For the first time since 3 million square feet of space became available at One World Trade Center, Downtown has a tighter office market than its submarket rival Midtown.
So much new supply is coming online at the World Trade Center site that there’s a feeling the Downtown market is headed for an oversupply. But that’s simply not the case, according to CBRE’s Ken Meyerson.
“The perception of having an oversupply of space Downtown is actually just perception and not reality,” he said during the brokerage’s second-quarter media luncheon Monday afternoon.
The availability rate Downtown – or the measure of available space to total supply – dipped during the second quarter to 11.5 percent on the year, according to CBRE data. Midtown’s rate, however, ticked up to 11.7 percent.
That’s the first time in 44 months that Downtown has had tighter supply constraints than Midtown – dating back to 2012 before the Port Authority of New York and New Jersey and the Durst Organization launched leasing at the 2.6-million-square-foot One World Trade Center.
Since 2011, 344 tenants representing 11.4 million square feet have relocated Downtown, as opposed to 2.4 million square feet worth of tenants that have migrated out of the submarket.
“That number represents a significant amount of absorption,” Meyerson added.
Midtown South had the lowest availability rate in Manhattan at 8.4 percent. But across the East River it was a different story.
The Brooklyn office market had an average availability rate of greater than 20 percent. And that’s as the borough approaches an overall size of 50 million square feet with some 6.5 million square feet of new inventory set to come online over the next four years.
“The lone exception is Downtown Brooklyn at 5 percent, which is actually one of the tightest submarkets in the tri-state region, but the other markets do have an excess of supply,” CBRE’s Travis Yuengst said.
The top two deals so far this year – Mast Brothers’ 65,000-square-foot lease at the Brooklyn Navy Yard and Amplify’s 55,000-square-foot deal at 55 Washington Street – were both organic growth companies from within the borough.
Meanwhile, Translation, Slate Media Group and Gap all relocated from Manhattan.
“There is demand coming from outside the boundaries of Brooklyn, which is going to be needed going forward,” Yuengst said.