Fourth Quarter Surge Helped Bolster Lower Manhattan Office Market in 2018
Since 2011, Lower Manhattan has seen 14.6 million square feet in relocations from Midtown and Midtown South, while only 4.6 million square feet of Lower Manhattan firms packed their bags for those two respective markets.
NEW YORK CITY—A surge in leasing activity in the fourth quarter, the like of which has not been seen since 2011, helped produce the best commercial leasing market in Lower Manhattan since 2014.
According to a report released by the Alliance for Downtown New York today, more than 2.12 million square feet of new commercial activity was recorded in Lower Manhattan in the fourth quarter, the highest quarterly total since the second quarter of 2011. For the year, there were 5.5 million square feet in commercial deals in the district, the highest level of activity since 2014. In 2017, a total of 5.49 million square feet of commercial deals were recorded in Lower Manhattan, a significant increase from the 3.36 million square feet leased in 2016.
The report noted that more than 1.82 million square feet of office activity was from tenants relocating to Lower Manhattan, according to commercial brokerage firm CBRE. The relocation total far exceeds the 1.27 million square feet in move-outs, including Deutsche Bank’s move from 60 Wall St. to One Columbus Circle.
The firms that moved into Lower Manhattan covered a wide range of industries that included: retail trade, fashion media, professional services, technology, non-profits and financial services.
In total, there were 26 relocations involving more than 25,000 square feet in Lower Manhattan, as compared to just 11 deals of that size a year earlier.
Since 2011, Lower Manhattan has seen 14.6 million square feet in relocations from Midtown and Midtown South, while only 4.6 million square feet of Lower Manhattan firms packed their bags for those two respective markets.
“It was an incredible year in Lower Manhattan,” says Downtown Alliance president Jessica Lappin. “We saw a number of new high-profile companies like McKinsey, Casper and Nike choosing to relocate to Lower Manhattan and many more current tenants like Omnicom and BMI choosing to stay. It’s clear that this neighborhood has arrived as a place where companies across all industries want to be located.”
While the opening of 3 World Trade Center put significant upward pressure on Lower Manhattan’s vacancy rate in 2018, continued high demand produced the largest quarterly drop in the vacancy rate since the second quarter of 2014 as the market tightened to 10.8% at year’s end. The Class A office vacancy rate in Lower Manhattan fell 2.1 percentage points in the fourth quarter to 11.7% as compared to the third quarter. Year-to-year, the vacancy rate at the end of 2018 was 2.2 percentage points higher as compared to year’s end 2017.
Retail in Lower Manhattan also continued to grow in 2018 with a total of 95 new stores and restaurants, the report stated. Nearly 60 full-service dining restaurants, casual eateries and nightlife spots across a variety of cuisines and price points opened this year, including Sola Lab, Brooklyn Chop House and Don Wagyu. Lower Manhattan also welcomed new and unique hotel brands to the market, including two concepts that are entirely new to New York City. The neighborhood’s lodging inventory now totals 7,700 rooms.
Some of the other pertinent data points from the report include:
• A total of 1,300 new units came online last year in six buildings, brining Lower Manhattan’s residential population to 62,000—a 148% increase from 2001.
• Six new office lease deals of more than 100,000 square feet were signed in 2018—three of which were finalized in the fourth quarter.
• The top five lease deals in Lower Manhattan in 2018 were: New York City Housing Authority’s 424,264-square-foot renewal at 90 Church St.; J. Crew’s 325,000-square-foot relocation lease at 225 Liberty St.; Omnicom Media Group’s 287,500-square-foot lease renewal at 195 Broadway; Pace University’s 214,466-square-foot renewal and expansion deal at 161 William St. and law firm Cahill Gordon & Reindel’s 213,017-square-foot lease at 32 Old Slip.
• J. Crew’s deal at 225 Liberty St. was the largest relocation deal in 2018 to Lower Manhattan, followed by McKinsey & Co.’s 184,389-square-foot deal at 3 World Trade Center; Wolters Kluwer E 42’s 130,000-square-foot lease at 28 Liberty St.; Syneos Health’s 86,498-square-foot deal at 200 Vesey St. and Diageo’s 86,375-square-foot lease at 3 World Trade Center.