2. Capital Markets Report
Table of Contents
3
Market Summary
4
5
6
7
8
9
10
11
12
Economic Indicators
13
14
15
16
17
18
19
Overview
Cap Rates by Property Type: Manhattan
Significant Recently Completed Office Sales
Significant Pending Office Sales
Venture Capital Funding: United States Metro Areas
Venture Capital Funding: San Fran-New York
Transactions: New York
Yesterday and Tomorrow: 2013 vs. 2014
Lending vs. Equity
Corporate Production
Unemployment Rates: International
Unemployment Rates: Domestic
Payroll Employment
Office-Using Employment
27
Capital Markets Intelligence
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
CMBS Issuance
Capital Distribution
Buyer Distribution
Sales Volume: Major Metropolitan Cities
Sales Volume: Manhattan
Half Billion Dollar Transactions
Historical Top-Tier Transactions: Price
Historical Top-Tier Transactions: Price / SF
Recession Flippers
Office Building Sales (P/PSF): United States
Historical Office Building Sales (P/PSF): Manhattan
Office Building Sales (Cap Rates): United States
Historical Office Building Sales (Cap Rates): Manhattan
Development Site Volume: Manhattan
Development Site Pricing: Manhattan
Residential Cap Rates: Manhattan
Residential Condominium Pricing: Manhattan
Luxury Condominium Pricing: Manhattan
Leasing Analysis
20
21
22
23
24
25
26
Availability & Rent: Manhattan
Availability & Rent: MT / MTS / DT
Historical Asking Rents
Top-Tier Taking Rents
Rental Rates: Net Effective vs. Base Taking
Rental Rates: Net Effective
Commercial Development Pipeline
4Q13 CAPITAL MARKETS REPORT
2
4. 4Q13 Market Summary
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 CAPITAL MARKETS REPORT
4
5. 4Q13 Capital Markets Intelligence
Cap Rates by Property Type
Manhattan
Despite declining yields,
8.0%
substantial worldwide
demand for prime Manhattan
6.0%
6.0%
opportunities remains
At 4.2%, average cap rates for
5.0%
residential and office property
4.2%
4.2%
are among the lowest in the
country along with Downtown
4.0%
San Francisco
Strength continues to exist in
all property types with hotel
2.0%
cap rates lagging slightly due
to increased supply
0.0%
Residential
Source: Newmark Grubb Knight Frank; Real Capital Analytics
Office
Retail
Hotel
4Q13 CAPITAL MARKETS REPORT
5
6. 4Q13 Market Summary
Significant Investment Sales Transactions
Recently Completed
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 Built in 1963
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
Built in 1997
2,200,000 SF
550,000 SF
60 floors
16 floors
Fosun Group
Brookfield Office
purchased
JPMorgan Chase
sold
Properties
purchased
CME Group sold
$725,000,000
$200,000,000
Marketed as
NYMEX will lease
potential
residential
conversion, will
likely remain an
office building
449,000 SF for 24
months before
they consolidate
into 222,000 SF,
2nd - 8th floors
Built in 1913
(renovated in
1986)
Built in 1927
(renovated in
1999)
1,100,000 SF
412,000 SF
29 floors
18 floors
J.P. Morgan Asset
Jowa Holdings
Management
purchased
Beacon Capital &
L&L Holding sold
purchased
jv Paramount
Group sold
$211,500,000
Recapitalization
B&H occupies
retained minority
interest (5%)
Built in 1952
740,000 SF
75,000 SF
25 floors
4 floors
American Realty
Toll Brothers
Capital NY
Recovery Reit
purchased
purchased
Sherwood Equities Rockpoint Group &
$498,450,000
L&L Holding
Built in 1925
150,000 SF on
long-term lease
United Cerebral
Palsy of New York
sold
Built in 1914
(renovated in
2012)
130,000 SF
7 floors
General Growth
purchased
Kushner
Monday Properties $150,000,000
Companies sold
sold
$274,000,000
Can develop
$528,000,000
200,000 SF
JCPenny signed a
95% leased at
residential building
NNN lease with
time of sale
on existing site
options through
2029
200,000 SF leased
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
to Macy’s
retains majority
interest
4Q13 CAPITAL MARKETS REPORT
6
7. 4Q13 Market Summary
Significant Investment Sales Transactions
Pending & Available
$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
Built in 1966
600,000 SF
35 floors
On the market for
Built in 1921
(renovated in
1999)
500,000 SF
10 floors
sale from SL
Green Realty Corp. On the market for
sale from
Looking for an
Sotheby’s
equity partner, not
an outright sale of Looking for
International
the building
approximately
Properties Corp. to Major tenant,
$600,000,000
purchase
Amazon (100,000 100% owned and
Looking for
sf), is currently in
occupied by
approximately
the market for
Sotheby’s
$125,000,000
possible relocation,
but may renew and
Lower level
expand
renovations
planned for
Superstorm Sandy
damage
Built in 1963
Built in 1917
50,000 SF
200,000 SF
6 floors
20 floors
On the market for
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
sale from
Metropolitan
Transit Authority
Close proximity to
Grand Central
Terminal
Likely teardown
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
and redevelopment Murray Hill
Properties owns
5% minority
interest
Built in 1986
Built in 1958
615,000 SF
475,000 SF
36 floors
26 floors
On the market for
On the market for
sale from
Shorenstein
Properties
Looking for
approximately
$775,000,000
Known as Park
Avenue Tower
255,000 SF lease
sale from
Blackstone
Looking for
approximately
$375,000,000
Wharton Property
Advisors owns the
80,000 sf retail
condo in the base
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
with Paul Hastings Merrill Lynch is
expires in 2016
major tenant with
over 100,000 SF
George Klein owns
5% minority
interest
4Q13 CAPITAL MARKETS REPORT
7
8. 4Q13 Leasing Analysis
2013 Venture Capital Funding
United States Metro Areas
2013 Top Technology Transactions – San Francisco / Silicon Valley
Tenant
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
Washington,
D.C.
Twitter
1355 Market Street
155,180
$1.5 B
StubHub
199 Fremont Street
140,378
171 deals
Neustar
505 Howard Street
138,574
Illumina, Inc.
San Francisco/Silicon Valley
Address
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
$12.1 Billion
Boston
(New England)
1,247 deals
$3.3 Billion
Square Feet
412 deals
Los Angeles
$1.7 B
New York
248 deals
$3.2 Billion
441 deals
Chicago
Philadelphia
$1.0 B
165 deals
$1.0 B
80 deals
San
Diego
$757 M
97 deals
DallasFt. Worth
$693 M
40 deals
Austin
$406 M
79 deals
Source: Newmark Grubb Knight Frank, PricewaterhouseCoopers /National Venture Capital Association MoneyTree Report
4Q13 CAPITAL MARKETS REPORT
8
9. 4Q13 Leasing Analysis
2013 Venture Capital Funding
San Francisco and New York – National Technology Anchors
$12.5
$11.8
$11.4
$11.2
$12.1
$3.8
$9.3
$10.0
$3.2
$2.9
$3.0
$8.2
$7.5
$2.3
$5.0
$1.5
$2.5
$0.8
$0.0
2008
2009
2010
2011
2012
$0.0
2013
Venture capital funding in San Francisco topped $12 billion in 2013 with 58%
2008
Strong demand for highly-skilled labor in technology is drawing workers to the city,
driving new housing development and investment in key San Francisco
2009
2010
2011
2012
2013
New York Venture Capital Funding
dedicated to software, 8% to media/entertainment and 6% to IT services.
$1.9
$1.7
San Francisco Venture Capital Funding
$2.3
$2.1
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.
neighborhoods such as Hayes Valley, Mission Bay, and Dogpatch.
Source: Newmark Grubb Knight Frank, PricewaterhouseCoopers /National Venture Capital Association MoneyTree Report
4Q13 CAPITAL MARKETS REPORT
9
10. 4Q13 Leasing Analysis
San Francisco and New York – National Technology Anchors
What began on the West Coast has ventured to Manhattan
2013 Top Technology Transactions - New York
Tenant
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
Source: Newmark Grubb Knight Frank
Address
Square Feet
100 West 33rd Street
40,503
4Q13 CAPITAL MARKETS REPORT
10
11. 4Q13 Market Summary
Yesterday and Tomorrow
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)
Recession Flippers
Foreign Investments
American Realty Capital Properties
Thor Equities
J.P. Morgan
RXR Realty
Blackstone
Equity Residential
International investors:
China
Canada
Australia
Middle East
Core Funds
Coach
L’Oreal
Time Warner
GroupM
Jones Day
AppNexus
Sony
Amazon.com
Sotheby’s
Reed Smith
Al Jazeera
Media/Technology
Media/Technology
Plaza District
World Trade Center
Brookfield Place
Facebook to 770 Broadway
IBM Watson to 51 Astor
WeWork Soho
Cornell Tech (Roosevelt Island groundbreaking )
Twitter to West 17th Street
WeWork Wall Street
Williamsburg, Downtown Brooklyn
Bushwick, Long Island City
INVESTMENT SALES
ACTIVE INVESTORS
LEASING
DOMINANT LEASING INDUSTRY SECTOR
RETAIL
TECHNOLOGY
HOT BOROUGH MARKET
4Q13 CAPITAL MARKETS REPORT
11
13. 4Q13 Economic Indicators
Lending vs. Equity
Dow Jones Industrial Average vs. 30-Year Fixed Mortgage Rate
8.0%
18,000
Following a mid-year run on 30-
year fixed mortgages, rates pulled
back at the beginning of the fourth
7.0%
quarter before increasing in
15,000
December to match late-summer
6.0%
averages.
5.0%
12,000
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
4.0%
lowest point on record dating back
9,000
to the 1970’s.
3.0%
The Dow Jones Industrial Average
has historically been a leading
2.0%
6,000
2005
2006
2007
2008
Dow Jones Industrial Average
Source: Newmark Grubb Knight Frank
2009
2010
2011
2012
2013
indicator and jumped 24% in 2013.
30-Year Fixed Mortgage Rate
4Q13 CAPITAL MARKETS REPORT
13
14. 4Q13 Economic Indicators
Corporate Profits
United States
$2,250.0
Corporate profits are at an all-time
high with over $2 billion registered
in each of the last five quarters.
$2,000.0
Profits have risen over 100% since
hitting a bottom in 2008 and are up
$1,750.0
Billions
25% over the previous peak
established in late 2006.
$1,500.0
Despite tax increases and
government spending cuts that
$1,250.0
have affected the economy,
continued improvement in 2014 is
$1,000.0
forecasted.
$750.0
$500.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Corporate Profits
Source: U.S. Department of Commerce: Bureau of Economic Analysis
4Q13 CAPITAL MARKETS REPORT
14
15. 4Q13 Economic Indicators
Unemployment Rate
International
30.0%
At 6.7%, the United States
unemployment rate is significantly
lower than in early 2013, down
25.9%
27.8%
25.0%
from 7.8% one year ago.
20.0%
Uneven job recovery in the U.S.
continued in December with only
74,000 new jobs, despite averaging
15.6%
15.0%
10.9%
Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics
Switzerland
Japan
Germany
Australia
United States
United Kingdom
Canada
Sweden
France
Ireland
Italy
Portugal
Spain
Greece
0.0%
Hong Kong 3.2%
continue is not prevalent. Gains in
3.5%
4.0%
5.2%
anticipation for this trend to
5.8%
6.7%
7.1%
7.2%
5.0%
While Japan kept unemployment
rates low during the recovery,
7.5%
10.0%
12.4%
12.7%
182,000 new jobs a month in 2013.
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.
4Q13 CAPITAL MARKETS REPORT
15
16. 4Q13 Economic Indicators
Unemployment Rate
Domestic
9.0%
Manhattan’s unemployment rate,
6.3%
6.3%
6.3%
6.0%
5.6%
Baltimore
Miami
Boston
San Francisco
Dallas
6.6%
6.7%
7.0%
7.0%
just below the national average,
7.3%
6.0%
8.1%
8.5%
Primary Markets
remains high as the financial
service sector has not begun to
Manhattan
United States
Philadelphia
Atlanta
Washington D.C.
Chicago
Los Angeles
3.0%
hire at a pre-recession pace.
Despite solid job growth, the city is
looking to supplement strong gains
in professional services, healthcare
and hospitality.
9.0%
Oklahoma City 4.7%
Houston
Seattle
Denver
Raleigh/Durham
Pittsburgh
Austin 4.7%
5.6%
5.7%
5.8%
6.1%
6.2%
6.2%
Portland
San Jose
United States
San Diego
3.0%
Primary Markets
Many of the cities near or below the
national average unemployment
6.3%
6.7%
6.8%
6.0%
ICE Markets
(Intellectual Capital & Energy)
rate have economies that produce
significant revenue from intellectual
capital (technology) and energy
industries.
ICE Markets
Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics
4Q13 CAPITAL MARKETS REPORT
16
17. 4Q13 Economic Indicators
Payroll Employment
United States vs. New York City
4.0
140
Despite employment growth in
several key sectors such as
135
professional/business services,
leisure/hospitality and education/
3.8
130
health services, New York City
125
3.6
120
3.4
115
just 3.4% in 2013 as employment in
Thousands
Thousands
remains below expectations adding
financial services continues
to lag.
The pace of New York’s
employment growth will be
110
somewhat restricted until financial
service jobs are added to
3.2
105
supplement the growing number of
technology positions in the
3.0
1989
100
1991
1993
1995
1997
1999
United States
Source: Newmark Grubb Knight Frank; U.S. Bureau of Labor Statistics
2001
2003
2005
2007
2009
2011
workforce.
2013
New York
4Q13 CAPITAL MARKETS REPORT
17
18. 4Q13 Economic Indicators
Office-Using Employment
New York City
1,350
Office employment (professional
and business services, financial
1298.4
1,300
services, real estate and
Thousands
1,250
information) is up 9,100 jobs over
1251.7
1244.4
the past year.
1,200
Since the recession officially ended
four years ago (June 2009), office
jobs have increased by 89,800
1,150
positions, or 7.7%.
1,100
1,050
1,000
950
900
1991
1993
1995
1997
1999
2001
2003
2005
Source: NYC Office of Management and Budget/NYC Office of the Comptroller; Seasonally Adjusted
2007
2009
2011
2013
4Q13 CAPITAL MARKETS REPORT
18
20. 4Q13 Leasing Analysis
Overall Asking Rent and Availability Rate
Manhattan
$65.00
15.0%
Positive absorption via strong
leasing in technology, on the west
$60.00
side of Lower Manhattan and along
the Sixth Avenue corridor over the
$55.00
13.0%
final two quarters of 2013 pushed
the overall availability rate to its
$50.00
lowest point in five years.
$45.00
11.0%
At $55.47/PSF, average asking
rents have risen 4.8% since the
$40.00
first quarter and closed at the
$35.00
9.0%
highest quarterly figure since third
quarter 2008.
$30.00
Rent (Price/SF)
Source: Newmark Grubb Knight Frank
4Q13
3Q13
2Q13
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
2Q09
1Q09
4Q08
3Q08
2Q08
7.0%
1Q08
$25.00
Availability (%)
4Q13 CAPITAL MARKETS REPORT
20
21. 4Q13 Leasing Analysis
Availability Rate and Average Asking Rent
MIDTOWN
12.2%
$63.61
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
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
6.9%
$54.00
Village
14.0%
$85.87
DOWNTOWN
14.7%
$45.80
8.0%
$37.23
WTC
25.9%
$64.62
Financial
14.6%
$39.63
Eastside
Westside
SoHo / NoHo
City Hall / Insurance
4Q13 CAPITAL MARKETS REPORT
21
22. 4Q13 Leasing Analysis
Overall Asking Rents by Market
Manhattan
$85.00
While average rental rates in
$80.45
Manhattan are considerably higher
than the trough in 2010, Midtown
$75.00
rents have been relatively flat for
the past eighteen months.
$65.00
$63.61
Midtown South asking rents have
increased at a faster pace than
Midtown and Downtown, up 48%
$55.00
$50.28
$46.44
$45.00
since the 2010 bottom and up 12%
$45.80
$49.66
in the past year.
$35.00
$25.00
1998
1999
2000
2001
2002
Midtown
Source: Newmark Grubb Knight Frank
2003
2004
2005
2006
2007
Midtown South
2008
2009
2010
2011
2012
2013
Downtown
4Q13 CAPITAL MARKETS REPORT
22
23. 4Q13 Leasing Analysis
Top-Tier Transactions – Taking Rents
Manhattan
200
There were nearly twice as many
deals completed with $100/PSF
175
base taking rents in 2013
42
47
than 2012.
21
150
125
100
16
The average base taking rent for
deals at or above $100/PSF in
51
12
42
48
2013 is $123.39/PSF compared
17
24
26
with $118.86/PSF in 2012.
30
75
25 buildings have completed deals
with base taking rents at or above
2
18
50
99
1
16
$100/PSF.
97
92
86
98
76
25
47
49
2009
2010
0
2006
2007
2008
$75.00 - $99.99
Source: Newmark Grubb Knight Frank
$100.00 - $124.99
2011
2012
2013
+ $125
4Q13 CAPITAL MARKETS REPORT
23
24. 4Q13 Leasing Analysis
Rental Rates: Net Effective vs. Base Taking
Direct Deals, 5 Years (+)
28% higher than Midtown South and
$67.03
Plaza District Class A
nearly 60% more than Downtown.
$79.66
$59.64
Midtown
Average Midtown taking rents are
The Plaza District has the highest
concentration of trophy assets and
$71.13
command the highest taking and net
effective rents in Manhattan.
$47.19
Midtown South
$56.06
Downtown has the largest net
effective to base taking rent spread
of the three major markets as Lower
$34.27
Downtown
Manhattan landlords have been
$45.10
giving significant concession
packages on new lease transactions.
$50.39
Manhattan
$61.25
$0.00
$10.00
$20.00
$30.00
2013 Net Effective Rent
Source: Newmark Grubb Knight Frank
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
2013 Base Taking Rent
4Q13 CAPITAL MARKETS REPORT
24
25. 4Q13 Leasing Analysis
Rental Rates: Net Effective
Direct Deals, 5 Years (+)
$68.40
Plaza District Class A
At $59.64/PSF, Midtown net
effective rents rose 4.6% in the
$67.03
past 12 months as Sixth Avenue
closed the year strongly,
$57.00
Midtown
absorbing a good amount of the
$59.64
existing vacancy.
Average Midtown South net
$45.99
Midtown South
effective rents have increased
$47.19
three consecutive years and
are now 30% higher than
$33.99
Downtown
Downtown rents.
$34.27
Lower Manhattan, the value play,
$50.05
$0.00
$10.00
$20.00
$30.00
2012 Net Effective Rent
Source: Newmark Grubb Knight Frank
$40.00
remains the least expensive of the
$50.39
Manhattan
three major New York markets.
$50.00
$60.00
$70.00
$80.00
2013 Net Effective Rent
4Q13 CAPITAL MARKETS REPORT
25
28. 4Q13 Capital Markets Intelligence
CMBS Issuance
United States
$250
$228.6
While the volume of CMBS
issuances in 2013 eclipsed the total
of the two previous years
$198.4
$200
combined, 2014 is expected to be
equally as active.
$166.5
$150
The dramatic rise in issuances
during 2013 coincided with low
interest rate levels as well as more
liquidity and availability of capital in
$92.6
$100
$86.1
the market.
$77.8
$48.4
$50
$32.7
$12.1
$11.6
$2.7
$0
2003
2004
2005
2006
Source: Newmark Grubb Knight Frank, Commercial Mortgage Alert
2007
2008
2009
2010
2011
2012
2013
4Q13 CAPITAL MARKETS REPORT
28
29. 4Q13 Capital Markets Intelligence
Capital Distribution – All Property Types
Origin of Capital
Total
Properties
Total
Volume
Canada
Germany
796
$20,428.0
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
UK
48
$3,379.6
75
$2,614.0
Other
586
$17,583.7
Total
United States
1,876
$67,605.3
Country
Top Markets For Investment
Total
Properties
Total
Volume
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
Market
Manhattan
Boston
$1,643.6
1,266
$25,747.0
Total
Source: Newmark Grubb Knight Frank; Real Capital Analytics
31
Other
1,876
$67,605.3
4Q13 CAPITAL MARKETS REPORT
29
30. 4Q13 Capital Markets Intelligence
Buyer Distribution – All Property Types
United States
100.0%
6.5%
9.3%
10.1%
Private buyers have been the most
5.3%
8.6%
6.0%
active type of purchasers in
9.9%
8.2%
Manhattan for the past several
years and account for more than
80.0%
26.9%
28.5%
31.8%
40% of the market.
24.2%
60.0%
Publically listed REIT’s continue to
be heavily invested in the United
States and have purchased at a
fairly consistent yearly rate.
40.0%
41.5%
37.8%
41.4%
34.1%
While cross-border transactions in
the United States account for 10%
of all activity, foreign investments in
20.0%
Manhattan represent 24% of year-
18.2%
17.9%
15.0%
18.9%
to-date deals, led by China,
Canada, Israel and Australia.
0.0%
2010
Public
2011
Private
Source: Newmark Grubb Knight Frank; Real Capital Analytics
2012
Institutional
Cross-Border
2013
User/Other
4Q13 CAPITAL MARKETS REPORT
30
31. 4Q13 Capital Markets Intelligence
2013 Total Sales Volume – All Property Types
Major Metropolitan Cities
$40.0
19 cities in the United States totaled
more than $5 billion in sales during
$35.0
2013 with volume jumping nearly
40% in Dallas, Houston, Atlanta and
$30.0
Inland Empire.
$25.0
Billions
$20.0
Activity in only 4 of the 19 cities
represented a decline from 2012 to
2013: San Francisco (-19%),
$15.0
Seattle (-15%), San Jose (-6%), and
Phoenix (-1%).
$10.0
$5.0
The majority of sales in Manhattan
(77%) are derived from office and
Austin
Inland Empire
San Diego
Northern NJ
Washington, D.C.
Phoenix
Denver
* NYC Boroughs
San Jose
San Francisco
D.C.-VA burbs
Seattle
Boston
Atlanta
Houston
Dallas
Chicago
Los Angeles
Manhattan
$0.0
residential building transactions.
* Includes Brooklyn, Queens, Bronx, Staten Island and Long Island
Primary Markets
ICE Markets
Source: Newmark Grubb Knight Frank; Real Capital Analytics
4Q13 CAPITAL MARKETS REPORT
31
32. 4Q13 Capital Markets Intelligence
2013 Sales Volume by Property Type
Manhattan
Hotel, 5.7%
Property Type
Volum e ($ m illion)
# of Properties
Office
$20,941
$9,411
459
Retail
$3,452
229
Development Sites
$2,669
60
Hotel
$2,235
17
Industrial
$346
21
Totals
$39,056
Development
Sites, 6.8%
171
Apartment
Industrial, 1.0%
957
Retail, 8.8%
Apartment,
24.1%
Source: Newmark Grubb Knight Frank; Real Capital Analytics
Office, 53.6%
4Q13 CAPITAL MARKETS REPORT
32
33. 4Q13 Capital Markets Intelligence
Office Building Sales
Manhattan Half Billion Dollar Transactions
20
Class A, trophy office building sales
20
have returned to the New York
market in large quantity with 14
16
completed transactions in excess
of $500 million during 2013 as well
14
as five more pending deals that are
12
expected to close in 2014.
11
11
8
7
5
4
3
3
2
2
1
0
2003
2004
1
2005
2006
2007
Completed
Source: Newmark Grubb Knight Frank
2008
2009
2010
2011
2012
2013
2014
Pending
4Q13 CAPITAL MARKETS REPORT
33
34. 4Q13 Capital Markets Intelligence
Office Building Sales – Price
Select Top-Tier Historical Manhattan Transactions
$3.0
$2.8
$2.5
$2.0
Billions
$1.8
$1.7
$1.8
$1.7
$1.5
$1.5
$1.5
$1.3
$1.3
$1.3
$1.2
$1.1
$1.0
$1.0
$1.0
$1.0
$0.8
$0.8
$0.7
$0.5
$0.0
399 Park
(3Q02)
111 Eighth
(1Q04)
200 Park
(2Q05)
Source: Newmark Grubb Knight Frank
1290 AoA
(2Q06)
1211 AoA 5 Times Sq. 666 Fifth
(3Q06)
(4Q06)
(1Q07)
825 Eighth
(1Q07)
767 Fifth
(2Q08)
1301 AoA 111 Eighth
1633
(3Q08)
(4Q10)
Broadway
(2Q11)
601 West
26th
(3Q11)
550
Madison
(1Q13)
650
Madison
(3Q13)
One CMP
(4Q13)
60
Columbus
(1Q14)
65 East
55th
(Pending)
4Q13 CAPITAL MARKETS REPORT
34
35. 4Q13 Capital Markets Intelligence
Office Building Sales – Price Per SF
Select Top-Tier Historical Manhattan Transactions
$2,500
$2,175
$2,000
$1,525
$1,507
$1,500
$1,373
$1,285
$1,258
$1,205
$1,166
$1,181
$1,010
$1,000
$1,000
$790
$753
$631
$685
$679
$610
$500
$0
745 Seventh
(4Q01)
399 Park
(3Q02)
767 Fifth
(3Q03)
Source: Newmark Grubb Knight Frank
111 Eighth
(1Q04)
666 Fifth
(1Q07)
450 Park
(3Q07)
280 Park
(4Q07)
767 Fifth
(2Q08)
111 Eighth
(4Q10)
450
Lexington
(3Q12)
450 West
15th
(1Q13)
140 West
(3Q13)
499 Park
(3Q13)
550 Madison 650 Madison
200
60 Columbus
(1Q13)
(3Q13)
Lafayette
(1Q14)
(4Q13)
4Q13 CAPITAL MARKETS REPORT
35
36. 4Q13 Capital Markets Intelligence
Office Building Sales – Recession Flippers:
Manhattan
197.0%
200%
Landlords who purchased buildings
between 2008–2010 when the
economy and real estate market
was depressed have seen values
145.0%
150%
130.0%
in their properties rise significantly.
Savvy landlords such as Savanna
and Kushner have purchased
100%
91.8%
84.2%
buildings, renovated, leased-up
and flipped for a substantial profit in
less than two years.
48.4%
50%
51.2%
55.0%
40.0%
30.4%
5.9%
8.1%
125 West
55th
1330
AoA
12.5%
0%
7 West
51st
86 Trinity
509 Fifth 430 West 434 Bway 104 West
14th
40th
15 East
26th
256 Fifth 158 West 100 Fifth
200
27th
Lafayette
* All calculations are of sale price and does not take into account pre-existing mortgages or liens.
Source: Newmark Grubb Knight Frank
4Q13 CAPITAL MARKETS REPORT
36
37. 4Q13 Capital Markets Intelligence
United States Office Building Sales
Price Per SF
$900
Average office building prices on a
per-square-foot basis in Manhattan
$800
$778
are 34% higher than this time
last year.
$700
$600
$535
the past year in some major
$480
$500
While prices have been flat over
$454
markets such as Washington, D.C.
and Chicago, averages are up in
$400
$321
$300
$296
secondary markets like Seattle
$286
$248
$232
and Denver.
$212
$200
$150
$147
$105
$100
Primary Markets
Dallas
Pittsburgh
Atlanta
Houston
Chicago
Denver
Los Angeles
San Diego
Seattle
Boston
San Francisco
Washington, D.C.
Manhattan
$0
ICE Markets
Source: Newmark Grubb Knight Frank; Real Capital Analytics
4Q13 CAPITAL MARKETS REPORT
37
38. 4Q13 Capital Markets Intelligence
Historical Office Building Sales
Manhattan Price Per SF
$1,000
$900
$849
$778
$800
$700
$600
$500
$400
$300
$245
$200
$100
$0
2006
2007
2008
Source: Newmark Grubb Knight Frank; Real Capital Analytics
2009
2010
2011
2012
2013
4Q13 CAPITAL MARKETS REPORT
38
39. 4Q13 Capital Markets Intelligence
United States Office Building Sales
Cap Rates
8.0%
7.4%
7.6%
7.6%
Manhattan and San Francisco
6.9%
6.5%
6.0%
6.0%
5.4%
6.5%
6.5%
have moved lower in the past
6.0%
year as strong demand in those
5.5%
cities continue.
4.2%
Cap rates on office buildings in
Liquidity and projected rent
4.2%
growth have pushed some
4.0%
notable sales in the New York and
San Francisco markets towards
cap rates in the 3-4% range.
2.0%
Primary Markets
Pittsburgh
Atlanta
Dallas
Chicago
San Diego
Denver
Houston
Seattle
Los Angeles
Washington, D.C.
Boston
San Francisco
Manhattan
0.0%
ICE Markets
Source: Newmark Grubb Knight Frank; Real Capital Analytics
4Q13 CAPITAL MARKETS REPORT
39
40. 4Q13 Capital Markets Intelligence
Historical Office Building Sales
Manhattan Cap Rates
8.0%
6.9%
7.0%
6.0%
5.0%
4.0%
4.2%
4.2%
3.0%
2006
2007
2008
Source: Newmark Grubb Knight Frank; Real Capital Analytics
2009
2010
2011
2012
2013
4Q13 CAPITAL MARKETS REPORT
40
41. 4Q13 Capital Markets Intelligence
Development Site Volume
Manhattan
After very little activity during the
recession and early recovery,
$4,000,000,000
volume of development site
sales have increased 67% in the
$3,500,000,000
past year and approached 20062007 levels.
$3,000,000,000
$2,500,000,000
As activity has trended higher,
pricing has significantly improved
and intensified competition
$2,000,000,000
among local and foreign
developers with the intent to
$1,500,000,000
develop high-end retail, residential
and hotel properties.
$1,000,000,000
Toll Brothers, Extell Development,
Related Companies and McSam
$500,000,000
Hotel Group were all active buyers
of development sites in 2013.
$0
2005
2006
2007
Source: Newmark Grubb Knight Frank; Real Capital Analytics
2008
2009
2010
2011
2012
2013
4Q13 CAPITAL MARKETS REPORT
41
42. 4Q13 Capital Markets Intelligence
Development Site Pricing (Price Per Buildable SF)
Manhattan
$1,200
$1,034
$1,000
$905
$853
$800
$722
$747
$635
$600
$555
$565
$575
356 Tenth
Avenue
101 Murray
Street
$586
$460
$400
$321
$329
517 W. 35th
(Pending)
616 First
Avenue
$330
$200
$0
234 E. 23rd * 41 E. 22nd * 180 E. 88th
Street
Street
Street
225 W. 57th 560 Seventh 118 E. 59th
Street
Avenue
Street
122 E. 23rd
Street
239 Tenth
Avenue
19 E.
Houston
Street
17 E. 12th
Street
* Prices reflects a blended rate with air rights
Source: Newmark Grubb Knight Frank
4Q13 CAPITAL MARKETS REPORT
42
43. 4Q13 Capital Markets Intelligence
Residential Cap Rates
Manhattan
7.0%
Averaging 4.2% as of the fourth
quarter 2013, cap rates on
residential buildings in Manhattan
6.5%
declined dramatically in the past
three years.
6.0%
5.5%
Cap rates have matched second
quarter 2008 averages, which was
the lowest point recorded over the
5.0%
past 10 years and are well below
the 6.8% average that was
4.5%
registered in second quarter 2010.
4.0%
3.5%
3.0%
2004
2005
2006
2007
Source: Newmark Grubb Knight Frank; Real Capital Analytics
2008
2009
2010
2011
2012
2013
4Q13 CAPITAL MARKETS REPORT
43
44. 4Q13 Capital Markets Intelligence
Residential Condominium Pricing
Manhattan
$1,500
$1,412
Prices of residential condominium
sales in Manhattan are up
$1,374
considerably since hitting a post$1,275
$1,225
$1,250
recession low in 2010 and have
$1,229
$1,210
increased 11% in the past year.
$1,167
$1,142
While the $1,412 per-square-foot
$1,086
average achieved in the fourth
quarter eclipsed 2008 peak pricing
$1,000
levels, demand is expected to drive
$873
prices even higher in 2014.
$765
$750
$500
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Average Price/PSF
Source: Newmark Grubb Knight Frank; Miller Samuels
4Q13 CAPITAL MARKETS REPORT
44
45. 4Q13 Capital Markets Intelligence
Luxury Condominium Pricing
Manhattan
Sales in twenty-two residential
condominium buildings in New
$5,505
$5,500
York have averaged at least $3,000
per square foot over the past
two years.
$4,642
$4,500
$3,960
$3,565 $3,574
$4,043
$3,671
future high-end projects such as
One West 57th Street, 432 Park
Avenue (Drake Hotel site) or
$3,500
$2,915 $2,957 $2,968
Not included in the sample are
1107 Broadway.
$3,128
$3,046 $3,064
$2,716 $2,738
$2,500
$1,500
The Park
Imperial
One
Central
Park West
(Trump)
165
Charles
Street
521 Park 173 Perry
Avenue
Street
Source: Newmark Grubb Knight Frank; CityRealty
279
40 Bond The Plaza
200
Central
Street
Eleventh
Park West
Avenue
One
Beacon
Court
Millenium 515 Park
80
One
15 Central
Tower
Avenue Columbus Madison Park West
Circle
Park
4Q13 CAPITAL MARKETS REPORT
45
46. North America
New York City
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