Office Sector Update 11/8

“Future Tenant Seeks to Create Tech Hub at Hudson Yards Development”

Related Companies and Oxford Properties Group are nearing the completion of 10 Hudson, a 52-story office tower that marks the beginning of the New York City’s Hudson Yards development. The tower is now 85% leased with the signing of VaynerMedia, a social media company, as a tenant occupying 88,000 square feet. VaynerMedia joins the German-headquartered SAP on the growing list of technology companies looking at space in the Hudson Yards development. VaynerMedia’s CEO stated that there is an opportunity to create a serious tech hub akin to Silicon Valley. Starwood Property Group brokered a $475 million construction loan for the developers to build 10 Hudson in a deal that included $350 million in funding from Starwood. Other firms leasing office space in 10 Hudson include Coach, L’Oreal, and Boston Consulting Group. Also nearing completion on the site is 30 Hudson Yards, a 92-story office tower that contains over two million square feet of office space. Tenants at 30 Hudson Yards include Time Warner Cable, KKR & Co., and both Related Companies and Oxford Properties Group. The developers recently broke ground on 55 Hudson Yards, a 51-story, 1.3-million-square-foot tower on the site as well. In its entirety, Hudson Yards is estimated to cost $20 billion, making it the largest private real estate development project in the history of the United States. It will include nearly 10 million square feet of office space spread among several towers.

“Office Vacancy in Detroit Trending Downwards”

Detroit’s office market has steadily improved in recent years following the last U.S. recession. The good news continued as both Amazon and Lear Corp. announced that they would be leasing more office space in the city’s Central Business District. Lear will soon be opening its new Innovation and Design Center to foster new growth. Amazon has plans to bring several hundred employees into Detroit in the future. New data from CBRE predicts office vacancy rates of about 15% in Detroit, down from over 30% experienced during the recession. There is a very limited supply of class-A office space in the city, and tenants looking for large contiguous spaces are expected to have a difficult time. A market study by Colliers International partly attributed the scarcity of class-A space to a lack of new construction. Still, the drop in office vacancy rates and the strong multifamily rental market have helped revitalize central Detroit.