FIRE Loses its Grip on Lower Manhattan

NEW YORK CITY—Since the financial crisis, the makeup of businesses in Lower Manhattan has become much more diverse with an influx of technology, advertising, media and information firms (TAMI) taking away market share from more traditional finance, insurance and real estate (FIRE) sectors.

In the past 10 years, FIRE’s market share of occupancy in Lower Manhattan has fallen from 55% in 2008 to a little over 35% today, according to the third quarter Lower Manhattan Real Estate Report released today by the Alliance for Downtown New York.

The TAMI sector has grown considerably over the past decade in Lower Manhattan, accounting for 15% of the office space today as compared to just 5% in 2008.

A property that typifies this seismic shift is the World Trade Center site where each of the main towers are anchored by a TAMI tenant. The property is currently 41% leased to TAMI concerns, a dramatic shift from the 5% market share TAMI firms had in the original twin tower buildings, the report notes.

“It’s amazing that Lower Manhattan has diversified its economy so rapidly in an expanding market,” says Downtown Alliance president Jessica Lappin. “This kind of shift is more often seen over several decades. But here in Lower Manhattan, we’ve witnessed significant growth in just 10 years and welcomed industries that never were here before. All of that is fueling the vibrant shopping and dining scene.”

More evidence of the area’s diversification cited in the Downtown Alliance report includes the tenant roster at 195 Broadway, which is nearly entirely made up of TAMI companies.

“Brookfield Place, once dominated by banks and financial firms such as Merrill Lynch, Nomura Holdings, and others, counts companies like the Associated Press, the Meredith Corp. (formerly Time Inc.), the College Board and J. Crew as some of its biggest occupants,” the report states.

Industry workforce totals also clearly point to a much more diverse Lower Manhattan business base. For example, professional services employment is at its highest level since 2001 at 51,332 employees, which is nearly 50% higher than this sector’s Lower Manhattan workforce in the depths of the recession in 2009.

Information sector employment has also shot up in recent times. The industry, which includes jobs in media and publishing, is just 5% off its peak level reached in 2001 with 12,083 people employed in that sector in 2018.

“If you work in Lower Manhattan today, you’re almost as likely to be working in information or professional services as you are in financial services or insurance,” the report notes.

Lower Manhattan private sector employment in the third quarter reached its highest level since Sept. 11, 2001 at 243,800 employees. The Seaport District is experiencing a busy 2018 with a number of new shops and eateries slated to open this fall.

In terms of office leasing, the third quarter was a downer for Lower Manhattan with just 726,000 square feet of new deals. However, the Downtown Alliance notes that several pending deals announced in the third quarter should put the market on par with its historical leasing average by year-end.

Those pending deals include the New York City Police Department, which is in talks to lease 106,000 square feet at 375 Pearl St. and Spotify, which is expected to close on an 85,666-square-foot expansion at 4 World Trade Center, which will increase its present at the property to 564,000 square feet.

Other pending transactions of note in Lower Manhattan include the London Stock Exchange’s 75,000-square-foot deal at 28 Liberty St. and BounceX’s relocation from Times Square to 79,118 square feet at One World Trade Center.

The report, citing statistics from Cushman & Wakefield, notes that the third quarter office vacancy rate in Lower Manhattan increased from 11.3% in the second quarter to 12%, still lower than the overall Manhattan office vacancy rate of 12.5%.

Other interesting data points concerning Lower Manhattan’s office market culled from the report include:

• Approximately two-thirds of Lower Manhattan’s available office space is located in the World Trade Center and Financial East submarkets;

• Thanks to the addition of 28 Liberty St. and 32 Old Slip, the Financial East submarket posted a 16% expansion in its available space;

• Other large blocks of available space in the Financial East area include 55 Water St. (269,764 square feet) and 120 Broadway (203,749 square feet);

• Average asking rents in Lower Manhattan reached a new high for the second consecutive quarter at $63.70-per-square-foot;

• The addition of 28 Liberty and 32 Old Slip helped push the third quarter Class A Lower Manhattan average asking rent to a new market high as well, reaching $67.20-per-square-foot, which was a 6.8% increase year-over-year.

• Midtown South’s overall average asking rent in the third quarter also reached a new record at $76.40-per-square-foot. The Class A office average asking rent in the district rose 10% to $93.40-per-square-foot due to the completion of several new office buildings in the Meatpacking/Chelsea area.