Paul Weiss Signs 2023's Largest US Office Lease in NYC
As 2023 draws to a close, marking one of the most challenging periods for the office sector, a beacon of optimism has appeared. Paul Weiss, a leading US law firm, has inked the year's largest office lease in Manhattan.
Jordan B.
December 22, 2023
Good morning. Law firm Paul Weiss has signed the largest commercial lease in the US this year and is moving its office in Midtown Manhattan. Plus, California's Inland Empire, previously buoyed by the industrial boom and migration, is now experiencing a decline in its multifamily market.
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Market Snapshot
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*Data as of 12/21/2023 market close.
MAJOR MILESTONE
Paul Weiss Secures Record-Breaking Lease in NYC, Largest in US for 2023
As 2023 draws to a close, marking one of the most challenging periods for the office sector, a beacon of optimism has appeared. Paul Weiss, a leading US law firm, has inked the year's largest office lease in Manhattan.
Lease agreement: Real estate group Fisher Brothers announced the lease of 765,000 square feet at 1345 Avenue of the Americas to Paul Weiss for a 20-year term after investing $120 million in building upgrades with JPMorgan's assistance. The lease rates vary, ranging from high $80s to $135 per square foot, depending on the floor level.
Modern touch: With about 1,000 lawyers and a history dating back to the late 19th century, Paul Weiss is expanding rapidly. The firm has been actively hiring, especially from other notable law firms, enhancing its presence in New York, Los Angeles, and London. The new property, equipped with modern amenities like touchless elevators, flexible meeting spaces, a wellness center, and New York City's largest indoor terrarium, is seen as "ideal" for their global expansion.
➥ THE TAKEAWAY
A BIG deal: The lease is a significant boost to Manhattan's office market, which has been struggling, partly due to the shift to remote work and a pullback by tech companies. While overall market conditions have been challenging, premium buildings with state-of-the-art amenities continue to attract robust rents. The deal also highlights the attractiveness of law firms as tenants in the current market due to their need for in-person collaboration and training, counteracting the narrative about the decline of traditional office spaces.
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INVESTMENT TRENDS
Inland Empire Multifamily Market Lags U.S. As Investment Slows to Decade Low
The multifamily market in California's Inland Empire, once thriving in sync with the industrial boom and migration trends, is now facing a downturn.
Falling short: According to Yardi, Investment in the Inland Empire's multifamily market has plummeted to a decade low of $414 million through October, marking a notable 14.5% drop in price per unit year-over-year. This decline is accompanied by a slight decrease in average rent and a lagging employment growth, contrasting with the previous steady upswing. Notable transactions within the year included significant sales by Archway Equities, Afton Properties, and Convenient Holdings, but these did not offset the overall downward trend.
Inland vs. National: While the Inland Empire struggles, it starkly contrasts with the national multifamily market. The average rent in this region decreased marginally to $2,113 per month, underperforming the U.S. average, which saw a slight increase. Moreover, the region's multifamily development is lagging, with only a few units added compared to the national market’s larger growth rate. This disparity highlights a unique regional challenge faced by the Inland Empire.
➥ THE TAKEAWAY
Why it matters: The Inland Empire's multifamily market, historically bolstered by a robust industrial sector, is at a pivotal moment. The observed slowdown in 2023, marked by a significant decrease in industrial construction starts, signals a potential shift in the region's economic backbone. This development suggests that the multifamily market's future may no longer align as closely with industrial growth as it did over the past decade.
QUICK HITS
💻️ WATCH: 2024 will be the ‘golden age’ of new home construction, says Howard Hughes CEO David O’Reilly
🎧️ LISTEN: On this week’s Best Ever Midweek News Brief, CRE journalist Jarred Schenke breaks down how renters use TikTok to defraud landlords on a massive scale.
CHART OF THE DAY
Based on Freddie Mac's Multifamily 2024 Outlook, the markets anticipated to have the highest ratio of new supply include Salt Lake City, Nashville in Tennessee, Austin in Texas, Charlotte in North Carolina, and Colorado Springs in Colorado. Each city is expected to see a new supply ratio exceeding 5.5 percent.
On the other end of the spectrum, the markets with the lowest projected new supply ratio are Tulsa in Oklahoma, Rochester in New York, Long Island in New York, Syracuse in New York, and New Orleans, with each expecting a new supply ratio of 0.4 percent or lower.
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