4 q13 ngkf_capital_markets_report

4Q13

CAPITAL MARKETS REPORT
FOR THE INTELLIGENT INVESTOR

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

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


4

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


5

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


6

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

 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



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

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



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


7

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


8


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


9


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


10

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


11

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


2009

2010

2011

2012

2013

indicator and jumped 24% in 2013.

30-Year Fixed Mortgage Rate


13


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


14


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.


15


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



16


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


2001

2003

2005

2007

2009

2011

workforce.

2013

New York


17


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


18


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)


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 (%)


20

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


21


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


2003

2004

2005

2006

2007

Midtown South

2008

2009

2010

2011

2012

2013

Downtown


22


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


$100.00 - $124.99

2011

2012

2013

+ $125


23


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


$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

2013 Base Taking Rent


24


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



$40.00

remains the least expensive of the

$50.39

Manhattan

three major New York markets.

$50.00

$60.00

$70.00

$80.00



25


Commercial Development Pipeline
Manhattan
18
 New Construction (1980-2013): 81.3 MSF
 Expected Delivery (2014-2017): 9.9 MSF

14

 2014: 1 WTC

 Potential (2018-2023): 16.3 MSF

16

 2013: 4 WTC, 250 W. 55th Street, 51 Astor Place

 2015: Hudson Yards South, Seven Bryant Park
 2016+: 3 WTC, Hudson Yards North, 425 Park Avenue, 380

12
MSF

Madison Avenue, One Vanderbilt Avenue, Manhattan West
10

8

6

4

2



2018+

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

0

26

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


28


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


31

Other

1,876

$67,605.3


29


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


2012
Institutional

Cross-Border

2013
User/Other


30


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



31


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%


Office, 53.6%


32


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


2008

2009

2010

2011

2012

2013

2014

Pending


33


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)


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)


34


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)


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)


35


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.



36


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



37


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


2009

2010

2011

2012

2013


38


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



39


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


2009

2010

2011

2012

2013


40


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


2008

2009

2010

2011

2012

2013

41


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



42


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


2008

2009

2010

2011

2012

2013


43


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


44


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


45

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New York City
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