Downtown NYC Office Vacancies Fall on Technology DemandDavid M. Levitt
Lower Manhattan office vacancies fell in the first quarter to the lowest since 2008 as technology and creative firms priced out of the midtown south area spilled into the market, Cushman & Wakefield said,
The vacancy rate downtown, home to the city’s financial district, declined to 8 percent from 9.2 percent a year earlier, the New York-based real estate services firm said in a report today. More than 20 percent of leasing below Canal Street in the first quarter was by technology and media firms, Cushman said.
“A decade ago, there was this measured wall at Canal Street,” Andrew Peretz, an executive vice president at Cushman, said in a briefing for reporters. “Financial-services people, they stayed on the southern side of it, and the creative people stayed on the northern side of it.”
Leasing by technology firms helped keep the Manhattan office market steady, while demand from the financial industry remains “lagging,” said Kenneth McCarthy, Cushman’s chief economist. Midtown south -- an amalgam of neighborhoods that includes such trendy areas as the Flatiron District, the East Village and Chelsea -- once again had the tightest vacancy rate in the U.S., at 6.9 percent, according to the brokerage.
Total office vacancies in Manhattan were 9.1 percent, the same as a year earlier, while the average asking rent climbed 1.2 percent to $59.60 a square foot. Downtown landlords sought an average of $40.28, up 0.2 percent from a year earlier, while in midtown south, rents rose 7.3 percent to $51.97.
In Midtown, roughly 30th Street to Central Park, rents averaged $66.34 a square foot, down 0.5 percent from a year earlier. The vacancy rate was 10.1 percent, up from 9.9 percent.
Among downtown’s largest leases in the quarter were Harper Collins Publishers Ltd.’s deal for 179,000 square feet (17,000 square meters) at 195 Broadway; and German market-research firm GfK SE’s agreement for 75,000 square feet at Brookfield Place, formerly the World Financial Center, according to a brokerage Studley Inc. Both companies are moving from more expensive markets to the north.
Lower Manhattan’s vacancy rate is poised to jump this quarter to “between 12 and 13 percent” when former Merrill Lynch & Co. offices at Brookfield Place enter its database, McCarthy of Cushman said. The leases expire in September, he said. Cushman’s vacancy data include empty space and offices that will become available in the next six months.
Across West Street, two World Trade Center skyscrapers are nearing completion. Those buildings -- including the 3 million-square-foot 1 World Trade Center -- probably would bump up the vacancy rate even more, according to McCarthy.
Peretz said he has no doubt that the new downtown space will appeal to technology and media firms. The area has already attracted Conde Nast Publications Inc., which has agreed to move its headquarters to 1 World Trade Center.
“It’s like the Berlin Wall. It’s gone,” he said. “The World Financial Center is getting a lot of activity right now from all different types of users. We’re just going to see a much more diverse downtown marketplace, especially when the World Trade Center opens.”