03.19 Legal Briefs - LSAG Newsletter

LEGAL SECTOR RENTAL ANALYSIS Starting vs. Net Effective Rents

Each of these three areas have or are undergoing a dramatic shift. Sixth Avenue/Rock Center contains the second largest average floor plate size in Midtown, and 60% of the Class A buildings in the submarket have undergone a major capital improvement plan. The Grand Central area is at the beginning of a major transformation with the passing of the East Midtown Rezoning with One Vanderbilt and 270 Park Avenue being at the forefront of the new Grand Central. New construction in the Hudson Yards and Manhattan West projects located in the Penn Station submarket will bring 18.8 msf of new office supply from 2016–2023, and as tenants continue to densify into more efficient floorplates, it comes as no surprise that demand for the area has come from all major tenant industries. As law firm relocate, they are taking full advantage of the hefty concession packages landlords are offering throughout Manhattan. Law firms’ starting and net effective rental rates increased in 2018 to $83.16 and $67.19 psf, an annual increase of 18.3% and 6.9% respectively. Although the rental terms increased, concessions did as well with the average law firm receiving 13.4 months of free rent and $89.03 psf in tenant improvement allowance, up from 6.7 months and $62.48 psf in 2017. Of the 2018 AM Law Top 100 list, 24 of the firms named are headquartered in Manhattan and an additional 70 firms have a New York presence. Through 2018, the 94 firms will occupy 19.1 msf, or 4.8% of the Manhattan office inventory. Since 2017, 19 firms have renewed or relocated 1 — these firms have reduced their square footage by 12.4% with five of the firms planning to relocate to buildings constructed or renovated in 2018 or later. There are currently eight major AM Law firms in the market actively looking for space, including Debevoise & Plimpton LLP and Cravath, Swaine & Moore LLP—these eight firms are looking for approximately 1.8 msf, a 31% decrease than what is currently occupied.

Starting Net Effective

$100.00

12.9%

10.5%

$83.16

$74.47

$80.00

$70.32

$67.19

$64.83

$62.91

$60.00

$40.00

$/sf

$20.00

$0.00

2016

2017

2018

Concessions

Year

Work Allowance (PSF) Free Rent (Months)

2016 $53.33 2017 $62.48 2018 $89.03

8.4 6.7

13.4

TOP 2018 MANHATTAN LEASES Starting vs. Net Effective Rents

1271 Sixth Ave Midtown

1 Vanderbilt Midtown

32 Old Slip Downtown

Latham & Watkins LLP

Greenberg Traurig LLP

Cahill Gordon & Reindel LLP 202K SF

407K SF 138K SF

Blank Rome LLP 138K SF

133K SF McDermott Will & Emery

1  Firms that leased only expansion space are excluded from this count.

CUSHMAN & WAKEFIELD | 13