Lookout, Midtown: Downtown is not only stealing your tenants, but its availability rate is dropping fast and catching up to yours! Since Downtown’s availability rate peaked at 14.6 percent in June 2013, it has plummeted 370 basis points to 10.9 percent today. This is only 60 basis points higher than Midtown’s current availability of 10.3 percent. Not that Midtown is underperforming; availability dipped 110 basis points during the same time period. It has just been outshined by Downtown over the past 12 months. One thing is for certain—the tenants that have left Midtown for Downtown in search of value have definitely helped shrink the available supply at a much faster rate than in Midtown.
This year alone, more than 1 million square feet of Midtown tenants migrated into Lower Manhattan, led by the recently announced Time, Inc. lease of 670,000 square feet at 225 Liberty Street. Midtown South has had its share of Downtown emigrants as well, with more than 430,000 square feet of tenants moving south of Canal Street in 2014. This total was also driven by a publishing firm’s relocation when Nature Publishing leased 176,000 square feet at 1 New York Plaza. And with recent reports suggesting that a couple more leases could close at Brookfield Place, 2014 Downtown migration totals by square feet are on track to surpass the 3.47 million square feet of combined relocations from 2012 and 2013.
Also, it is not just the migration of tenants helping this market. Demand for large blocks of space Downtown remains high, as only 13 existing spaces greater than 100,000 square feet are on the market compared to 21 two years ago. On the flip side, Midtown has seen its share of large transactions, but with tenants migrating south over the past few years, the number of large availabilities has increased from 42 to 52.