passed into law, the bill’s foundation would require buildings that are larger than 25,000 square feet to cut climate emissions by 40 percent by 2030 and by more than 80 percent by 2050. The legislation also requires certain buildings to cover roofs with plants, solar panels, small wind turbines or a combination of those elements. Rent-regulated housing, as well as structures of worship, won’t be subject to the emissions cap. However, building owners whose properties are subject to the new law will be fined $268 for every ton of emission beyond an individual building’s limit. To make the necessary changes to avoid these massive penalties — such as replacing outdated heating, cooling and lighting systems — owners will need to retrofit older buildings with updated energy-efficient technology. The legislation demonstrates what a metropolitan version of the Green New Deal, the national movement for a multi-trillion dollar, climate-friendly plan, might look like. The legislation is expected to create thousands of blue collar jobs and make it easier for the city to take advantage of future state and federal funding for clean energy projects …

February 12, 2020

Market Reports New York Northeast Northeast Market Reports Retail

Savvy Retailers ‘Recalibrate’ in New York City

by Taylor Williams February 5, 2020

Manhattan has long been one of the most competitive retail markets in the country due to two characteristics of its population: an incredible density and high incomes among residents and workers. The Bureau of Labor Statistics reported that the average weekly wage of Manhattan’s private sector workforce was $3,153 in the first quarter of 2019, much higher than the national average of $1,184 per week. In addition to its residential base, tourism plays a strong role in Manhattan’s retail sales. Marketing agency NYC & Co. projects that New York City will host 67 million visitors this year, up from approximately 65 million in 2018. While these demographic factors have kept Manhattan’s brick-and-mortar retail market somewhat insulated from e-commerce and other factors affecting the industry, the borough has not been completely shielded from the woes affecting the retail industry. Pocket-sized technology offers immediate access to everything from groceries and apparel to cars and construction materials, forcing brick-and-mortar retailers to get creative with their shopping experiences in order to avoid closing stores. Manhattan remains a top-tier market that commands rents above the national average. But the net result of e-commerce and asking rents that don’t match operating costs is a shift in …

February 5, 2020

Connecticut Market Reports New York Northeast Northeast Market Reports

Investors Like Fairfield, Westchester Counties

by Taylor Williams January 8, 2020

With a unemployment rate of 3.9 percent, strong demographics, transportation that provides direct access to New York City and a highly skilled workforce, Westchester County is seeing steady investor interest across all major property types. We have seen significant interest from institutional investors, including pension fund advisors, insurance companies and REITs. This same buyer class has continued to underwrite increased rent growth in the more urban markets of Westchester County — Yonkers, New Rochelle, White Plains — ranging from 2.5 to 4.5 percent depending on occupancy and development pipeline within the local submarkets. This investor group is targeting yields of 5.5 to 6.5 percent in return on cost metrics and purchasing existing assets for cap rates ranging from 4.4 to 5.3 percent, depending on the age, location and upside of the transaction. That spread has historically been between 150 and 200 basis points. Given the need to put capital to work, the spread is now closer to 100 basis points, reflecting more aggressive pricing for the market. This trend is evident in the Westchester market with new construction projects in the transportation-oriented towns. In addition, interest rates have helped keep investors motivated to buy. Low yields have helped to keep …

January 8, 2020

Market Reports New York Northeast Northeast Market Reports Office

Brooklyn and Queens: Worthy Alternatives to Overpriced Manhattan Office Market?

by Taylor Williams December 13, 2019

New York City is one of the priciest office markets in the world, with Manhattan housing the core business district of the city. The borough has always been the place to be — the ultimate live-work-play destination that houses the big corporations and the talent that recruiters look for. Overall, office asking rents in Manhattan fell only slightly during the third quarter to $74 per square foot, per Cushman & Wakefield, while rents in some submarkets continued to rise. In highly appealing office clusters like Hudson Yards or the Plaza District, asking rents often exceed $100 per square foot, meaning small- to mid-sized tenants are often priced out of these areas. Historically, areas outside Manhattan have not been as desirable for office users. Yet with rising housing prices, many New Yorkers have been priced out of the borough, forcing them to either downsize or get off the island. Developers have taken advantage of this trend and started investing in residential projects in Brooklyn and Queens in order to attract homebuyers. Businesses soon started to take notice, and many office-using tenants have since migrated or expanded into the outer boroughs, primarily Brooklyn and Queens. Small Leases Drive Brooklyn Brooklyn has always …

December 13, 2019

Market Reports New York Northeast Northeast Market Reports Retail

Price Escalation in Other Asset Classes Pushes Investors Toward NYC Retail

by Taylor Williams December 11, 2019

The value proposition for retail investment in New York City is reaching new highs amid an arguably overvalued office market and a multifamily market that continues to grapple with onerous new regulations. Rapid price escalations in both of these sectors have played an integral role in spurring additional investor demand for retail as of late. Analysis of Avison Young’s third-quarter property sales report for Manhattan revealed a rare opportunity, as the average price per square foot for retail properties has now dipped to $1,449, nearly 40 percent below the trailing four-quarter average. In addition, deal volume was also down nearly 40 percent below the trailing four-quarter average, clocking in at just $175 million. The glory days of 2014, when the market eclipsed $3.5 billion in sales volume, are well behind us. “For Rent” signs now cover swaths of the hardest-hit corridors of Broadway in SoHo, Third Avenue on the Upper East Side and Canal Street. What’s The Upshot? All is not lost, however, in the world of retail investment. In fact, it’s very much the opposite. The legislative constraints putting pressure on the multifamily investment market do not currently exist in the retail world. And with retail pricing down significantly …

December 11, 2019

Market Reports Massachusetts New York Northeast Northeast Market Reports Office Pennsylvania

Developers Adapt to Tight Office Market in Northeast

by Taylor Williams December 4, 2019

Office vacancies are falling across the big metros of the Northeast as robust user demand outpaces the supply of new construction. Deliveries in the last year have primarily been limited to Class A, build-to-suit properties and mixed-use developments. Meanwhile, office tenants are seeking high-end amenities at favorable prices. Nationally, the office vacancy rate stood at 16.8 percent in the second quarter, up slightly from 16.6 percent a year ago, according to real estate research firm Reis. Net absorption for the quarter totaled 3.2 million square feet, down from 3.9 million square feet a year ago. The average asking rent was $33.79 per square foot, up 2.2 percent on a year-over-year basis. Approximately 11.1 million square feet of office space was under construction at the end of the second quarter across Philadelphia, New York and Boston, according to CoStar Group. Helped by approximately 8.3 million square feet of absorption in the second quarter, the average vacancy rate across all three markets was 8.1 percent. Rather than undertake costly new ground-up construction projects, many developers are choosing to redevelop existing assets and efficiently incorporate office space into mixed-use projects. Coworking tenants occupied 54.2 million square feet of office space nationally at the …

December 4, 2019

Industrial Market Reports New Jersey New York Northeast Northeast Market Reports

Industrial Development Shifts Westward From Port

by Taylor Williams October 2, 2019

Demand for industrial space is roaring throughout the submarkets surrounding the Port of New York and New Jersey, propelled by the port’s handling of a record amount of cargo thus far in 2019. As a result of the healthy demand, as well as more product coming in and out of the port, landlords are enjoying positive rent growth accentuated by a limited supply of quality industrial space. The port experienced record growth in cargo volume handled during the first six months of 2019, according to internal data from the organization. The number of 20-foot equivalent units (TEUs) handled by the port has already exceeded 3 million for the year and surpassed 611,000 in June alone. This figure represents an all-time record for the port during the first half of the year, enabling it to surpass the Port of Long Beach for the first time in 20 years. Increasing amounts of inventory coming in and out of the port translates to greater demand for industrial space to store, process and ship product. But the port submarket has but a meager supply of real estate to meet the demand. Due to a limited space available for lease, the industrial submarket experienced negative …

October 2, 2019

Market Reports New York Northeast Northeast Market Reports Retail

Retail Rent Picture Varies Greatly Across New York City Submarkets

by Taylor Williams August 21, 2019

Retail leasing activity across New York City accelerated during the second quarter of 2019, but the market continues to see vast discrepancies in supply-demand balances across various submarkets. In certain parts of Manhattan, year-over-year asking rents declined by double-digit percentages, according to the Real Estate Board of New York (REBNY) Spring 2019 Report. Midtown East, for example, saw its average asking rent drop by 22 percent from $3,900 per square foot to $3,050 per square foot during this time period. The corridor between 42nd and 49th streets experienced similar activity, sliding 20 percent from an average asking rent of $1,000 per square foot to $800 per square foot. Historically high vacancy and low absorption rates are behind the negative rent growth. Due to the high cost of doing business in New York, landlords have also struggled to backfill spaces vacated by tenants that were victims of the e-commerce world. As a result, property owners are being forced to bring down their tenant improvement allowances and integrate more flexibility into their leases, primarily in the form of shorter lease terms to stimulate cash flows. Midtown East had approximately 100 vacant retail spaces totaling more than 500,000 square feet at the end …

August 21, 2019

Market Reports Multifamily New York Northeast Northeast Market Reports

NYC Multifamily Investors Pivot to Find New Opportunities After Rent Reform Laws

by Taylor Williams August 14, 2019

On June 14th, the New York State legislature passed a series of stringent rent regulation reforms. The laws damaged property owners’ means of making money by strengthening tenant protections, capping rent increases and keeping units permanently stabilized. A quick Google search will explain the specifics regarding IAIs, J51s, eviction, buyouts, vacancy bonus and decontrol. In short, landlords will face rising taxes, higher water and sewer bills and elevated construction costs with no mechanism to raise rents to outpace or even match these expenses. Gloom was in the air until an auspicious turn of events occurred on June 21st, just one week after the new rent laws passed. A Pennsylvania woman won a momentous victory in the U.S. Supreme Court that opened the doors for property owners to go directly to federal court without going to state court first. The timing was nothing short of incredible. Essentially, the decision paves the way for New York City landlords to get a fast-track hearing by the Supreme Court, which may view the these new rent laws as going too far and violating owners’ constitutional rights. In weeks to follow, property owners spoke with each other and with major law firms to get a …

August 14, 2019

Market Reports New York Northeast Market Reports Office

Manhattan’s Office Market Thrives as Top-Tier Tenants Flock to Midtown

by Taylor Williams August 7, 2019

Driven by activity in the office sector, commercial real estate in Manhattan is having one of its best years on record. The overwhelming demand for Manhattan office space has led to a surge in office-using employment and an accelerated pace of construction. In addition, the success and appeal of the new Hudson Yards project has breathed new life into the borough’s office market, with developers unable to keep up with the demand. The continued expansion in the technology and coworking sectors is reshaping the market. Companies are willing to pay a premium to snag office space that attracts top-tier, tech-savvy talent. This trend has caused office asking rents to rise to record levels. By The Numbers CBRE data shows that average asking rents for Midtown Manhattan office space reached $88 per square foot in the second quarter of 2019, 9.1 percent higher than the previous year. Class A office space commands even more, surpassing the $100 per square foot mark in desirable submarkets like Hudson Yards, Times Square or the Plaza District. The Midtown vacancy rate decreased 10 basis points to 12.2 percent, the lowest in 18 years, according to CBRE, while the past quarter saw 14.7 million square feet …

August 7, 2019

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