For the past year or more, there has been widespread concern about the Downtown office market. With the impending completion of the two World Trade Center towers (1 World Trade Center will be completed at the end of 2013 and 4 World Trade Center in the third quarter of 2013) and the consolidation of tenants in Brookfield Place, the market is facing the very real prospect of more than six million square feet of space arriving within a very short period of time.
In a market that Cushman & Wakefield defines as currently consisting of 84.9 million square feet of office space (current inventory in Manhattan overall is 392 million square feet) increasing to 89.9 million square feet when the World Trade Center buildings are completed, that much space would increase the vacancy rate by approximately 6.5 percentage points.
That’s a scary proposition, but of course it is not so simple. While there is a lot of space entering the Downtown market today, there is also a lot of leasing happening in that office market. Over the past decade, new leasing in the Downtown market has averaged 1.1 million square feet per quarter, but since the beginning of 2011, new leasing Downtown has averaged more than 1.5 million square feet per quarter, or 34 percent above the long-term average and the strongest two-year period of the past decade.
The Downtown market is going through a major transformation, as a much more integrated transportation infrastructure is being completed, along with the rebuilding of the World Trade Center site, including the memorial. The result will be a market that is more connected and more integrated than it ever has been. As these developments are completed, the Downtown market is attracting tenants from all over Manhattan. As this process continues, leasing high-quality space in what is rapidly becoming one of the most vibrant and attractive areas of the city may not be as daunting or difficult as it appears.
Ken McCarthy is chief economist at Cushman & Wakefield, the world’s largest privately-held commercial real estate services firm. Mr. McCarthy is responsible for preparing C&W’s US and global economic analysis, as well as working with the New York City research group to track and analyze activities in the New York City, Westchester County, Fairfield County, Long Island and New Jersey areas. Follow Ken via RSS. Ken.McCarthy@cushwake.com