Influx of New Companies, Decisions To Retain Space Boost Downtown's Office Market

The Alliance for Downtown New York announced that relocating businesses, companies retaining space previously earmarked for sublease and new leasing activity in the second quarter of 2006 helped strengthen Lower Manhattan's office market and position it for further growth in the coming months.

Lower Manhattan continues to lure new companies to the area, with approximately 1.5 million square feet in leases signed by businesses moving Downtown from Midtown, Midtown South and other locations around the New York metropolitan area over the past year and a half. This includes Empire Blue Cross' 52,600 square-foot deal at One Liberty Plaza and BearingPoint's 53,611-square-foot deal at Three World Financial Center, which will house 633 BearingPoint employees.

Downtown vacancy rates have also fallen in part due to firms taking space off the market to use it for their own purposes. More than 1.2 million square feet of space has been withdrawn from the market by JP Morgan Chase, General Electric, Merrill Lynch, Guardian Life Insurance, TD Waterhouse and others since the beginning of 2006, according to data complied by CB Richard Ellis.

"Lower Manhattan continues to be the location of choice for a diverse mix of large and small companies, and the forecast for the Downtown office market in the coming months is very encouraging," said Eric Deutsch, president of the Downtown Alliance. "We should see well over 1 million square feet in leases signed, just counting the anticipated deals by Moody's, Aon and the Custom House, and we expect substantial new leasing activity as more companies recognize the value and benefits of Lower Manhattan."

Businesses signed leases for 590,929 square feet of office space in the second quarter of 2006, according to data compiled by Cushman & Wakefield Inc. Companies signing leases downtown included industry leaders LaBranche & Company, a stock trading firm that leased 48,000 square feet and agreed to keep 511 jobs in Lower Manhattan for at least 10 years; Reliance Insurance, 47,609 square feet; Jane Street Capital, 35,765 square feet; American Stock Exchange, 26,129 square feet; American Express, 14,622 square feet; Bank of Japan, 12,778 square feet; and the Junior League, square feet 10,525 square feet.

While leasing activity experienced a modest drop compared to the first quarter of the year, falling vacancy rates and rising rents demonstrate the ongoing vitality of the Downtown office market. Overall, vacancy rates for office space in Lower Manhattan dropped to 11.2 percent at midyear 2006 from 11.6 percent in the first quarter; and rents increased slightly, rising to $35.18 per square foot from $34.97 per square foot in the same time period.

Big-name retailers are also continuing their push into Lower Manhattan. Tiffany & Co. plans to open its second shop in New York around the corner from the New York Stock Exchange at 37 Wall Street. The 7,600-square-foot store, which will be the building's exclusive retailer, is scheduled to open in fall 2007 and marks the return of the company to the neighborhood where it was founded more than 135 years ago. Tiffany & Co. joins other mid-and high-end retailers who have new locations in Lower Manhattan, including BMW, Hickey Freeman, Sephora, and the World of Golf.

Over the past year, a number of high-end restaurants including Bobby Van's Steakhouse, PJ Clarke's, Trinity Bar and Grill, and Harry's Caf„ and Steakhouse have opened, raising the profile of Downtown's culinary scene. What's more, Whole Foods Market, the world's leading natural and organic supermarket, has signed a lease to bring a 55,000-square-foot grocery store to Lower Manhattan by spring 2007.