New Breed of Creative Class Tenant Heads to Financial East Submarket
Jotham Sederstrom Oct. 23, 2012, 7:15 a.m.
Silverstein Properties this month leased a 50,000-square-foot block of space at 120 Broadway to Beyer Blinder Belle Architects & Planners LLP, taking advantage of the incipient migration of a new breed of tenant into the Financial East area.
The prewar buildings that predominate in the submarket, which includes the financial landmarks along Broad and Wall Streets, have long since ceased attracting the biggest banks, law firms and insurers. Still, while vacancies in the submarket remain at almost 14 percent, local landlords and brokers say the flow of nontraditional tenants into the area is beginning to gain momentum.
The submarket “has and will continue to benefit from Midtown South tenants not wanting to pay increases in rents,” said Cassidy Turley Vice President Stephen Bellwood, referring to the technology, new-media and creative companies that have filled up the funky office market to the north. “As these companies grow, they’re growing out of mid-block buildings” and are being attracted by rents that are “10 to 15 percent less that what they’re finding in Midtown South.”
Beyer Blinder is currently located at 41 East 11th Street.
Built in 1915, 120 Broadway was once the biggest office building in the world, with 1.8 million square feet of space. Joe Artusa, a senior vice president at Silverstein, said the property had a 17 percent vacancy rate at the beginning of the year, and he expects it to be 95 percent leased by the end of the year. The building boasts H-shaped floorplates that “allow an enormous amount of light—and eight corners,” he said. The building also offers direct access to the 4, 5, M and J subway lines.
The area’s appeal as an office market is enhanced by an influx of residents that has tripled the Downtown population to almost 60,000 since 2001.
“A lot of the people who live down here want to walk to work,” said Brad Gerla, executive vice president at CBRE. The transformation is most in evidence on weekends, when streets used to be empty. Now you might see couples pushing strollers down Wall Street alongside tourists heading for the South Street Seaport.
The residential market has fueled a stronger market for retail businesses such as the Capital Grille at 120 Broadway, which, Mr. Artusa said, is packed for lunch and dinner every night.
While the area lacks the access to Metro-North and the Long Island Rail Road that brings commuters to Midtown markets, Mr. Bellwood said a recent demographic study for a technology company considering a move showed that it was easier for most of its employees to get to buildings in lower Manhattan than to properties in Midtown South.
“Downtown is going to become one of the receiver markets for the overflow from Midtown South,” said Marcus Rayner, managing principal of Cresa, a real estate advisory firm that exclusively represents tenants. “The media has already established itself as a candidate for going Downtown with the lease to Condé Nast” at 1 World Trade Center, he said.
Landlords have “worked very hard on creating 24-hour community,” said Marc Shapses, executive managing director at Studley. The neighborhood offers water views from many of its buildings, and landlords offer generous build-outs to adapt spaces to the tenants’ needs. “It’s definitely the best value in Manhattan,” Mr. Shapses said.