EFFECTIVE RENT REPORT

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M A N H A T T A N O F F I C E S N A P S H O T Q4 2 0 1 3

1 | CompStak Q4 2013 Effective Rent Report

Overview

Effective Rent Indicator: Midtown $57.32 ↑

Midtown South $50.47↑ Downtown $40.03 ↑

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Manhattan Overall Office Effective Rents

A B Overall

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Manhattan Effective Rent by Submarket

Downtown Midtown South Midtown A Midtown B

Manhattan’s office market ended the year on a positive note with strong performance in all

three major markets. Overall effective rent increased $1.29 to $52.33 this quarter - the

highest since the end of 2008. Manhattan class B space closed the year with a $0.71 increase

in effective rent to $44.48 while class A was still hovering under $61, not progressing beyond

the second quarter peak.

2 | CompStak Q4 2013 Effective Rent Report

-35%

-25%

-15%

-5%

5%

15%

25%

2007 2008 2009 2010 2011 2012 2013

Manhattan Overall Effective Rent Y-O-Y Change

Year-End Review

Recovery at the Top

Trophy office leases bolstered the high-end

market in 2013. Including Och-Ziff Capital

Management’s renewal in Q2, leases with starting

rent higher than $100 comprised over 4.2% of the

total transaction numbers in 2013. The

comparable number in 2012 was only 2.7%. The

strong performance of the high-end market was

matched by the steaming hot Midtown South,

which saw class B effective rent increase 6.63% this year. Overall, Manhattan’s average

effective rent recorded the best performance since 2008, an increase of 5.08% Y-O-Y.

Midtown South - Red Hot

In 2013, Midtown South was still hot with activity shifting from Chelsea and Flatiron to

Greenwich Village and NoHo, as seen in the heat map below. The increasing rents and limited

supply in MTS resulted in a geographical spillover, which drove up the effective rent in adjacent

submarkets such as Penn Station and TriBeCa. At this point, with no evidence for a slowdown in

the tech industry and no significant increases in supply, the vibrant Midtown South market is

expected to stay in the headlines for the

foreseeable future.

Bullish 2014

With the abundance of class A availability,

Downtown is set to prosper in 2014. The tug of

war between Downtown affordability and the

traditional appeal of Midtown office space is likely

to continue. Further improvement in the economy

and increasing prices in Class B and C buildings

throughout Manhattan will ease the absorption

woes. As prices increase, Midtown South and class

B properties in both Midtown and Downtown will

continue their strong performance that was

observed in 2013.

3 | CompStak Q4 2013 Effective Rent Report

Both class A and B office sectors in Midtown performed

well in the last quarter of 2013. Class A rents closed the

year at over $66 per square foot, which was 1.66%

higher than the 2013 year average. In the meantime,

class B effective rents rose $1.55 from $44.72 to

$46.27, a new peak for 2013. Facing additional

competition from Downtown, Midtown landlords

maintained their desired starting rents by offering

concession packages at a value of 8.7% of the total

lease value. Overall in 2013, average concession

packages were in the range of 7.4% to 8.8%.

Midtown – Stalwart

57.7%

42.3%

New Renewal

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Midtown Effective Rent and Concessions

Midtown A Midtown B Concessions

New leases comprised more than half of total leased square footage for the third

consecutive quarter, indicating a healthy market in Q4. Notable transactions in this quarter

include Kasowitz Benson Torres & Friedman’s 225k square foot renewal at 1633 Broadway

and Mayer Brown’s relocation from 1675 Broadway to 1221 Avenue of America.

4 | CompStak Q4 2013 Effective Rent Report

Continuing the phenomenal growth in 2012, the average

Midtown South office effective rent increased 8.4% year over

year in 2013, and achieved a new average effective rent record

of $50.47 in the last quarter. While Chelsea is still the driver of

this flourishing submarket, all eyes were on 51 Astor Place as

1stdibs, St. John’s and the IBM Watson Group signed leases for

around $80 per square foot, about 60% above the average rent

in the submarket. Other notable transactions include Infor’s

expansion at 635 Avenue of the Americas and Intercept

Pharmaceuticals’ new lease at the Milk Studios Building.

Midtown South – New Heights

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Midtown South Effective Rent and Concessions

Effective Rent Concessions

Midtown South had the highest percentage of new leasing activity in Manhattan as new

leases comprised 68.6% of total leasing activity in 2013. Concession packages stabilized at

about 7% this quarter, after falling for three consecutive quarters, signaling that landlords

are achieving the new rent records by trading for higher concession costs.

86.2%

13.8%

New Renewal

5 | CompStak Q4 2013 Effective Rent Report

2013 ended with a spectacular fourth quarter in the

Downtown submarket, highlighted by GroupM’s new

lease at 3 World Trade Center. Class A transactions drove

up the average office effective rent, which climbed by

$3.05 to $40.03, bringing the overall increase since last

year to $5.39. Not only rents, but also total leasing

activity was remarkable, with Citigroup’s massive 2.63

million square feet renewal at 388-390 Greenwich Street

combined with a good flow of new leasing activity in Q4.

Downtown – Ready to Charge

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Downtown Effective Rent and Concessions

Effective Rent Concessions

With many large blocks of high-end new leases signed, such as Jones Day’s 330K new lease

at Brookfield Place, concession values increased to more than 8% of the deal value this

quarter. With brand-new prime space becoming available in the World Trade Center

submarket, we expect both rents and concessions to increase in 2014.

39.6%

60.4%

New Renewal

6 | CompStak Q4 2013 Effective Rent Report

Asking / Starting Rent Spreads

Midtown: The spread between asking and staring rent in both Class A and B remained virtually

unchanged from the third quarter. The increase in average class A starting rents indicates more

stable growth then the increases see in trophy rents in the second quarter. Landlords in Class B

properties have learned to set high expectations following surprising popularity of Class B space

earlier this year.

Midtown South: Spreads decreased slightly but stayed near same level that was seen

throughout the year, as both starting rent and asking rent continued to increase.

Downtown: Starting rent outpaced increases in asking rent for the second consecutive quarter,

and the spread shrank considerably. It is the first time Downtown's asking rent increased by

more than 5% in two consecutive quarters since 2008, signaling a promising 2014.

$71.60 $74.33 $74.18

$75.84

64.72

71.7070.06

72.07

$25.00

$35.00

$45.00

$55.00

$65.00

$75.00

1Q13 2Q13 3Q13 4Q13

Midtown Class A Rent Spread

$50.61 $52.04

$53.58 $55.24

47.4245.98 46.10

47.61

$25.00

$35.00

$45.00

$55.00

$65.00

$75.00

1Q13 2Q13 3Q13 4Q13

Midtown Class B Rent Spread

$45.33 $46.79 $46.81 $47.79

36.13 35.7138.50

41.74

$25.00

$35.00

$45.00

$55.00

$65.00

$75.00

1Q13 2Q13 3Q13 4Q13

Downtown Rent Spread

$53.45 $56.25

$57.41 $58.13

47.14

50.92 50.97

53.20

$25.00

$35.00

$45.00

$55.00

$65.00

$75.00

1Q13 2Q13 3Q13 4Q13

Midtown South Rent Spread

7 | CompStak Q4 2013 Effective Rent Report

Notable Transactions in 2013

ID Tenant Address ID Tenant Address

1 Citigroup 388-390 Greenwich Street 11 Hughes Hubbard & Reed 1 Battery Park Plaza

2 Sony Corporation of America 550 Madison Avenue 12 Kasowitz Benson Torres & Friedman 1633 Broadway

3 Macy's 11 Penn Plaza 13 Phillips-Van Heusen (PVH) 501 7th Avenue

4 Simpson Thacher & Bartlett 425 Lexington Avenue 14 AppNexus 28-40 West 23rd Street

5 GroupM 3 World Trade Center 15 Capital One 299 Park Avenue

6 CME Group 1 North End Avenue 16 NYC Health and Hospital Corporation 55 Water Street

7 L'Oreal 10 Hudson Yards 17 Patterson Belknap Webb & Tyler 1133 Avenue Of The Americas

8 Jefferies & Company 520 Madison Avenue 18 Mayer Brown 1221 Avenue Of The Americas

9 Jones Day 250 Vesey Street 19 Cornell University 575 Lexington Avenue

10 Metro-North Commuter Railroad 420 Lexington Avenue 20 HarperCollins 195 Broadway

Citigroup’s 2.36

million SQFT renewal

is the largest

transaction of 2013

GroupM will

consolidate more

than 2,000 employees

to its new WTC office

Metro-North renewed and

expanded with a 20-year

lease at the Graybar Building Clothing giant PVH renewed

and expanded in ESRT’s 501

7th Avenue

About

About CompStak™: CompStak is the world’s first comprehensive database of commercial lease comparable data. We gather our data from our users, a committed community of commercial real estate brokers, appraisers and researchers. Our analysts review all of the data we receive to ensure data integrity and quality.

The information contained in this report was gathered from CompStak users and other sources that we consider reliable. While we strive for perfection, this report may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

* Effective Rent takes into consideration the rent paid for every year of the lease, as well as landlord concessions such as free months and tenant improvement allowance.

The Effective Rent Report is produced by CompStak, Inc. For comments or questions, please contact Noam Shahar: Noam@CompStak.com or Wei-Chen Yu: Wayne@CompStak.com.