Office Leasing Rebounds in Lower Manhattan
Activity jumps 40% over Q2, but still well below five-year quarterly average.
Lower Manhattan recorded 851K SF of office leasing activity in Q3, a surge of 40% over the second quarter, and 10% more than Q3 2021. The surge in activity represents the market’s third best quarter since the start of the pandemic.
However, while the surge in activity—measured in CBRE’s latest market report—reverses two quarters of decline in leasing activity in Lower Manhattan, the overall activity remains 17% lower than the five-year quarterly average for the market.
Midtown Manhattan, by comparison, saw 4.62M SF of leasing activity in Q3—27% above the five-year quarterly average and a 40% surge YOY, according to the Alliance for Downtown New York’s latest Lower Manhattan market report.
“This is the second highest quarterly total since Q4 2019 and the second consecutive quarter with over 4M SF of leasing. Flight-to-quality continues to drive leasing in Midtown,” the Alliance report said, noting that the largest lease of the year was signed at 2 Manhattan West.
The Alliance report cautioned that the robust leasing activity comes as headwind storm clouds are brewing.
“Vacancy rates remained stubbornly high in all three Manhattan office markets, which were over 20% for the second quarter in a row [in Q3],” the market report said.
“While tenants have continued to show an interest in newer Class A properties, high availability and increasing economic uncertainty continue to present serious headwinds for Lower Manhattan’s office market,” The Alliance for Downtown New York report said.
Midtown South saw the highest quarterly increase in leasing among Manhattan’s submarkets, notching 1.7M SF as activity rocketed by 55% above second quarter levels, 37% above the five-year quarterly average.
Government and legal services drove the uptick in leasing activity in Lower Manhattan, the Alliance reported. Freshfields Bruckhaus Deringer signed the largest deal of the quarter in the market, relocating to Lower Manhattan from Midtown in a 15-year deal for an expanded 180K SF footprint at 3 World Trade Center.
The Manhattan District Attorney’s Office renewed its 113K SF lease at 250 Vesey Street; the New York City Housing Development Corp. inked a deal for 109K Sf at 120 Broadway; and the US General Services Administration signed a 48K Sf lease at 123 William Street.
Lower Manhattan continued to experience steady momentum in its retail market, with 34 new openings helping to fill vacancies created during the pandemic.