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Capital Market Update!
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4Q13
CAPITAL MARKETS REPORT FOR THE INTELLIGENT INVESTOR
4Q13 CAPITAL MARKETS REPORT 2
Capital Markets Report
Table of Contents
3 Market Summary
4 Overview
5 Cap Rates by Property Type: Manhattan
6 Significant Recently Completed Office Sales
7 Significant Pending Office Sales
8 Venture Capital Funding: United States Metro Areas
9 Venture Capital Funding: San Fran-New York
10 Transactions: New York
11 Yesterday and Tomorrow: 2013 vs. 2014
19 Leasing Analysis
20 Availability & Rent: Manhattan
21 Availability & Rent: MT / MTS / DT
22 Historical Asking Rents
23 Top-Tier Taking Rents
24 Rental Rates: Net Effective vs. Base Taking
25 Rental Rates: Net Effective
26 Commercial Development Pipeline
27 Capital Markets Intelligence
28 CMBS Issuance
29 Capital Distribution
30 Buyer Distribution
31 Sales Volume: Major Metropolitan Cities
32 Sales Volume: Manhattan
33 Half Billion Dollar Transactions
34 Historical Top-Tier Transactions: Price
35 Historical Top-Tier Transactions: Price / SF
36 Recession Flippers
37 Office Building Sales (P/PSF): United States
38 Historical Office Building Sales (P/PSF): Manhattan
39 Office Building Sales (Cap Rates): United States
40 Historical Office Building Sales (Cap Rates): Manhattan
41 Development Site Volume: Manhattan
42 Development Site Pricing: Manhattan
43 Residential Cap Rates: Manhattan
44 Residential Condominium Pricing: Manhattan
45 Luxury Condominium Pricing: Manhattan
12 Economic Indicators
13 Lending vs. Equity
14 Corporate Production
15 Unemployment Rates: International
16 Unemployment Rates: Domestic
17 Payroll Employment
18 Office-Using Employment
4Q13
MARKET SUMMARY
4Q13 CAPITAL MARKETS REPORT 4
Overview
Domestic and international capital has generally flocked to primary markets, gateway cities and supply constrained
environments. However, demand from investors has saturated the prime markets and smart money is now looking
at the ICE markets (intellectual capital and energy) in the search for higher yields
While absorption totals have been healthy, the momentum in investment sales has outpaced rent growth
Interest rates remain low yet somewhat volatile, but are expected to rise within the next couple of years and put pressure
on highly leveraged investors who are financed with floating rate debt
With limited quality product on the market, land and lot sales have spiked as developers are competing to build new
properties in supply constrained markets such as New York, San Francisco, Boston, Washington, D.C. and Seattle
While San Francisco and New York remain national technology hubs, several large office transactions (Twitter, Facebook,
IBM Watson, Google and Spotify expansions) were completed that solidified Midtown South as the center of New York’s
technology universe
The New York investment sales market has matched pre-recession levels in four property types: residential, office, retail
and development sites
4Q13 Market Summary
4Q13 CAPITAL MARKETS REPORT 5
4Q13 Capital Markets Intelligence
Cap Rates by Property Type
Manhattan
Source: Newmark Grubb Knight Frank; Real Capital Analytics
Despite declining yields,
substantial worldwide
demand for prime Manhattan
opportunities remains
At 4.2%, average cap rates for
residential and office property
are among the lowest in the
country along with Downtown
San Francisco
Strength continues to exist in
all property types with hotel
cap rates lagging slightly due
to increased supply
4.2% 4.2%
5.0%
6.0%
Residential Office Retail Hotel
0.0%
2.0%
4.0%
6.0%
8.0%
4Q13 CAPITAL MARKETS REPORT 6
4Q13 Market Summary
N/A $330 P/PSF $364 P/PSF $475 P/PSF $513 P/PSF $712 P/PSF $750 P/PSF $1,166 P/PSF $1,181 P/PSF
1345 Sixth /
605 Third
One Chase
Manhattan Plaza
One North End
Avenue
195 Broadway 440 Ninth
Avenue
1440 Broadway 122-130 East 23rd
Street
200 Lafayette
Street
60 Columbus
Circle
Built in 1969 (1345
Sixth; 1963 (605
Third)
1345 renovated in
1988
1,900,000 SF
(1345); 1,100,000
SF (605)
50 floors (1345);
43 floors (605)
Rockpoint Group
jv Fisher Brothers
purchased
National Bulk
Carriers sold
Fisher Brothers
retains majority
interest
Built in 1963
2,200,000 SF
60 floors
Fosun Group
purchased
JPMorgan Chase
sold
$725,000,000
Marketed as
potential
residential
conversion, will
likely remain an
office building
Built in 1997
550,000 SF
16 floors
Brookfield Office
Properties
purchased
CME Group sold
$200,000,000
NYMEX will lease
449,000 SF for 24
months before
they consolidate
into 222,000 SF,
2nd - 8th floors
Built in 1913
(renovated in
1986)
1,100,000 SF
29 floors
J.P. Morgan Asset
Management
purchased
Beacon Capital &
L&L Holding sold
$498,450,000
Recapitalization
L&L Holding
retained minority
interest (5%)
Built in 1927
(renovated in
1999)
412,000 SF
18 floors
Jowa Holdings
purchased
Sherwood Equities
jv Paramount
Group sold
$211,500,000
B&H occupies
150,000 SF on
long-term lease
Built in 1925
740,000 SF
25 floors
American Realty
Capital NY
Recovery Reit
purchased
Rockpoint Group &
Monday Properties
sold
$528,000,000
95% leased at
time of sale
200,000 SF leased
to Macy’s
Built in 1952
75,000 SF
4 floors
Toll Brothers
purchased
United Cerebral
Palsy of New York
sold
$150,000,000
Can develop
200,000 SF
residential building
on existing site
Built in 1914
(renovated in
2012)
130,000 SF
7 floors
General Growth
purchased
Kushner
Companies sold
$274,000,000
JCPenny signed a
NNN lease with
options through
2029
Built in 2003
1,100,000 SF
80 floors
Related
Companies with
GIC and Abu
Dhabi purchased
Time Warner sold
$1,300,000,000
(approximate)
Time Warner will
relocate its
headquarters to
Hudson Yards
Significant Investment Sales Transactions Recently Completed
4Q13 CAPITAL MARKETS REPORT 7
4Q13 Market Summary
$321 P/PSF $850 P/PSF $1,200 P/PSF TBD TBD TBD TBD TBD TBD
90 Broad Street 1350 Avenue of
the Americas
1334 York
Avenue
560 Seventh
Avenue
347 Madison
Avenue
One Park
Avenue
65 East 55th
Street
717 Fifth
Avenue
450 Park
Avenue
Built in 1930
(renovated in
2000)
393,000 SF
25 floors
On the market for
sale from Swig
Equities
Princeton
International
Properties Corp. to
purchase
Looking for
approximately
$125,000,000
Lower level
renovations
planned for
Superstorm Sandy
damage
Built in 1966
600,000 SF
35 floors
On the market for
sale from SL
Green Realty Corp.
Looking for an
equity partner, not
an outright sale of
the building
Major tenant,
Amazon (100,000
sf), is currently in
the market for
possible relocation,
but may renew and
expand
Built in 1921
(renovated in
1999)
500,000 SF
10 floors
On the market for
sale from
Sotheby’s
Looking for
approximately
$600,000,000
100% owned and
occupied by
Sotheby’s
Built in 1963
50,000 SF
6 floors
On the market for
sale from Parson
New School for
Design
Soho Properties &
Murray Hill
Properties to
purchase
Looking for
approximately
$60,000,000
Plans to demolish
and build a hotel
Built in 1917
200,000 SF
20 floors
On the market for
sale from
Metropolitan
Transit Authority
Close proximity to
Grand Central
Terminal
Likely teardown
and redevelopment
Built in 1926
(renovated in
2000)
1,000,000 SF
20 floors
On the market for
sale from Vornado
Realty Trust
Purchased 3 years
ago to avoid
default
Murray Hill
Properties owns
5% minority
interest
Built in 1986
615,000 SF
36 floors
On the market for
sale from
Shorenstein
Properties
Looking for
approximately
$775,000,000
Known as Park
Avenue Tower
255,000 SF lease
with Paul Hastings
expires in 2016
George Klein owns
5% minority
interest
Built in 1958
475,000 SF
26 floors
On the market for
sale from
Blackstone
Looking for
approximately
$375,000,000
Wharton Property
Advisors owns the
80,000 sf retail
condo in the base
Merrill Lynch is
major tenant with
over 100,000 SF
Built in 1972
(renovated in
2003)
320,000 SF
33 floors
Somerset Partners
& Michael Tabor
selling
Looking for
approximately
$600,000,000
Previously sold in
2007 for $1,585/psf
Significant Investment Sales Transactions Pending & Available
4Q13 CAPITAL MARKETS REPORT 8
4Q13 Leasing Analysis
2013 Venture Capital Funding
United States Metro Areas
Source: Newmark Grubb Knight Frank, PricewaterhouseCoopers /National Venture Capital Association MoneyTree Report
2013 Top Technology Transactions – San Francisco / Silicon Valley
Tenant Address Square Feet
Google 100-222 Mayfield Avenue 527,679
Microsoft 1065 La Avenida Street 515,700
Intuit/Demand Force 22 4th Street 202,355
Nvidia 2880 Scott Boulevard 200,000
eBay 2515-2535 N1st Street 187,282
Samsung 601 McCarthy Boulevard 187,134
Western Digital 1710 Automation Parkway 183,303
Twitter 1355 Market Street 155,180
StubHub 199 Fremont Street 140,378
Neustar 505 Howard Street 138,574
Illumina, Inc. 499 Illinois Street 97,700
Eventbrite 155 5th Street 97,624
Uber Technologies 1455 Market Street 88,000
Square, Inc. 1455 Market Street 85,111
Zendesk 1019 Market Street 72,933
San Francisco/Silicon Valley
$12.1 Billion 1,247 deals
Boston
(New England)
$3.3 Billion 412 deals
New York
$3.2 Billion 441 deals
Chicago
$1.0 B 80 deals
San
Diego
$757 M 97 deals
Dallas-
Ft. Worth
$693 M 40 deals Austin
$406 M 79 deals
Washington,
D.C.
$1.5 B 171 deals
Philadelphia
$1.0 B 165 deals
Los Angeles
$1.7 B 248 deals
4Q13 CAPITAL MARKETS REPORT 9
4Q13 Leasing Analysis
2013 Venture Capital Funding
San Francisco and New York – National Technology Anchors
Source: Newmark Grubb Knight Frank, PricewaterhouseCoopers /National Venture Capital Association MoneyTree Report
$11.4
$8.2 $9.3
$11.8 $11.2
$12.1
$0.0
$2.5
$5.0
$7.5
$10.0
$12.5
2008 2009 2010 2011 2012 2013
San Francisco Venture Capital Funding
Venture capital funding in San Francisco topped $12 billion in 2013 with 58%
dedicated to software, 8% to media/entertainment and 6% to IT services.
Strong demand for highly-skilled labor in technology is drawing workers to the city,
driving new housing development and investment in key San Francisco
neighborhoods such as Hayes Valley, Mission Bay, and Dogpatch.
Venture capital funding in the New York area has risen 88% since the down year of
2009, compared with a 48% gain for Silicon Valley.
In 2013, there were 441 VC deals for New York while New England had 412; Silicon
Valley led the nation with 1,247.
$2.1
$1.7 $1.9
$2.9
$2.3
$3.2
$0.0
$0.8
$1.5
$2.3
$3.0
$3.8
2008 2009 2010 2011 2012 2013
New York Venture Capital Funding
4Q13 CAPITAL MARKETS REPORT 10
4Q13 Leasing Analysis
San Francisco and New York – National Technology Anchors
What began on the West Coast has ventured to Manhattan
Source: Newmark Grubb Knight Frank
2013 Top Technology Transactions - New York
Tenant Address Square Feet
AppNexus 28-40 West 23rd Street 219,105
Twitter 245-249 West 17th Street 140,000
WeWork 222 Broadway 120,537
SAP Hudson Yards - South Tower 115,000
Facebook 770 Broadway 98,570
Mediaocean 620 Avenue of the Americas 88,387
Shutterstock 350 Fifth Avenue 80,062
Droga5 120 Wall Street 75,144
BuzzFeed 200 Fifth Avenue 68,791
High 5 Games 770 Broadway 58,378
eMarketer 11 Times Square 53,573
Indeed.com 125 West 55th Street 49,536
Infor 641 Avenue of the Americas 49,246
LinkedIn Corporation 350 Fifth Avenue 40,781
Rocket Fuel 100 West 33rd Street 40,503
4Q13 CAPITAL MARKETS REPORT 11
4Q13 Market Summary
2013 2014
BUILDING CONVERSIONS/RENOVATIONS 550 Madison Avenue
10 East 53rd Street
140 West Street
101 Murray Street
Brookfield Place
280 Park Avenue
St. John’s Center
180 Maiden Lane
One Soho Square
CONSTRUCTION DELIVERIES 4 WTC
250 West 55th Street
51 Astor Place
1 WTC
837 Washington Street
432 Park Avenue (formally The Drake Hotel)
INVESTMENT SALES Recession Flippers Foreign Investments
ACTIVE INVESTORS American Realty Capital Properties
Thor Equities
J.P. Morgan
RXR Realty
Blackstone
Equity Residential
International investors:
China
Canada
Australia
Middle East
Core Funds
LEASING Coach
L’Oreal
Time Warner
GroupM
Jones Day
AppNexus
Sony
Amazon.com
Sotheby’s
Reed Smith
Al Jazeera
DOMINANT LEASING INDUSTRY SECTOR Media/Technology Media/Technology
RETAIL Plaza District World Trade Center
Brookfield Place
TECHNOLOGY Facebook to 770 Broadway
IBM Watson to 51 Astor
WeWork Soho
Cornell Tech (Roosevelt Island groundbreaking )
Twitter to West 17th Street
WeWork Wall Street
HOT BOROUGH MARKET Williamsburg, Downtown Brooklyn Bushwick, Long Island City
Yesterday and Tomorrow
4Q13
ECONOMIC INDICATORS
4Q13 CAPITAL MARKETS REPORT 13
4Q13 Economic Indicators
Lending vs. Equity
Dow Jones Industrial Average vs. 30-Year Fixed Mortgage Rate
Source: Newmark Grubb Knight Frank
Following a mid-year run on 30-
year fixed mortgages, rates pulled
back at the beginning of the fourth
quarter before increasing in
December to match late-summer
averages.
The 30-year rate is more than a full
percentage point higher since
hitting a low of 3.4% at the end of
2012, when rates were at the
lowest point on record dating back
to the 1970’s.
The Dow Jones Industrial Average
has historically been a leading
indicator and jumped 24% in 2013. 2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013
6,000
9,000
12,000
15,000
18,000
Dow Jones Industrial Average 30-Year Fixed Mortgage Rate
4Q13 CAPITAL MARKETS REPORT 14
4Q13 Economic Indicators
Corporate Profits
United States
Source: U.S. Department of Commerce: Bureau of Economic Analysis
Corporate profits are at an all-time
high with over $2 billion registered
in each of the last five quarters.
Profits have risen over 100% since
hitting a bottom in 2008 and are up
25% over the previous peak
established in late 2006.
Despite tax increases and
government spending cuts that
have affected the economy,
continued improvement in 2014 is
forecasted.
$500.0
$750.0
$1,000.0
$1,250.0
$1,500.0
$1,750.0
$2,000.0
$2,250.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Bil
lio
ns
Corporate Profits
4Q13 CAPITAL MARKETS REPORT 15
4Q13 Economic Indicators
Unemployment Rate
International
Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics
At 6.7%, the United States
unemployment rate is significantly
lower than in early 2013, down
from 7.8% one year ago.
Uneven job recovery in the U.S.
continued in December with only
74,000 new jobs, despite averaging
182,000 new jobs a month in 2013.
While Japan kept unemployment
rates low during the recovery,
anticipation for this trend to
continue is not prevalent. Gains in
gross domestic product during
2014 will be hard pressed as new
tax laws beginning in April may
have an adverse effect on the
short-term growth of the economy.
27
.8%
25
.9%
15
.6%
12
.7%
12
.4%
10
.9%
7.5
%
7.2
%
7.1
%
6.7
%
5.8
%
5.2
%
4.0
%
3.5
%
3.2
%
Gre
ece
Sp
ain
Po
rtug
al
Italy
Ire
lan
d
Fra
nce
Sw
ed
en
Can
ad
a
Unite
d K
ing
do
m
Unite
d S
tate
s
Au
str
alia
Ge
rma
ny
Jap
an
Sw
itze
rlan
d
Hon
g K
on
g
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
4Q13 CAPITAL MARKETS REPORT 16
4Q13 Economic Indicators
Unemployment Rate
Domestic
Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics
Manhattan’s unemployment rate,
just below the national average,
remains high as the financial
service sector has not begun to
hire at a pre-recession pace.
Despite solid job growth, the city is
looking to supplement strong gains
in professional services, healthcare
and hospitality.
Many of the cities near or below the
national average unemployment
rate have economies that produce
significant revenue from intellectual
capital (technology) and energy
industries.
6.8
%
6.7
%
6.3
%
6.2
%
6.2
%
6.1
%
5.8
%
5.7
%
5.6
%
4.7
%
4.7
%
Sa
n D
ieg
o
Unite
d S
tate
s
Sa
n J
ose
Po
rtla
nd
Pitts
burg
h
Rale
igh/D
urh
am
Den
ve
r
Se
att
le
Hou
sto
n
Au
stin
Okla
ho
ma
City
3.0%
6.0%
9.0% ICE Markets
(Intellectual Capital & Energy)
8.5
%
8.1
%
7.3
%
7.0
%
7.0
%
6.7
%
6.6
%
6.3
%
6.3
%
6.3
%
6.0
%
5.6
%
Los A
nge
les
Chic
ago
Wa
sh
ing
ton
D.C
.
Atlan
ta
Ph
ilad
elp
hia
Unite
d S
tate
s
Ma
nh
att
an
Ba
ltim
ore
Mia
mi
Bo
sto
n
Sa
n F
ran
cis
co
Dalla
s
3.0%
6.0%
9.0% Primary Markets
Primary Markets ICE Markets
4Q13 CAPITAL MARKETS REPORT 17
4Q13 Economic Indicators
Payroll Employment
United States vs. New York City
Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics
Despite employment growth in
several key sectors such as
professional/business services,
leisure/hospitality and education/
health services, New York City
remains below expectations adding
just 3.4% in 2013 as employment in
financial services continues
to lag.
The pace of New York’s
employment growth will be
somewhat restricted until financial
service jobs are added to
supplement the growing number of
technology positions in the
workforce. 3.0
3.2
3.4
3.6
3.8
4.0
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
100
105
110
115
120
125
130
135
140
Th
ou
sa
nd
s
Th
ou
sa
nd
s
United States New York
4Q13 CAPITAL MARKETS REPORT 18
4Q13 Economic Indicators
Office-Using Employment
New York City
Source: NYC Office of Management and Budget/NYC Office of the Comptroller; Seasonally Adjusted
Office employment (professional
and business services, financial
services, real estate and
information) is up 9,100 jobs over
the past year.
Since the recession officially ended
four years ago (June 2009), office
jobs have increased by 89,800
positions, or 7.7%.
1298.4
1244.4 1251.7
900
950
1,000
1,050
1,100
1,150
1,200
1,250
1,300
1,350
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Th
ou
sa
nd
s
4Q13
LEASING ANALYSIS
4Q13 CAPITAL MARKETS REPORT 20
4Q13 Leasing Analysis
Overall Asking Rent and Availability Rate
Manhattan
Source: Newmark Grubb Knight Frank
Positive absorption via strong
leasing in technology, on the west
side of Lower Manhattan and along
the Sixth Avenue corridor over the
final two quarters of 2013 pushed
the overall availability rate to its
lowest point in five years.
At $55.47/PSF, average asking
rents have risen 4.8% since the
first quarter and closed at the
highest quarterly figure since third
quarter 2008.
7.0%
9.0%
11.0%
13.0%
15.0%
$25.00
$30.00
$35.00
$40.00
$45.00
$50.00
$55.00
$60.00
$65.00
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
Rent (Price/SF) Availability (%)
4Q13 CAPITAL MARKETS REPORT 21
4Q13 Leasing Analysis
Availability Rate and Average Asking Rent
MIDTOWN 12.2% $63.61
Eastside 9.0% $60.38
Grand Central 14.5% $58.12
Park Avenue 11.6% $69.91
Sixth Avenue / Rock Center 12.6% $81.77
Upper Fifth / Plaza 16.2% $63.63
Westside 8.1% $64.74
MIDTOWN SOUTH 10.3% $50.28
Times Square South 8.6% $43.05
Penn Station 12.5% $47.14
Park Avenue South 10.5% $49.08
Chelsea 6.5% $48.00
Lower Sixth Avenue 4.5% $55.72
Flatiron / Union Square 13.6% $61.85
Hudson Square 10.0% $56.09
SoHo / NoHo 6.9% $54.00
Village 14.0% $85.87
DOWNTOWN 14.7% $45.80
City Hall / Insurance 8.0% $37.23
WTC 25.9% $64.62
Financial 14.6% $39.63
4Q13 CAPITAL MARKETS REPORT 22
4Q13 Leasing Analysis
Overall Asking Rents by Market
Manhattan
Source: Newmark Grubb Knight Frank
While average rental rates in
Manhattan are considerably higher
than the trough in 2010, Midtown
rents have been relatively flat for
the past eighteen months.
Midtown South asking rents have
increased at a faster pace than
Midtown and Downtown, up 48%
since the 2010 bottom and up 12%
in the past year.
$80.45
$63.61
$49.66 $50.28
$46.44 $45.80
$25.00
$35.00
$45.00
$55.00
$65.00
$75.00
$85.00
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Midtown Midtown South Downtown
4Q13 CAPITAL MARKETS REPORT 23
4Q13 Leasing Analysis
Top-Tier Transactions – Taking Rents
Manhattan
Source: Newmark Grubb Knight Frank
There were nearly twice as many
deals completed with $100/PSF
base taking rents in 2013
than 2012.
The average base taking rent for
deals at or above $100/PSF in
2013 is $123.39/PSF compared
with $118.86/PSF in 2012.
25 buildings have completed deals
with base taking rents at or above
$100/PSF.
86 99 97
47 49
76
92 98
26
51 42
18 16
30
24
48 16
42
47
2 1
17
12
21
0
25
50
75
100
125
150
175
200
2006 2007 2008 2009 2010 2011 2012 2013
$75.00 - $99.99 $100.00 - $124.99 + $125
4Q13 CAPITAL MARKETS REPORT 24
4Q13 Leasing Analysis
Rental Rates: Net Effective vs. Base Taking
Direct Deals, 5 Years (+)
Source: Newmark Grubb Knight Frank
Average Midtown taking rents are
28% higher than Midtown South and
nearly 60% more than Downtown.
The Plaza District has the highest
concentration of trophy assets and
command the highest taking and net
effective rents in Manhattan.
Downtown has the largest net
effective to base taking rent spread
of the three major markets as Lower
Manhattan landlords have been
giving significant concession
packages on new lease transactions.
$61.25
$45.10
$56.06
$71.13
$79.66
$50.39
$34.27
$47.19
$59.64
$67.03
Manhattan
Downtown
Midtown South
Midtown
Plaza District Class A
$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00 $90.00
2013 Net Effective Rent 2013 Base Taking Rent
4Q13 CAPITAL MARKETS REPORT 25
4Q13 Leasing Analysis
Rental Rates: Net Effective
Direct Deals, 5 Years (+)
Source: Newmark Grubb Knight Frank
At $59.64/PSF, Midtown net
effective rents rose 4.6% in the
past 12 months as Sixth Avenue
closed the year strongly,
absorbing a good amount of the
existing vacancy.
Average Midtown South net
effective rents have increased
three consecutive years and
are now 30% higher than
Downtown rents.
Lower Manhattan, the value play,
remains the least expensive of the
three major New York markets. $50.39
$34.27
$47.19
$59.64
$67.03
$50.05
$33.99
$45.99
$57.00
$68.40
Manhattan
Downtown
Midtown South
Midtown
Plaza District Class A
$0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 $80.00
2012 Net Effective Rent 2013 Net Effective Rent
4Q13 CAPITAL MARKETS REPORT 26
0
2
4
6
8
10
12
14
16
18
198
0
198
1
198
2
198
3
198
4
198
5
198
6
198
7
198
8
198
9
199
0
199
1
199
2
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8+
MS
F
2013: 4 WTC, 250 W. 55th Street, 51 Astor Place
2014: 1 WTC
2015: Hudson Yards South, Seven Bryant Park
2016+: 3 WTC, Hudson Yards North, 425 Park Avenue, 380
Madison Avenue, One Vanderbilt Avenue, Manhattan West
4Q13 Leasing Analysis
Commercial Development Pipeline
Manhattan
Source: Newmark Grubb Knight Frank
New Construction (1980-2013): 81.3 MSF
Expected Delivery (2014-2017): 9.9 MSF
Potential (2018-2023): 16.3 MSF
4Q13
CAPITAL MARKETS INTELLIGENCE
4Q13 CAPITAL MARKETS REPORT 28
4Q13 Capital Markets Intelligence
CMBS Issuance
United States
Source: Newmark Grubb Knight Frank, Commercial Mortgage Alert
While the volume of CMBS
issuances in 2013 eclipsed the total
of the two previous years
combined, 2014 is expected to be
equally as active.
The dramatic rise in issuances
during 2013 coincided with low
interest rate levels as well as more
liquidity and availability of capital in
the market.
$77.8
$92.6
$166.5
$198.4
$228.6
$12.1
$2.7
$11.6
$32.7
$48.4
$86.1
$0
$50
$100
$150
$200
$250
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
4Q13 CAPITAL MARKETS REPORT 29
4Q13 Capital Markets Intelligence
Capital Distribution – All Property Types
United States
Source: Newmark Grubb Knight Frank; Real Capital Analytics
Country Total
Properties
Total
Volume
Canada 796 $20,428.0
Germany 97 $4,966.7
Singapore 19 $4,466.6
Australia 41 $3,717.5
Israel 91 $3,540.4
Norway 75 $3,464.4
China 48 $3,444.3
Switzerland 48 $3,379.6
UK 75 $2,614.0
Other 586 $17,583.7
Total 1,876 $67,605.3
Origin of Capital
Top Markets For Investment
Market Total
Properties
Total
Volume
Manhattan 107 $17,256.2
Los Angeles 81 $6,677.3
San Francisco 47 $3,390.6
Chicago 72 $3,295.8
Houston 93 $3,139.5
Washington, D.C. 24 $2,344.8
Seattle 58 $2,006.1
Dallas 97 $2,049.6
Boston 31 $1,643.6
Other 1,266 $25,747.0
Total 1,876 $67,605.3
4Q13 CAPITAL MARKETS REPORT 30
4Q13 Capital Markets Intelligence
Buyer Distribution – All Property Types
United States
Source: Newmark Grubb Knight Frank; Real Capital Analytics
Private buyers have been the most
active type of purchasers in
Manhattan for the past several
years and account for more than
40% of the market.
Publically listed REIT’s continue to
be heavily invested in the United
States and have purchased at a
fairly consistent yearly rate.
While cross-border transactions in
the United States account for 10%
of all activity, foreign investments in
Manhattan represent 24% of year-
to-date deals, led by China,
Canada, Israel and Australia.
17.9% 18.2% 15.0%
18.9%
37.8% 34.1% 41.4%
41.5%
26.9% 31.8% 28.5%
24.2%
8.2% 9.9% 8.6% 10.1%
9.3% 6.0% 6.5% 5.3%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2010 2011 2012 2013
Public Private Institutional Cross-Border User/Other
4Q13 CAPITAL MARKETS REPORT 31
4Q13 Capital Markets Intelligence
2013 Total Sales Volume – All Property Types
Major Metropolitan Cities
Source: Newmark Grubb Knight Frank; Real Capital Analytics
19 cities in the United States totaled
more than $5 billion in sales during
2013 with volume jumping nearly
40% in Dallas, Houston, Atlanta and
Inland Empire.
Activity in only 4 of the 19 cities
represented a decline from 2012 to
2013: San Francisco (-19%),
Seattle (-15%), San Jose (-6%), and
Phoenix (-1%).
The majority of sales in Manhattan
(77%) are derived from office and
residential building transactions.
Ma
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D.C
.-V
A b
urb
s
Sa
n F
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Sa
n J
ose
* N
YC
Bo
roug
hs
Den
ve
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Ph
oe
nix
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sh
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ton
, D
.C.
Nort
he
rn N
J
Sa
n D
ieg
o
Inla
nd E
mpir
e
Au
stin
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
Bil
lio
ns
* Includes Brooklyn, Queens, Bronx, Staten Island and Long Island
Primary Markets ICE Markets
4Q13 CAPITAL MARKETS REPORT 32
4Q13 Capital Markets Intelligence
2013 Sales Volume by Property Type
Manhattan
Source: Newmark Grubb Knight Frank; Real Capital Analytics
Property Type Volume ($ million) # of Properties
Office $20,941 171
Apartment $9,411 459
Retail $3,452 229
Development Sites $2,669 60
Hotel $2,235 17
Industrial $346 21
Totals $39,056 957
Office, 53.6% Apartment, 24.1%
Retail, 8.8%
Development Sites, 6.8%
Hotel, 5.7% Industrial, 1.0%
4Q13 CAPITAL MARKETS REPORT 33
4Q13 Capital Markets Intelligence
Office Building Sales
Manhattan Half Billion Dollar Transactions
Source: Newmark Grubb Knight Frank
Class A, trophy office building sales
have returned to the New York
market in large quantity with 14
completed transactions in excess
of $500 million during 2013 as well
as five more pending deals that are
expected to close in 2014.
2
1
3
11
20
7
1
2
11
3
14
5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
0
4
8
12
16
20
Completed Pending
4Q13 CAPITAL MARKETS REPORT 34
4Q13 Capital Markets Intelligence
Office Building Sales – Price
Select Top-Tier Historical Manhattan Transactions
Source: Newmark Grubb Knight Frank
$1.0
$0.8
$1.7
$1.2
$1.5
$1.3
$1.8 $1.7
$2.8
$1.5
$1.8
$1.0 $1.0
$1.1
$1.3
$0.7
$1.3
$0.8
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
399 Park(3Q02)
111 Eighth(1Q04)
200 Park(2Q05)
1290 AoA(2Q06)
1211 AoA(3Q06)
5 Times Sq.(4Q06)
666 Fifth(1Q07)
825 Eighth(1Q07)
767 Fifth(2Q08)
1301 AoA(3Q08)
111 Eighth(4Q10)
1633Broadway
(2Q11)
601 West26th
(3Q11)
550Madison(1Q13)
650Madison(3Q13)
One CMP(4Q13)
60Columbus
(1Q14)
65 East55th
(Pending)
Bil
lio
ns
4Q13 CAPITAL MARKETS REPORT 35
4Q13 Capital Markets Intelligence
Office Building Sales – Price Per SF
Select Top-Tier Historical Manhattan Transactions
Source: Newmark Grubb Knight Frank
$631 $679
$753
$1,000
$1,205
$1,525
$1,258
$1,507
$610
$790
$1,010
$685
$1,373
$1,285
$2,175
$1,166 $1,181
$0
$500
$1,000
$1,500
$2,000
$2,500
745 Seventh(4Q01)
399 Park(3Q02)
767 Fifth(3Q03)
111 Eighth(1Q04)
666 Fifth(1Q07)
450 Park(3Q07)
280 Park(4Q07)
767 Fifth(2Q08)
111 Eighth(4Q10)
450Lexington
(3Q12)
450 West15th
(1Q13)
140 West(3Q13)
499 Park(3Q13)
550 Madison(1Q13)
650 Madison(3Q13)
200Lafayette(4Q13)
60 Columbus(1Q14)
4Q13 CAPITAL MARKETS REPORT 36
4Q13 Capital Markets Intelligence
Office Building Sales – Recession Flippers:
Manhattan
Source: Newmark Grubb Knight Frank
Landlords who purchased buildings
between 2008–2010 when the
economy and real estate market
was depressed have seen values
in their properties rise significantly.
Savvy landlords such as Savanna
and Kushner have purchased
buildings, renovated, leased-up
and flipped for a substantial profit in
less than two years.
5.9% 8.1% 12.5%
30.4%
40.0%
48.4% 51.2% 55.0%
84.2%
91.8%
130.0%
145.0%
197.0%
0%
50%
100%
150%
200%
125 West55th
1330AoA
7 West51st
86 Trinity 509 Fifth 430 West14th
434 Bway 104 West 40th
15 East26th
256 Fifth 158 West27th
100 Fifth 200Lafayette
* All calculations are of sale price and does not take into account pre-existing mortgages or liens.
4Q13 CAPITAL MARKETS REPORT 37
4Q13 Capital Markets Intelligence
United States Office Building Sales
Price Per SF
Source: Newmark Grubb Knight Frank; Real Capital Analytics
Average office building prices on a
per-square-foot basis in Manhattan
are 34% higher than this time
last year.
While prices have been flat over
the past year in some major
markets such as Washington, D.C.
and Chicago, averages are up in
secondary markets like Seattle
and Denver.
$778
$535
$480 $454
$321 $296 $286
$248 $232
$212
$150 $147
$105
Ma
nh
att
an
Wa
sh
ing
ton
, D
.C.
Sa
n F
ran
cis
co
Bo
sto
n
Se
att
le
Sa
n D
ieg
o
Los A
nge
les
Den
ve
r
Chic
ago
Hou
sto
n
Atlan
ta
Pitts
burg
h
Dalla
s
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
Primary Markets ICE Markets
4Q13 CAPITAL MARKETS REPORT 38
4Q13 Capital Markets Intelligence
Historical Office Building Sales
Manhattan Price Per SF
Source: Newmark Grubb Knight Frank; Real Capital Analytics
$849
$245
$778
2006 2007 2008 2009 2010 2011 2012 2013
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
4Q13 CAPITAL MARKETS REPORT 39
4Q13 Capital Markets Intelligence
United States Office Building Sales
Cap Rates
Source: Newmark Grubb Knight Frank; Real Capital Analytics
Cap rates on office buildings in
Manhattan and San Francisco
have moved lower in the past
year as strong demand in those
cities continue.
Liquidity and projected rent
growth have pushed some
notable sales in the New York and
San Francisco markets towards
cap rates in the 3-4% range.
4.2% 4.2%
5.4% 5.5%
6.0% 6.0%
6.5% 6.5% 6.5%
6.9%
7.4% 7.6% 7.6%
Ma
nh
att
an
Sa
n F
ran
cis
co
Bo
sto
n
Wa
sh
ing
ton
, D
.C.
Los A
nge
les
Se
att
le
Hou
sto
n
Den
ve
r
Sa
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ieg
o
Chic
ago
Dalla
s
Atlan
ta
Pitts
burg
h
0.0%
2.0%
4.0%
6.0%
8.0%
Primary Markets ICE Markets
4Q13 CAPITAL MARKETS REPORT 40
4Q13 Capital Markets Intelligence
Historical Office Building Sales
Manhattan Cap Rates
Source: Newmark Grubb Knight Frank; Real Capital Analytics
4.2%
6.9%
4.2%
2006 2007 2008 2009 2010 2011 2012 2013
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
4Q13 CAPITAL MARKETS REPORT 41
4Q13 Capital Markets Intelligence
Development Site Volume
Manhattan
Source: Newmark Grubb Knight Frank; Real Capital Analytics
After very little activity during the
recession and early recovery,
volume of development site
sales have increased 67% in the
past year and approached 2006-
2007 levels.
As activity has trended higher,
pricing has significantly improved
and intensified competition
among local and foreign
developers with the intent to
develop high-end retail, residential
and hotel properties.
Toll Brothers, Extell Development,
Related Companies and McSam
Hotel Group were all active buyers
of development sites in 2013. $0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
$4,000,000,000
2005 2006 2007 2008 2009 2010 2011 2012 2013
4Q13 CAPITAL MARKETS REPORT 42
4Q13 Capital Markets Intelligence
Development Site Pricing (Price Per Buildable SF)
Manhattan
Source: Newmark Grubb Knight Frank
$321 $329 $330
$460
$555 $565 $575 $586
$635
$722 $747
$853
$905
$1,034
$0
$200
$400
$600
$800
$1,000
$1,200
517 W. 35th(Pending)
616 FirstAvenue
234 E. 23rdStreet
* 41 E. 22ndStreet
* 180 E. 88thStreet
356 TenthAvenue
101 MurrayStreet
225 W. 57thStreet
560 SeventhAvenue
118 E. 59thStreet
122 E. 23rdStreet
239 TenthAvenue
19 E.HoustonStreet
17 E. 12thStreet
* Prices reflects a blended rate with air rights
4Q13 CAPITAL MARKETS REPORT 43
4Q13 Capital Markets Intelligence
Residential Cap Rates
Manhattan
Source: Newmark Grubb Knight Frank; Real Capital Analytics
Averaging 4.2% as of the fourth
quarter 2013, cap rates on
residential buildings in Manhattan
declined dramatically in the past
three years.
Cap rates have matched second
quarter 2008 averages, which was
the lowest point recorded over the
past 10 years and are well below
the 6.8% average that was
registered in second quarter 2010.
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
4Q13 CAPITAL MARKETS REPORT 44
4Q13 Capital Markets Intelligence
Residential Condominium Pricing
Manhattan
Source: Newmark Grubb Knight Frank; Miller Samuels
Prices of residential condominium
sales in Manhattan are up
considerably since hitting a post-
recession low in 2010 and have
increased 11% in the past year.
While the $1,412 per-square-foot
average achieved in the fourth
quarter eclipsed 2008 peak pricing
levels, demand is expected to drive
prices even higher in 2014.
$765
$873
$1,086
$1,142
$1,225
$1,374
$1,210
$1,167
$1,229
$1,275
$1,412
$500
$750
$1,000
$1,250
$1,500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Average Price/PSF
4Q13 CAPITAL MARKETS REPORT 45
4Q13 Capital Markets Intelligence
Luxury Condominium Pricing
Manhattan
Source: Newmark Grubb Knight Frank; CityRealty
Sales in twenty-two residential
condominium buildings in New
York have averaged at least $3,000
per square foot over the past
two years.
Not included in the sample are
future high-end projects such as
One West 57th Street, 432 Park
Avenue (Drake Hotel site) or
1107 Broadway.
$2,716 $2,738
$2,915 $2,957 $2,968 $3,046 $3,064
$3,128
$3,565 $3,574 $3,671
$3,960 $4,043
$4,642
$5,505
$1,500
$2,500
$3,500
$4,500
$5,500
The ParkImperial
OneCentral
Park West(Trump)
165CharlesStreet
521 ParkAvenue
173 PerryStreet
279Central
Park West
40 BondStreet
The Plaza 200EleventhAvenue
OneBeaconCourt
MilleniumTower
515 ParkAvenue
80Columbus
Circle
OneMadison
Park
15 CentralPark West
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