The west side of Downtown Manhattan has been in the news a lot lately for obvious reasons—big developments both at Brookfield Place with its redeveloped retail and at the World Trade Center with the soon-to-open Towers 1 and 4.
But there has been significant activity on the east side of Downtown, as well. This week, I thought I’d take a snapshot of the Water Street corridor, in particular. One year ago, this area was struggling with the aftereffects of Hurricane Sandy, and many wondered if it would ever rebound. Today, many of the office buildings have undergone significant renovations (some you can see and much you can’t see) at substantial expense. Retail, meanwhile, also is undergoing a metamorphosis, especially with the rebuilding of South Street Seaport.
Water Street crosses through two different Newmark Grubb Knight Frank submarkets—financial and City Hall/insurance. For this exercise, I’ve created a mini submarket essentially from Battery Park up to the Brooklyn Bridge, from FDR Drive west to Pearl Street. This pocket of Downtown encompasses 40 office buildings with 23.4 million square feet of space. There are 20 office buildings considered Class A, though they contain a whopping 84 percent of the total 19.7-million-square-foot inventory. The biggest office building along this strip (and in all of Manhattan) is 55 Water Street at 3.6 million square feet. There are a total of nine buildings with at least 1 million square feet.
The overall average asking rent for Water Street stands at $42.29 per square foot, which is up from its recent low of $37.76 per square foot back in the second quarter of 2010. That said, pricing is 14.6 percent below the overall figure in Midtown South and 34 percent below the overall figure in Midtown, which could most definitely pull some price-sensitive tenants down south.
Availability across the Water Street submarket does remain steep, even taking into account recent leasing activity. The figure closed the third quarter at 17.1 percent, though it is down from the recent peak of 20.8 percent in the second quarter of 2012. This compares to 15.1 percent for all of Downtown and 12.7 percent for Manhattan.
What’s the building with the most space available? That would be 180 Maiden Lane with 827,000 square feet ready for occupancy in May 2014.
It had been discussed that 180 Maiden Lane would be next to fall under the residential conversion spell—something that has been rampant across this area for years (e.g., 85 Wall Street and 95 Wall Street—both former Class A office buildings). However, it appears it will remain office product for now. Another much-discussed tower has been 110 Wall Street, which was shut down after Sandy with the expectation of a residential conversion. Now it appears WeWork will step in and net-lease the entire structure with a residential/office hybrid. Similarly, it’s unclear what will happen to 111 Wall Street, which has been occupied by Citigroup. It’s likely not long for this world as an office building and may indeed end up as a residential development site (with awesome views over the East River to Brooklyn).
So keep an eye on Water Street. Change is definitely underway, whether in retail, residential conversions/redevelopment or simply the allure of upgraded and less expensive office space. Sandy be damned.