C&W ECONOMIC UPDATE

NEW YORK CITY EMPLOYMENT

A Cushman & Wakefield Research Report JANUARY 30, 2014

RECORD SETTING EMPLOYMENT IN NEW YORK CITY

The latest employment report on New York City showed the city at an all-time high in total number of jobs and recording the strongest single year of employment growth in its history.
In December 2013, New York City had a total of 4.002 million people on payrolls as the number of jobs passed the 4.0 million mark for the first time in history. To put this in perspective, there are only nine states (excluding New York State) that have more payroll jobs than New York City. To reach this milestone, the City experienced the strongest employment growth in its history during 2013. On a seasonally adjusted basis, payroll employment in New York City increased by 93,700 jobs between December 2012 and December 2013. The previous record job growth was in 1999 when the City added 93,400 jobs. Since December 2010, employment in New York City has increased more than 262,000 jobs, the best three year period since 1996 to 1999. Continued on Page 2

NEW YORK CITY PAYROLL EMPLOYMENT

4,050 4,000 3,950 3,900 3,850 Thousands of Persons 3,800 3,750 3,700 3,650 3,600 3,550 3,500 3,450 3,400 3,350 3,300 3,250 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

SOURCE: U.S. Bureau of Labor Statistics

4,002,000

Number of workers in New York City, the first time in history employment exceeded four million

C&W ECONOMIC UPDATE

A Cushman & Wakefield Research Report

The key drivers of this growth have been three sectors: Education and health employment is up over 100,000 jobs since November 2009 accounting for nearly one third of the job growth. In 2013 employment in these industries rose 46,300 jobs.
Thousands of Persons

NEW YORK CITY FINANCIAL SERVICES EMPLOYMENT

470

Tourism is booming. In 2013 slightly more than 54 million visitors came to New York City, a record. Not surprisingly, employment in leisure and hospitality as well as retail have grown strongly. In 2013, these two sectors added 27,000 jobs. However, despite creative industries such as Technology, Advertising, Media and Information (TAMI) growing strongly, employment in the three key office-using sectors was not as healthy as the citys overall performance in 2013. Office-using sectors (the sum of financial services, professional & business services and information (i.e. media)) increased only 8,700 jobs. These three sectors account for approximately one-third of all the jobs in New York City, but they accounted for only 9.3% of employment growth in 2013. All three of the office-using sectors were weak in 2013. The financial services sector added only 3,700 jobs; professional & business services 3,900 jobs and information only 1,200 jobs. This slow growth in the key office-using sectors goes a long way to explain the performance of the Manhattan office market in 2013 where we saw substantial leasing but more space came on the market than was taken off. Overall absorption in 2013 was -3.65 million square feet, the weakest by far since 2009 and the Manhattan vacancy rate increased to 11.0% from 9.5% at the end of 2012. Another contributor to the negative absorption was a significant increase in the supply of office space in Manhattan as several projects were completed. In all approximately 3.6 million square feet of new office space was added to the inventory last year.

460

450

440

430

420 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

SOURCE: U.S. Bureau of Labor Statistics

Financial services companies have faced an uncertain environment over the past two and a half years. First, the eurozone debt crisis has constrained European financial institutions, many of which are large employers in New York City. Additionally, many of the key regulations required by the Dodd-Frank law (such as the Volcker Rule), which was passed in July 2011, were not finalized until December 2013. With the eurozone economies on the mend and the Dodd-Frank regulations in place, the environment for financial institution in New York has improved. Add to this a stronger national economy, which should boost demand for financial services, and we anticipate employment in this sector to grow in 2014.

CONCLUSION
Healthy global, national and local economic conditions and the resulting stronger growth in office-using employment should lead to more absorption of office space in Manhattan in 2014. The anticipated growth in demand caused by faster employment growth will be partially offset by the completion of one more major office building, the three million square foot One World Trade Center. Nevertheless, we anticipate stronger job growth will lead to a declining vacancy rate in Manhattan. We expect the vacancy rate at the end of 2014 to be lower than that at the end of 2013 across most submarkets. This should lead to upward pressure on rents. Overall, 2014 is expected to be a year of healthy improvement in the Manhattan office market.

EMPLOYMENT OUTLOOK
New York City is expected to continue experiencing healthy employment growth in 2014. Accelerating national economic growth, continuing strong trends in the education and health, tourism and TAMI sectors and a better performing financial services sector will lead to further solid gains in New York City employment. Historically an important contributor to the local economy, as of December 2013 financial services employment was only 900 jobs higher than in August 2011.

For more information, contact: Ken McCarthy, Chief Economist (212) 698 2502 ken.mccarthy@cushwake.com

The market terms and definitions in this report are based on NAIOP standards. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.