At the same time, Friedrich said the company remains “incredibly excited” about the positive developments in Lower Manhattan and the growing interest from both office and retail tenants. “We fully understand that the best support for the positive momentum that we see taking place in Downtown and at the World Financial Center specifically everyday and every week, there is an announcement on tenant commitments,” he said. “The velocity of these commitments is slower than we anticipated than at the start of the year, but I think that is pretty characteristic of what has happened throughout most of the Manhattan market.”

But overall, the REIT reported solid Q2 leasing activity across the portfolio, with 2.6 million square feet of new leases signed at an average net rent of $28.59 per square foot, representing a 34% increase over expiring net rents in the period. The portfolio occupancy rate finished the quarter at 93.4%, up from 92.9% at the end of the first quarter.

In New York, Brookfield inked a 17-year, 1.2 million-square-foot renewal and expansion with Morgan Stanley at One New York Plaza. In other markets, the company re-upped the US Secret Service for three years at Ernst &Young Plaza for 94,000 square feet in L.A., and signed a five-year, 164,000-square-foot renewal with Chevron at 1600 Smith St. in Houston.

Friedrich said the high amount of renewals are due to “uncertainty” in the market overall. “Tenants, particularly large-scale tenants, are reluctant to make decisions on a strategic basis unless pressured by large expirations or consolidation needs,” he said.

In New York in particular, Mitch Rudin, president and CEO of US commercial operations at Brookfield, said Manhattan overall has a 9% office vacancy rate, and certain areas are performing better than others. While Midtown has “suffered,” the low vacancy rate in Midtown South (under 6%) will eventually tenant spillover will occur into other neighborhoods, he explained. “And Downtown will likely be the greater beneficiary,” he added.

Overall, the REIT reported funds from operations of $171 million in Q2 2012, compared with $166 million during the same period in 2011. Commercial property net operating income for Q2 2012 increased to $342 million, compared with $217 million in Q2 2011, largely due to the impact of property acquisitions and the consolidation of its US office fund.