The Downtown office market is in even worse shape than widely reported data indicate, in response to several major dealmakers.
One of them, an industry legend not given to doom-and-gloom scenarios, told us that massive amounts of space are quietly up for sublease even on the World Trade Center and Brookfield Place – Lower Manhattan’s best-performing properties.
Most brokerage firms cite FiDi-area “availability” – including space currently vacant or soon to be — at between 20% and 23%, compared with around 16% uptown. But so-called “shadow space” cited by the market insider could raise the full much higher.
Not every constructing is in trouble. The district’s grim overall data are skewed by two particular enormous properties – Paramount Group’s “transitioning” 60 Wall Street, where most of 1.6 million square feet are yet to be leased, and 111 Wall Street, a wholly empty 1 million square-foot address that’s now in foreclosure.
But other struggling buildings are also on the downbound train, resembling 40 Wall Street. The landmark tower is about 30% empty and its plight will likely worsen because the Trump Organization skyscraper is vulnerable to seizure by state attorney general Letitia James.
Even more vulnerable are Downtown’s large variety of pre-war, Class B-minus buildings that few tenants want at any rent and which may’t easily convert to residential use.
Yet hope is perhaps on the way in which. According to VTS, the national real estate technology platform that uses AI to watch and interpret market office-space “tours” — look-sees by corporations eyeing a move or expansion – have recently been higher Downtown than in Midtown or Midtown South.
Lower Manhattan saw 40% more so-called “tire-kicking” visits within the months of December 2023 through February 2024 than it did between September and November 2023.
A 43% increase in tours month over month easily beat Midtown’s 25% and Midtown South’s 11%, in response to VTS. Much of the tenant interest Downtown was by corporations searching for 50,000 square feet or more.
VTS chief strategy officer Ryan Masiello said, “I believe generally, corporations are starting to understand we’re at the underside of the market without delay. More corporations are exploring to attempt to reap the benefits of lower rents, especially downtown,” he said.
But one highly achieved downtown market-watcher was skeptical of VTS’ findings.
“They can only be true in the event that they’re including the smallest users. It definitely is just not true of tenants on the lookout for greater than 20,000 square feet,” the insider said.
Manhattan leasing in all submarkets hit the “mute” button in the primary quarter, in response to Savills which cited “a dearth of huge deals.”
The first quarter’s 6.8 million sf of transactions was 6.6% lower than in the primary three months of 2023, Savills said.
Interestingly, three of the biggest office deals were renewals and/or expansions by major retailers — including for Michael Kors, Burlington Stores and David Yurman, which tallied a complete of nearly a half-million square feet.
At least one major landlord saw some positive news. At SL Green’s 485 Lexington Ave., 4 recent latest leases and one renewal totalled 64,303 square feet.
Leasing director Steven Durels said, “Our recent success at 485 Lexington confirms that well-located buildings are experiencing increased tenant demand.”
In the 2 largest latest leases, RSC Insurance Brokerage took 27,964 square feet on all the seventeenth floor and Exponent, Inc., an engineering and scientific consulting firm, took 14,383-square feet on the twenty second floor.
Smaller deals include capital markets company William O’Neil & Co. for 4,797 square feet and Graham Holdings Company signed for 3,006 square feet.
In addition, Tegna, Inc., a broadcast, digital media and marketing services company, renewed its 14,078-square-foot lease on the twenty seventh floor.
