The downtown office market is in even worse shape than widely reported data suggests, according to several major dealmakers.
One of them is an industry legend who doesn’t fit into the doom and gloom scenario, with large amounts of space quietly being subleased even in Lower Manhattan’s best-performing properties, the World Trade Center and Brookfield Place. He said that it is being served on.
Most brokerages say the FiDi area’s “vacancy rate” (which includes currently vacant or soon-to-be vacant spaces) is 20% to 23%, compared to about 16% in Uptown. However, the so-called “shadow space” mentioned by market participants could cause the total to rise even further.
Not all buildings have problems. The district’s grim overall data is skewed by two particular real estate giants. Paramount Group’s “transitional” 60 Wall Street, which has 1.6 million square feet, most of which is still unleased, and 111 Wall Street, which has 1 million square feet and is completely vacant. It’s currently in foreclosure.
But there are other struggling buildings on the down train, such as 40 Wall Street. Landmark Tower is about 30% vacant, and its plight is likely to worsen as the Trump Organization skyscraper is at risk of foreclosure by state Attorney General Letitia James.
Even more vulnerable are the many prewar Class B-minus buildings downtown, which have few tenants willing to pay any rent and cannot easily be converted to residential use.
But hope may be on the way. VTS, a national real estate technology platform that uses AI to monitor and interpret market office space “tours” (viewings by companies looking to relocate or expand), has recently Downtown is more expensive than that.
In Lower Manhattan, so-called “tire-kicking” visits increased by 40% from December 2023 to February 2024 compared to September 2023 to November 2023.
According to VTS, the 43% month-over-month increase in tour numbers easily outpaces Midtown’s 25% and Midtown South’s 11%. Much of the downtown tenant interest was from businesses seeking 50,000 square feet or more.
said Ryan Masiello, Chief Strategy Officer at VTS. “Especially downtown, more businesses are looking to take advantage of lower rents,” he said.
But one downtown market watcher was skeptical of VTS’ findings.
“They are only true if they include the smallest number of users. That is definitely not the case for tenants looking for 20,000 square feet or more,” the source said.
Savills said Manhattan leasing companies in all submarkets hit the “mute” button in the first quarter, citing a “lack of large transactions.”
Savills said transaction volume in the first quarter was 6.8 million sq ft, down 6.6% compared to the first three months of 2023.
Interestingly, three of the largest office transactions were renewals and/or expansions by major retailers including Michael Kors, Burlington Stores, and David Yuman, totaling nearly 500,000 square feet. Did.
At least one major landowner saw some positive news. 485 Lexington Avenue in SL Green recently had 4 new leases and 1 renewal for a total of 64,303 square feet.
“The recent success of 485 Lexington confirms the increasing demand for tenants in well-located buildings,” said Leasing Director Stephen Durrells.
The two largest new leases include RSC Insurance Brokerage, which occupied 27,964 square feet across the 17th floor, and engineering and scientific consulting firm Exponent, Inc., which occupied 14,383 square feet on the 22nd floor.
Smaller deals include capital markets firm William O’Neill & Company signing for 4,797 square feet and Graham Holdings Company signing for 3,006 square feet.
In addition, Tegna, Inc., a broadcast, digital media and marketing services company, renewed its lease on 14,078 square feet on the 27th floor.
