M
idtown's office market is becoming increasingly tight, with large tenants struggling to find quality space. This has led to a surge in demand for Lower Manhattan, where vacancy rates are plummeting and rents are rising.
"Downtown has always been the more cost-effective market," said Jonathan Mazur of Newmark. "With Midtown at capacity, we're seeing a lot of activity downtown." Last year was the lowest on record for leasing in Lower Manhattan, but this year is shaping up to be a different story.
The CollegeBoard will move into 41,000 square feet at 225 Liberty, while Jane Street Capital has taken over 983,791 square feet at Brookfield Place. Two tenants are nearly doubling their space at 1 World Trade Center, with one taking its first city office and another relocating from the area.
Axsome Therapeutics has subleased an additional 48,000 square feet from Condé Nast, bringing its occupancy to 96,000 square feet. BNY Mellon is negotiating a four-year sublease for 200,000 square feet while it renovates its headquarters at 240 Greenwich St.
CBRE reported 127,000 square feet of leasing in April, with the year-to-date total now standing at 1.55 million square feet – up 122% from last year. Average asking rents are $57.39 per foot, a bargain compared to Midtown's $82.90.
American Express is still negotiating with Larry Silverstein to anchor a new 2 World Trade Center, but the deal is complicated. The financial firm would take the lower floors of a 2.5 million- to 3 million-square-foot tower and include many amenities for its employees.
Recent downtown deals include Masterworks moving from Brookfield's 225 Liberty St. to 1 World Trade Center in a sublease of 37,000 square feet from Network Capital. Uber has expanded to 351,000 square feet by leasing another 44,000 square feet from Silverstein Properties at 3 World Trade Center.
Expanding tenants and absorption of subleases are helping the overall market. San Francisco-based Stripe opened its first New York office in 2019 at 199 Water St. and a year ago expanded to 28 Liberty where it subleased 147,000 square feet.
The newly developed 107 Greenwich will soon be 96% leased, with one tenant taking two floors. The building's amenity floor was crucial in securing leases, according to JLL's John Wheeler.
While there is leasing activity on Class A space, much of it comes from musical chairs – tenants forced to move due to conversions or upgrading in a flight to quality from other space in Lower Manhattan.
