Overall Vacancy Rates Drop 21%, Class A Vacancy Rates Fall 31%

The Alliance for Downtown New York announced that the ongoing influx of businesses into Lower Manhattan fueled the remarkable performance of its office market during the past 12 months. According to CBRE, tenants leased 6.93 million square feet in 2006, the best showing Downtown since 2000. The commercial market also experienced more than 4 million square feet in net absorption, the highest annual total since 2000.

The continued interest in Lower Manhattan office space drove down overall vacancy rates by 21 percent, with building owners boosting overall average asking rental rates by 25 percent, according to Cushman & Wakefield. The area's Class A buildings posted even greater growth, with vacancy rates falling by more than 31 percent and rents jumping up by 34 percent.

"The continued expansion of Lower Manhattan businesses demonstrates the organic growth of existing companies and their commitment to the area," said Eric Deutsch, president of the Downtown Alliance. "27 companies, totaling in excess of 1.2 million square feet in expansion space, have grown their business Downtown in the past six months."

Lower Manhattan companies that have increased their presence in the submarket during the past six months include Moody's Investors Service boosting its occupancy by 264,000 square feet in its move from 99 Church to 7 World Trade Center; AIG taking 250,000 square feet of new space at 32 Old Slip and 79,000 square feet at 40 Wall Street; Sullivan & Cromwell added 67,000 square feet at 55 Water Street; Morgan Stanley & Co. leased an additional 65,000 square feet at One New York Plaza; and Willis expanded by 65,000 square feet in its relocation from 7 Hanover to 1 World Financial Center.

"With Midtown space renting at a premium and the number of feasible options for tenants there dwindling, companies are turning to Lower Manhattan in ever greater numbers," said Deutsch. "Downtown office buildings offer the same high-quality space and superior service at substantially reduced rates."

New companies to Lower Manhattan were also responsible for a substantial amount of leasing activity. In the past six months, companies relocating Downtown leased approximately 1 million square feet of space. In the past two years, about 119 companies have joined the Downtown office market, signing for more than 3.1 million square feet.

Major relocations to Downtown during the past three months include ABN AMRO leasing 140,000 square feet at 7 World Trade Center, Labaton Sucharow taking 70,480 square feet at 140 Broadway, IT USA signing for 35,000 square feet at 17 Battery Place South and Levitz Furniture leasing 30,000 square feet at 233 Broadway.