Downtown Rising: Once Down, Leasing Up Again in Lower Manhattan Offices
After the storm, things are looking brighter for the lower Manhattan real estate market.
Even with construction scaffolds clogging the district’s narrow streets in a reminder of Hurricane Sandy’s devastation, Downtown office leasing activity jumped 73 percent in the first two months of the year, according to Cushman & Wakefield (CWK).
The firm’s data shows a spike in larger transactions, with leases on spaces 50,000 square feet or larger increasing to seven, from two a year earlier. That’s a sign that the market has “momentum,” just when as much as five million square feet of World Trade Center space is about to added to the inventory, said Jonathan Mazur, C&W’s director of research.
Technology-oriented companies such as GFK Market Research and WeWork (WE) are moving into the area south of Canal Street as rents rise and vacancies dwindle in Midtown South, the city’s burgeoning tech center. Brokers say the newcomers, led by bigger creative companies like Condé Nast and HarperCollins, are attracted not only by cheaper rents but also by the convenience and excitement that will come with the opening of the transportation hub, restaurants and retail outlets at the new World Trade Center. Developer Larry Silverstein, president and chief executive officer of Silverstein Properties, predicted that the project will have a “far greater” impact than Rockefeller Center had on Midtown in the 1930s.
The Durst Organization, which oversees the construction, leasing and management of 1 World Trade Center, and Silverstein, which controls four other towers in the complex, report strong interest from prospective tenants touring their properties, as does Brookfield Office Properties, currently the biggest Downtown landlord. Mr. Silverstein said that 4 World Trade Center, scheduled to open this year, is about 50 percent leased and that he is negotiating deals that will be sufficient to trigger financing for the completion of towers 2 and 3 under an agreement with the Port Authority of New York and New Jersey.
“As the economy has gotten stronger, we’ve had a steady stream since [the] first of the year,” Robert Becker, Durst’s senior leasing manager, said of the groups checking out 1 World Trade Center, which is 55 percent leased and scheduled to open next year. “We’re very happy,” he said. “We’re expecting to have a busy 2013.”
Seven of the top 10 Downtown leases so far this year were either relocations from Midtown or Midtown South or expansions by tenants migrating to the market, according to Jones Lang LaSalle. Publisher HarperCollins’s lease on about 180,000 square feet at 195 Broadway and GfK’s deal on 75,000 square feet at 200 Liberty Street were the biggest relocations, while collaborative work space provider WeWork’s 120,000 square feet at 222 Broadway was the largest “new location,” JLL (JLL) found.
GfK is moving from Chelsea Market, and it considered spaces in Midtown and Midtown South before choosing Brookfield’s complex west of the World Trade Center, said John Wheeler, managing director at JLL, who represented the landlord. Brookfield is in the midst of a $250 million renovation of the complex, lining up restaurants for waterfront space on the Hudson River and changing its name from World Financial Center to Brookfield Place.
Condé Nast, which spurred interest in the Downtown market in 2011 when it agreed to lease more than one million square feet in 1 World Trade Center, is in final negotiations to lease an additional 80,000 square feet at 222 Broadway.