Downtown Leasing Activity Improves Year Over Year While Still Lagging Behind the Five-Year Average

Downtown Leasing Activity Improves Year Over Year While Still Lagging Behind the Five-Year Average

Lower Manhattan office leasing showed an improvement over the same quarter in 2023, according to the Alliance for Downtown New York’s Q1 report on the neighborhood’s real estate market. However, leasing lagged 35% behind the five-year average and 18.9% behind the post-pandemic average. The quarter also marked the first time in a year that positive absorption has been created, with more office space leaving the market than entering due to residential conversions. 

Lower Manhattan recorded 582,000 square feet of new leasing in the first quarter, a 16% increase compared to the same quarter in 2023, but a single percentage point down from the last quarter of last year. Technology and legal services accounted for over 60% of leasing activity, while the single largest lease of the quarter came from the education/not-for-profit sector with Success Academy Charter School expanding its footprint to 93,937 sq. ft. at 120 Wall St. Lower Manhattan’s vacancy rate ticked up to 24.7%, the highest the district has seen, largely due to large chunks of space entering the market as well as sublets. 

During Q1, residential conversions created the first positive absorption in Lower Manhattan in a year. Due to GFP Real Estate’s acquisition of 222 Broadway and Intervest Capital Partners’s plans to convert 111 Wall St. to residential, 1.6 million sq. ft. exited the office market. This left Lower Manhattan with 669,000 sq. ft. of positive absorption for the quarter, reflecting the neighborhood’s mixed use appeal as well as its growing residential presence.  

“As residential conversions continue to entice developers, the health of the commercial real estate market in Lower Manhattan could ultimately stand to benefit,” Downtown Alliance president Jessica Lappin said. “These conversions will not only give more housing options to our residential population, but will help reset the supply and demand across the office sector, as low-demand space leaves the market.”

On the retail front, Lower Manhattan saw 16 new openings in the first quarter, approximately two thirds of which were food and beverage businesses. Of note, Conwell Coffee Hall, an Art Deco cafe, opened its doors at 6 Hanover St. Also, Mercer Labs Museum of Art & Technology, a 36,000 sq. ft. technology-forward museum featuring AI art and digital, immersive art spaces opened at 21 Dey St. Looking forward, 10 retailers announced plans to open locations in Lower Manhattan.   

Meanwhile, the tourism sector continues to show strength. Lower Manhattan’s hotels saw their highest collective Q1 occupancy rates since 2008 at 74%. Overall, 9.4 million tourists visited the neighborhood in 2023, a 27% boost from 2022, primarily due to the increase in international visitors, which have nearly doubled from 2021. The hotel inventory in Lower Manhattan currently stands at 8,990 rooms across 43 hotels. Q1 saw the opening of the Warren Street Hotel, a new boutique property operated by Firmdale Hotels. 

For more info, including the full Q1 2024 Lower Manhattan Real Estate Report, CLICK HERE