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NEW YORK CITY SPOTLIGHT

NOT-FOR-PROFIT & PUBLIC SECTOR


2018 YEAR-IN-REVIEW
CUSHMAN & WAKEFIELD RESEARCH
TABLE OF CONTENTS
3 2018 KEY TAKEAWAYS

4 OFFICE LEASING TRENDS

5 •SALE/PURCHASE TRENDS
•2019 TRENDS TO WATCH

6 MAP OF MANHATTAN
TRANSACTIONS

7 MAP OF BROOKLYN &


QUEENS TRANSACTIONS

Cushman & Wakefield | 2


2018 KEY TAKEAWAYS
2018 not-for-profit and public sector lease & investment activity in New York City
finished at 9.3 msf—6.8% below 2017’s record of 10.0 msf

Leasing in 2018 was defined by robust activity in the education industry, which
accounted for 30.8% of the total sector's leasing

Leasehold condominiums, a transaction structure which allows not-for-profits to


be exempt from paying real estate taxes, continue to be a popular option—two of
the preeminent transactions during the past year include Mercy College at 2 Herald
Square and Community Preservation Corporation at 220 East 42nd Street

Total investment sales exceeded 5.0 msf and $2.7B in value—fueled by


13 transactions for 100,000 sf or more with seven above 200,000 sf

Despite signing no new leases in 2018, religious organizations were active in the
investment sales market, participating in 80 of the 158 not-for-profit or public
sector transactions that took place throughout New York City

cushmanwakefield.com | 3
Not-For-Profit & Public Sector Year-in-Review 2018
New York City’s not-for-profit and public sector lease, sale, and purchase activity totaled 9.3 million square
feet (msf) in 2018. This is 6.8% below 2017’s record high of 10.0 msf, but 52.9% above the five-year annual
historical average of 6.1 msf. In total, there were 285 transactions completed in 2018—19.7% above the
previous record of 238 in 2017. The slowdown was primarily the result of a decline in leasing activity from
2017’s all-time high. Annual leasing activity for 2018 measured 4.3 msf—down 28.4% from 6.0 msf in 2017.
However, activity remained robust in 2018 as a result of record capital markets volume, with more than
$2.7 billion traded—the highest on record and a 54.6% increase from 2017.

Leasing Falls in 2018


Across Manhattan, 2018 was a record year for excess of 150,000 sf. Meanwhile, Cornell University
large leases; however, this was not the case for continued its expansion by entering into three leases
the not-for-profit and public sector as the amount for different schools at 570 Lexington Avenue totaling
of 100,000-square-foot (-sf) leases decreased nearly 90,000 sf. The government sectors and
significantly from 2017. In 2018, there were only membership organizations had the largest average
nine leases signed above 100,000 sf and two above deal size in 2018 at 73,570 sf and 61,810 sf, respectively.
250,000 sf, down from 12 and seven, respectively, in Government leased the most space in 2017 with over
2017. As a result, the average deal size also declined 2.7 msf of office space leased, but activity declined
during the year, falling 27.3% to 34,062 sf. In total, the significantly in 2018 to 1.0 msf—a 61.9% year-over-
sector leased or renewed nearly 4.3 million square year decline, reflecting the extraordinary activity
feet (msf) in 2018—down 28.4% from the all-time in 2017.
high of more than 6.0 msf in 2017 and 4.7% from
4.1 msf in 2016. Volume & Average Deal Size: Leases & Sales
12.0 60,000
In total, not-for-profit leases in Manhattan averaged Transaction Volume Average Deal Size

an effective rent of $50.47 per square foot (psf) 10.0


during 2018, which is 24.3% lower than the overall 50,000
Activity Volume in Million SF

8.0
market average of $66.63 sf. This is primarily due

Average Deal Size


to the sector’s preference for value-oriented assets, 6.0 42,060 SF 40,000
highlighted by DHU Realty/1199 SEIU’s 521,374-sf
renewal at 330 West 42nd Street in Times Square 4.0 36,842 SF
33,010 SF 32,047 SF 31,554 SF 32,745 SF 30,000
South—the largest not-for-profit lease in 2018. 2.0 28,736 SF
Midtown, offering the largest inventory of this type 26,880 SF

of space, led leasing activity in 2018 with a total of 0.0 20,000

1.9 msf, or 51.2% of the city’s total. Manhattan


accounted for 83.5% of all not-for-profit and public
sector deals in New York City over the year. 2018 Leasing by Public Sector
While nonprofit organizations signed the most PUBLIC SECTOR # OF AVERAGE DEAL
TOTAL SF
leases in 2018 with 49, educational services leased CATEGORY LEASES SIZE (SF)
significantly more office space. The education sector Educational Services 33 1,330,876 40,330
leased 1.3 msf of office space in 2018—more than four Government 14 1,029,984 73,570
times the 2017 total—and accounted for nine of the
top 20 deals throughout the city. Despite this, the Health Services 19 480,848 25,308
average deal size for the education sector was only Member Organization 12 741,721 61,810
slightly above-average, finishing 2018 at 40,330 sf.
Nonprofit 49 742,452 15,152
This sector was led by Touro College, which closed
three separate new leases or renewals totaling in TOTAL 127 4,325,881 34,062

Top Five Leasing Transactions


TENANT ADDRESS MARKET TYPE SIZE (SF)
DHU Realty/1199 SEIU 330 West 42nd Street Times Square South Renewal 521,374
New York City Housing Authority (NYCHA) 90 Church Street World Trade Renewal 422,264
Pace University 161 William Street Insurance Renewal 214,466
NYU Langone 1 Park Avenue Murray Hill Expansion 150,000
Touro College 320 West 31st Street Penn Station New Lease 146,028

Cushman & Wakefield | 4


Sale/Purchase Trends
Figure ExampleFigure Example
1: Dollar Volume1:by
Dollar Volume by
Not-for-Profit Not-for-Profit Sector
Sector
Figure Example 1: Dollar Volume by Not-for-Profit Sector
Active Investment Market Dollar Volume for Not-for-Profit & Public Sector
With the New York City investment market posting
a healthy rebound in 2018—dollar volumes and total
transactions increasing by 35.0% and 4.0% annually—
the not-for-profit and public sector followed suit.
Dollar volume on these transactions—used for
program purposes rather than as investments—
outpaced the city as a whole, increasing by 54.6%
year-over-year to $2.7 billion. The number of
transactions increased substantially by more 45.0%,
from 109 deals in 2017 to 158 in 2018. Pricing for
not-for-profit and public sector assets declined for
the year to $600 psf but are largely in line with the
Figure ExampleFigure Example
2:Number
Number of2:Transactions
Number by
of Transactions of Transactions
Not-for-Profit by Not-for-Profit Sector
Sector
New York City average of $603 psf in 2018. Sellers
Figure Example 2: Number of Transactions by Not-for-Profit Sector
in the sector were more active in 2018 with 79 sales
compared to 60 purchases. Not-for-profit or public
sector organizations were involved in both sides of
the transaction 19 times.
The sector was most active in Brooklyn, with
56 of the total sale/purchase transactions. Of the
56 Brooklyn transactions, not-for-profits and public
sector entities purchased 24 assets and sold 27; five
assets were both purchased and sold by a not-for-
profit on both sides of the transaction.
Within the public sector sub-categories, nonprofit
Sales by Market
organizations were the most active, transacting
on 27 deals for $872 million in 2018. Of this total, Manhattan Northern Manhattan Brooklyn Queens
nonprofits were the buyers on 10 transactions for & The Bronx
$585 million, the seller on 15 deals for $280 million,
and were on both sides of the transaction two times
for $6.0 million. Religious institutions continue to
produce the largest share of transactional activity in 41 31 56 30
the sector with 50.6% of all activity at 80 deals, up
from a 36.7% share in 2017. Religious organization
dollar volume, however, declined by 8.3% to
$473 million in 2018.

2019 Trends to Watch



• The majority of public sector organizations will strive to remain in Manhattan aside from entities fulfilling
program needs in the Outer Boroughs
• Organizations with budget constraints will look for less expensive space with easily accessible public transportation,
in areas like Long Island City, Harlem, Downtown Brooklyn, and increasingly in Sunset Park/Industry City
• Religious organizations will continue to sell or ground lease surplus property as they rationalize their real estate
portfolios in relation to membership and available funds
• Organizations will prioritize limited resources to accommodate more collaborative, modern work environments
and to support the maintenance of real estate assets that are outdated
• With nearly 30.0 msf of new product under construction throughout NYC, expect additional value options to
become available in pre-1980s assets

© Cushman & Wakefield 2019 cushmanwakefield.com | 5


2018 Not-For-Profit & Public Sector
Commercial Real Estate Transactions
Manhattan
MAUTNER-GLICK
UPPER EAST SIDE
PORTFOLIO
$176.1M PURCHASE
The University Financing
Foundation purchased
Mautner-Glick’s Upper
East Side portfolio
(1329 3rd Avenue, 1339-
1341 3rd Ave, 1345 3rd
Avenue, 1347 3rd Avenue,
202 E 77th Street) for
W
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$176.1M to develop in a
JV with Northwell Health.
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Cushman & Wakefield | 6


Brooklyn & Queens
90 SAND STREET 118-35 QUEENS BOULEVARD
$170.0M PURCHASE 44,000-SF LEASE
The nonprofit United Federation of Teachers
Breaking Ground leased 44,000 sf at 118-35 Queens
purchased 363,100 sf Boulevard.
at 90 Sands Street
in Dumbo Heights
from RFR.
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34 35TH STREET & 167 41ST STREET


35,000-SF & 132,814-SF LEASES
The Industry City market's broadening
appeal was evident in Vera Institute’s
35,000-sf lease in 34 35th Street for new
HQ space. In addition, NYC Department
of Records and Information Services
renewed and expanded to 132,814 sf at
167 41st Street.

>100,000 SF 50,000-99,999 SF 25,000-49,999 SF 10,000-24,999 SF <10,000 SF

NFP Purchase NFP Sale NFP Purchase & Sale

cushmanwakefield.com | 7
About Cushman & Wakefield
Cushman & Wakefield closed 38 transactions in the not-for-profit and public sectors
in 2018. These comprised approximately 2.2 million square feet out of 4.3 million
square feet leased, for a market share in excess of 50% in New York City. The
Not-for-Profit Practice Group’s successes included transactions that created
productive and collaborative space for NYC School Construction Authority, NYC
Housing Authority, Community Preservation Corp, Tide Center/Opportunity
Agenda, Services for the UnderServed, Doe Fund, SCAN New York, Citizens Union,
Community Access, National Domestic Workers Alliance, Presbyterian Senior
Services, Healthcare Chaplaincy Network, ACMH, Inc., and Educational Alliance.
The group’s clients span across a wide spectrum, including educational leaders,
museums, affordable housing builders, community-based providers of social services
and sophisticated governmental entities. Approximately half of all efforts included
traditional brokerage activities (leasing, acquisition, disposition, and sales), and
the balance involved providing advisory services such as site location to maximize
social impact, placement of schools in response to changing demographics, building
consensus among real estate stakeholders, and helping not-for-profits navigate buy-
versus-lease decisions. For more information, contact members of the Not-For-Profit
Practice Group or visit our website at cushmanwakefield.com/en/sectors/nonprofit.

New York City Not-For-Profit Practice Group:

David Lebenstein Carri Lyon


Executive Managing Director Executive Managing Director
+1 212 318 9737 +1 212 709 0749
david.lebenstein@cushwake.com carri.lyon@cushwake.com

Robair Reichenstein Debra Wollens


Managing Director Senior Vice President
+1 212 318 9778 +1 212 318 9773
robair.reichenstein@cushwake.com debra.wollens@cushwake.com

Authored By:

Richard Persichetti Marc Kunesch


Vice President Senior Analyst
Tri-State Region Research Lead 1290 Avenue of the Americas
1290 Avenue of the Americas New York, NY | USA
New York, NY | USA +1 212 660 7764
+1 212 954 0917 marc.kunesch@cushwake.com
richard.persichetti@cushwake.com

Timothy Coy
Senior Analyst
1290 Avenue of the Americas
New York, NY | USA
+1 212 660 7715
timothy.coy@cushwake.com

© 2019 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or
omissions and is presented without any warranty or representations as to its accuracy.