Stat of the Week: 3.3 Million Square Feet
Despite a slight uptick in the available supply in January 2015, the Downtown office market has been in high demand. With Downtown demand at the highest it has been in over 15 years, more and more tenants from Midtown and Midtown South continue to relocate south. Although this trend really took off in 2012, the space leased by tenants migrating downtown in 2014 totaled more than 3.3 million square feet; this surpassed the amount leased in 2012 and 2013 combined. Over the last three years, there has been over 10.5 million square feet of new leases signed downtown, with over 6.5 million square feet, or 62.2 percent, coming from tenants new to the area, attracted to the value-oriented spaces.
It is not just the aggregate square footage that is increasing; each year the number of tenants relocating to Lower Manhattan and the average size of each transaction is growing as well. In 2014, 78 companies migrated downtown, a 52.9 percent increase from 2012. More tenants with larger requirements are moving out of Midtown and Midtown South and into Lower Manhattan compared to 2012. In 2014, the average lease signed by Midtown tenants migrating downtown was 61,787 square feet—almost three times the size of those signed in 2012. The average lease size for migrating Midtown South tenants was up as well, from 21,696 square feet in 2012 to 25,322 square feet in 2014.
The TAMI (tech, advertising, media and information services) sector was the most active industry to move downtown in 2014. With over 1.6 million square feet leased, this industry accounted for 48.2 percent of the leasing activity. This is a significant difference compared to 2012 when TAMI tenants migrated into only 199,340 square feet. Midtown and Midtown South retailers finally caught wind of this migration trend in 2014, as three retail companies leased just under 725,000 square feet combined downtown, compared to only one retailer in 2012 and 2013. Additionally, Midtown and Midtown South non-profit companies continued their upward trend of migrating downtown, as the industry leased 423,035 square feet in 2014, up from on 54,617 square feet in 2012.