"Lower Manhattan showed strong signs of a sustained recovery last year," says Eric Deutsch, president of the Alliance for Downtown New York. The firm released its third annual State of Lower Manhattan report which covers a range of sectors including commercial, retail, residential, transportation and tourism. "Lower Manhattan has made tremendous progress, although significant challenges lie ahead."

He notes that the Downtown office market saw the largest decrease in vacancy rate of any of the eight CBDs in the country that have more than 40 million sf of commercial space. "Smaller companies are relocating to Lower Manhattan to take advantage of the area's lower rents compared to other sections of the city," says Deutsch. Numerous firms outside of Downtown's traditional finance and insurance sectors represent sectors as non-profit, media, law, education, health, and other professional services that are moving to the area.

Companies taking space Downtown fueled a drop in the vacancy rate to 10.6% in the fourth quarter of 2005 from 13.7% in the fourth quarter of 2004. Total absorption reached 1.1 million at the end of 2005, which is the first time this figure has been positive since 2000.