After a half-decade recovery period, real estate firms are reporting that February marked the first time the Downtown commercial market reached pre-9/11 levels.
Vacancy rates skyrocketed and average asking rent prices dropped significantly in the aftermath of Sept. 11. These trends gradually began to reverse near the end of 2004, and have continued improving ever since.
“The office market in Lower Manhattan is showing incredible resilience, rebounding in the last year and a half in a dramatic way,” said Eric Deutsch, president of the Alliance for Downtown New York, which manages the area’s business improvement district.
Vacancy rates for premier office space are almost half what they were at the same time last year, dropping to 6.6 percent, according to Colliers ABR.
Average asking rent prices have risen from $41.74 per square foot in Feb. 2006, to $49.83 last month.
While this still remains significantly below Midtown prices, which are at an average of $80.50 per square foot, space in the tower floors of 7 World Trade Center is commanding $75, according to Cushman & Wakefield.
Cushman also reported a 32.8 percent increase in Downtown leasing over last year, a figure that is nearly triple Midtown’s rate.
Leasing figures were helped significantly by 7 World Trade Center alone, which is about two-thirds leased. Moody’s Investors Service acquired nearly 600,000 square feet of the rebuilt space, which marked the largest lease signed Downtown last year. And Moody’s reportedly has plans to lease more space in the building soon.
Several factors have contributed to the Downtown market’s recent success, according to the Alliance.
The first, they say, is the “significant progress being made toward improving its transportation infrastructure,” as progress continues on the World Trade Center transit hub and the Fulton Street Transit Center.
Another contributing factor is the increasingly high rent and low vacancy rates in Midtown, forcing businesses to relocate. Bruce Brodoff, the Alliance’s spokesperson, said, “Since the beginning of 2005, 128 firms have relocated to Lower Manhattan from Midtown and other parts of the metropolitan area, leasing a total of 3.3 million square feet.”
Deutsch said a diversifying clientele is also adding to growth Downtown. “While financial services remain our most important player and our anchor,” he said, “we are becoming more diverse than we ever were before.” Deutsch said businesses of all types and sizes have been flooding into Lower Manhattan, with technology firms, law and accounting firms, media companies, non-profits and educational institutions leasing or purchasing space in the more-affordable Downtown market.
With continuing redevelopment underway, including foundation work on the Freedom Tower and deconstruction on the former Deutsche Bank, Deutsch predicted the Downtown commercial market would continue its upward trend.
— Brooke Edwards
