Downtown Office Leasing Activity Up Slightly in Q2; Hospitality Sector Continues to Surge

Lower Manhattan’s office market wrapped up the first half of 2024 on stable footing, with office leasing up 1% over the first quarter in 2024, according to the Alliance for Downtown New York’s Q2 report on the neighborhood’s real estate market. Leasing still lags 25% behind the five-year average and 17% behind the post-pandemic average. The quarter also marked the second consecutive quarter that positive absorption has been created, with more office space leaving the market than entering due to residential conversions. 

Lower Manhattan recorded 589,000 square feet of new leasing in the second quarter. The tech sector led the way, taking up 36% of all space leased. The financial services and legal sectors had an equal share of leasing, both at 15%. The largest single lease of the quarter was from Stripe, a financial services and software company, which signed a 147,509 sq. ft. lease at 28 Liberty St. Subleasing accounted for 49% of all leases for the quarter, including four of the five largest deals, showing that turnkey spaces are a popular option for tenants. 

During Q2, positive absorption continued to grow in Lower Manhattan for the year. To date, 696,000 sq. ft. of office space has left the market due to underperforming office properties being converted to residential use. This includes major residential conversion projects at 111 Wall St. and 222 Broadway. This figure is the highest among Manhattan’s submarkets and provides a possible signifier of market stabilization. 

“While the office market remains slow but stable, our hospitality sector has taken off, with record numbers of visitors filling up our Lower Manhattan hotels,” Downtown Alliance president Jessica Lappin said. “Tourism is back across the city but our hotels have eclipsed even the Midtown and city-wide occupancy rates.”

Downtown’s hotels boasted an occupancy rate of 89% in Q2, the district’s highest mark on record and a significant increase in quarterly and yearly growth. Lower Manhattan’s Average Daily Room Rates also posted its highest Q2 ever at $317.06. The current hotel inventory for the neighborhood stands at 8,498 rooms across 43 hotels. 

Finally, Lower Manhattan saw 14 new retail openings in the second quarter, most of which were food and beverage businesses. In addition, the neighborhood’s entertainment and cultural scene expanded with the opening of “Life and Trust,” a new theatrical experience at 69 Beaver St., which spans six floors and 100,000 sq. ft. The new production, from the producers behind the popular “Sleep No More” show, joins Lower Manhattan’s growing roster of first class entertainment venues including the Perelman Performing Arts Center, Pier 17 and Mercer Labs. 

Read the full report here.