Residential rents, commercial vacancies both on the rise

BY Aline Reynolds

Residential rents in Downtown are up compared to last year, a sign of overall economic growth, according to a report released last week by The Real Estate Group New York. And the Downtown Alliance’s latest quarterly report of the Lower Manhattan market shows an increase in leasing activity as commercial landlords are scaling back on rents.

Tribeca studios and apartment leases jumped considerably – rents for studios in buildings without doormen, for example, have increased by 36.5 percent since October 2009.

“Tribeca is one of the most desirable areas rent-wise,” said Andrew Barrocas, chief operating officer of T.R.E.G.N.Y., particularly due to its accessibility to other parts of the city. “Most people in financial services, where we would have seen that person as a buyer, they’re now opting to rent.”  

Average apartment rents in Battery Park City also went up by 2.5 percent over the past year, while rents in the Financial District rose by 2.8 percent, according to the real estate firm’s report.  

The gains, though small, are a good indicator that the overall market is picking up steam, according to Barrocas. “Typically the [rental] market is very much in line with employment rates,” he said.

According to Barrocas, large-scale development projects such as the World Trade Center are contributing to Downtown’s residential growth.

“Anytime you bring that much commercial property to the market, you can certainly expect that a percentage of the people that’ll occupy that space will want to live in the area, which can only create more demand,” said Barrocas.  

A former Downtown resident, Barrocas recalled the area’s bleak atmosphere back in the early 2000s, when luxury apartments were few and far between.

“After people left work, it was a little desolate down there,” said Barrocas.

Anticipating the greater demand for high-rises, residential developers slowly began to build and attract high-end tenants. 

The D.A.’s third-quarter report, meanwhile, which tracked economic activity during July, August and September, showed mixed results. Commercial leasing activity during quarter three was the highest since mid-2008, according to the findings, having risen by 16 percent since October 2009.

The report stated, “Lower Manhattan landlords remain bullish on Downtown commercial real estate as citywide employment increased earlier than expected and there are more tenants on the market.”  

New Downtown leases during the third quarter include the New York Daily News, moving to 4 New York Plaza; Healthfirst, moving to 100 Church St.; and Deloitte & Touche, which is renewing its lease at the World Financial Center. Deloitte & Touche is one of 158 Lower Manhattan firms that have renewed their leases since the recession began in December 2007.  

“This strong activity reinforces longer-term trends that new firms are increasingly attracted to Lower Manhattan,” said D.A. President Elizabeth Berger, attributing the high occupancy rate to a diversification of the economy.

Eighteen Downtown restaurants and stores opened during the third quarter, including Milk Street Café and Duane Reade at 40 Wall Street; Burger King at 106 Fulton Street; B.L.T. Bar and Grill at 123 Washington Street.

Four new hotels opened south of Chambers Street: the Holiday Inn Express, the World Center Hotel, the Club Quarters and the W Hotel and Residences. Three other hotels are under construction, including the Doubletree at 8 Stone Street, which is slated to open by the end of the year, according to the D.A.  

“While financial services and professional services remain as the signature industries downtown, we’ve seen a huge rise in professional services, creative services and also non-profits as well as the hospitality industry,” Berger said.

However not all of the D.A. report’s numbers were promising. Commercial vacancies rose to 12.1 percent during the third quarter, after hovering around 10 percent for nearly a year; and asking rents for retail storefronts dropped by 15 percent from last quarter.

“While the economic downturn has caused decreases in consumer spending and retail asking rents, we’re encouraged by the steady flow of retail openings throughout the downturn,” said Jeff Simmons, vice president of communications for the D.A.