Class A Office Space and Retail Openings Lead Fragile Growth in Lower Manhattan Real Estate Market
The third quarter of Lower Manhattan office leasing saw an uptick in activity, driven in large part by demand for newer Class A Office space. Meanwhile, overall activity remained below the five-year quarterly average, according to the Alliance for Downtown New York’s Q3 2022 Lower Manhattan Real Estate Report.
With just 851,000 square feet of new leasing in the third quarter, Lower Manhattan’s recovery continued to lag behind Midtown and Midtown South. Vacancy rates remained stubbornly above 20% in all three Manhattan markets for the second quarter in a row.
“We’re seeing incremental gains in office leasing each quarter, as well as demand for rental properties and an influx of new shops — all of which are encouraging signs,” said Jessica Lappin, President, Alliance for Downtown New York. “Yet, despite those positive indicators, our office leasing activity still falls significantly behind our five-year average and is being outpaced by stronger performances in other parts of Manhattan.”
Rental demand continued in Lower Manhattan as the third quarter saw a new record high with median rents reaching $4,500, up over 12% from last quarter. Likely stunted by rising interest rates, however, the sales market cooled considerably.
On the retail front, Lower Manhattan saw 34 new openings, bringing the presence of street-level retailers back to pre-pandemic levels. Roughly half of the openings were food and beverage businesses, including the Tin Building by Jean-Georges, a 53,000 sq. ft. foodie destination that houses gourmet markets, full-service restaurants, bars and fast-casual eateries.
Read the full Q3 2022 Lower Manhattan Real Estate Report.