Downtown Alliance Reports that 250 Firms Have Relocated To Lower Manhattan Since 2005
The Alliance for Downtown New York issued a report today noting that Lower Manhattan has seen an influx of tenants—more than 250 firms—relocate to the area in the last five years.
The Downtown Alliance’s latest quarterly assessment of commercial, residential and hotel activity in Lower Manhattan notes that 158 firms have renewed their Lower Manhattan leases totaling 3.5 million square feet since the economic downturn in New York City in September 2008, according to Cushman & Wakefield. Meanwhile, only 10 Downtown commercial tenants have relocated across the river, to Midtown or to midtown South since the economic downturn began two years ago.
Major tenants that have renewed their Lower Manhattan leases include Stroock & Stroock & Lavan, Kenyon & Kenyon, Daiwa Securities American Inc., and Skidmore, Owings & Merrill.
“This strong activity reinforces longer-term trends that new firms are increasingly attracted to Lower Manhattan, while major tenants remain committed to the area,” said Elizabeth H. Berger, President of the Downtown Alliance. “One of the reasons Lower Manhattan has a strong occupancy rate is because of the diversification of our economy. While financial services and professional services remain as the signature industries downtown, we’ve seen a huge rise in professional services, creative services and also non-profits as well as the hospitality industry.”
“Our district—in less than one square mile—now contains more than 88 million square feet of office space, more than 1,000 restaurants and retailers, 3,700 hotel rooms, and more than 55,000 residents, and draws six million tourists a year.”
The report additionally found that commercial leasing activity remained strong south of Chambers Street throughout the calendar year, with 2.4 million square feet of leases, a 16 percent increase over year-to-date 2009, according to CB Richard Ellis. The quarter’s leasing activity was the highest since mid-2008.
Those leases include: the New York Daily News, which will move from its Midtown offices and into 100,000 square feet at 4 New York Plaza (along with U.S. News & World Report); and, Healthfirst, which signed a lease for 172,000 square feet at 100 Church St. Deloitte & Touche will soon renew 400,000 square feet at 4 World Financial with the option to expand by 230,000 square feet. Additionally, Conde Nast took the next step in its plans to move downtown by signing a Letter of Intent for one million square feet during the third quarter.
The report also notes that Lower Manhattan landlords remain bullish on Downtown commercial real estate as citywide employment increased earlier than expected and there are more tenants in the market. This confidence is reflected in softer concessions packages and an increase in asking rents for the first time in two years.
Overall asking rents were $39.08 per square foot and Class A asking rents were $42.35 per square foot, a 3% and 6% increase, respectively, over Q2 2010. The increase in asking rents and less generous concessions packages are resulting in higher taking rents and the Lower Manhattan taking rent index returned to pre-recession levels. During the last quarter, the report notes, there has been significant progress at the site of the World Trade Center. Steelwork for One World Trade Center – originally called the Freedom Tower – is at 40 floors and rising, while Four World Trade Center has reached seven floors, and below-grade work has begun on Towers 2 and 3. The twin memorial pools that will feature 30-foot waterfalls are visible at the 9/11 Memorial site, and more than a dozen trees have been planted at the Memorial Plaza.
The Downtown Alliance’s latest quarterly report – which you can view at http://www.downtownny.com/assets/research/Q3.pdf – highlights residential, commercial and retail activity in Lower Manhattan. Among the report’s other highlights:
• Lower Manhattan’s commercial vacancy rate rose to 12.1 percent during the third quarter, after hovering around 10 percent for nearly a year. This is largely due to the addition of 85 Broad, 70 Pine, and over 600,000 square feet at One New York Plaza. There are no other major blocks of space expected to hit the market. The report notes that Lower Manhattan’s vacancy rate should soon begin to stabilize at a rate much lower than the 18% to 20% many industry experts forecasted at the onset of the economic downturn in New York. Additionally, despite the increase, Lower Manhattan’s vacancy rate is still under the level at which Midtown peaked—12.6% in Q1 2010.
• The summer saw a large increase in hotel inventory as four hotels south of Chambers Street opened during the second and third quarters: the 112-room Holiday Inn Express, the 169-room World Center Hotel and 252-room Club Quarters, and the 220-room W Hotel & Residences. These additions brought Lower Manhattan’s total inventory to almost 3,700 rooms in 17 hotels. Three additional hotels with 680 rooms are under construction, including the Doubletree at 8 Stone Street, which is scheduled to open before the end of the year.
• Pricing continued to improve citywide and in Lower Manhattan for the second consecutive quarter, reversing the trend over the prior year when many hoteliers cut rates to bolster occupancy during a difficult market. This quarter, Lower Manhattan’s average daily room rate was $287, stable over last quarter and a strong 13% increase over last year. This growth outpaced citywide recovery, which decreased 1% over last quarter and increased 10% over last year.
• The W Hotel & Residences opened during the third quarter, adding 223 condominiums to the area’s residential market for a total of 28,300 units in 317 buildings south of Chambers Street. Five other buildings are under construction, all of which are scheduled for completion in 2011.
• The Lower Manhattan residential rental market has tightened, as the vacancy rate dropped by nearly 60 percent over the last year, from 2% in Q3 2009 to 0.8% in Q3 2010, below the Manhattan-wide average of 0.99%. Lower Manhattan rents showed quarter-over-quarter improvement ranging from 2% to 14% depending on the unit types, with one-bedroom units showing particularly strong market performance during this year’s peak season with a 20% spike in rents from Q1 2010 to Q2 2010, and an additional 14% spike from Q2 2010 to Q3 2010.
• Several notable retail leases were signed this quarter including Milk Street Café’s 27,000 square foot lease at 40 Wall Street, Duane Reade’s 26,000 square foot lease at 40 Wall Street, Burger King’s 3,500 square foot lease at 106 Fulton Street ($90 per square foot), Chickpea’s 2,500 square foot lease, which opened at 110 William Street just a few weeks after signing their lease, and My Suit’s 2,300 square foot lease at 30 Broad ($250 per square foot). Since January, 56 retailers – including 18 in the third quarter – have opened their doors in Lower Manhattan.