Downtown Manhattan’s vacancy rates decreased by more than three percentage points in the last year despite large amounts of space for tenants at the World Trade Center, according to new quarterly data released by JLL and other market observers.
Downtown’s overall vacancy rate dropped from 13.7 percent to 10.6 percent between the third quarter of 2013 and the third quarter of this year, while downtown Class A vacancies plummeted from 15.5 percent to 11.2 percent over the same period, according to the JLL report. The trend reflects the area’s growing appeal to tenants from the technology, advertising, media and information sector who are moving from other neighborhoods, said John Wheeler, the director of JLL’s downtown office.
“The market has really benefited from attracting tenants from both Midtown and Midtown South,” said Mr. Wheeler. “The financial services sector no longer dominates the occupancy the way it did even six or seven years ago. What’s interesting is that the market’s only going to become more attractive. You’re going to have a whole different demographic of people walking around the streets.”
The 404,591-square-foot lease for Saks Fifth Avenue parent company Hudson’s Bay at Brookfield Place, where vacancy fell from 32.5 percent to 5 percent in one year, represents the largest transaction downtown in the third quarter, according to the report. Average office rents in the downtown area grew from $49.91 to $53.12 for a 6.4 percent gain over the past 12 months, the JLL report says.
The area’s vacancy rate does, however, show higher availabilities than the Midtown South market, according to both JLL and Cushman & Wakefield. With an 8.5 percent vacancy rate, Midtown South “continues to lead the nation as the tightest central business district,” according to C&W’s latest quarterly report. But downtown did register a drop from a 10.9-percent vacancy rate in the third quarter of 2013 to a flat 9 percent rate in the third quarter of 2014 after total available space downtown shrank by more than 16 percent to 7.7 million square feet of total available space, C&W’s figures say.
World Trade Center towers 1, 3, and 4 represent 40 percent of all available space downtown, said Cresa New York real estate analyst Peter Kozel. Vacancy rates for all other Class A buildings in the downtown market fell to 10.4 percent in the third quarter, according to Cresa.