Downtown’s double blow

Lower Manhattan ends string of positive news as BofA shrinks footprint and Nomura departs for Midtown

The giant, 900,000-square-foot relocation and expansion lease that Japanese financial firm Nomura Holdings America signed in Midtown late last month punctuated an improved second quarter in the Manhattan office-leasing market.

That improvement came even as the national economy was battling high unemployment and slow growth, preliminary data from commercial services firm Cassidy Turley showed.

“Midtown, Midtown South and Downtown all recorded positive absorption in the second quarter,” said Robert Sammons, vice president of research at Cassidy Turley, citing a key indicator of a tightening leasing market.

That slight improvement bore out in the numbers: The availability rate — measuring vacant space and space that will be available in the next 12 months — for Manhattan fell by .6 points to 11.7 percent in the second quarter, and the average asking rent rose by $0.78 per square foot to $49.12 per foot, the preliminary figures from Cassidy Turley showed.

Still, Marc Shapses, an executive managing director at commercial services firm Studley, said both tenants and landlords were being “extra conservative.”

“People are more risk-averse. They are thinking and rethinking before making a decision,” he said.

Technology firms seem to be among those who’ve done their thinking. They continued to lease up space in Manhattan last month, both in Midtown and Midtown South. Two new deals involved the popular web-based platform Major League Gaming, which attracts hundreds of thousands of fans to Internet competitions, and Interactive Partners, which develops sophisticated web applications.

But Downtown, still the weakest Manhattan market, was hit with negative news on two fronts late last month, ending a string of positive developments. Indeed, the Downtown market is losing a big tenant in Nomura. And, Bank of America announced that it would keep just a fraction of floors in Brookfield Properties’ World Financial Center that it currently leases.

But in a positive sign, CoStar Group categorized about 1.2 million square feet of space in two deals at Silverstein Properties’ under-construction 4 World Trade Center as “leased.” While the deals were agreed to in 2006 and the classification is largely a bureaucratic housekeeping change, it is nevertheless a significant milestone.


While Midtown South has been the go-to neighborhood for new technology leases — underscored by Google’s record-setting purchase last year of 111 Eighth Avenue in Chelsea (see article on page 39) — some Internet firms have made a home in Midtown.

According to CoStar, Major League Gaming, which industry publication The Next Web said had half a million people streaming a live competition in Ohio last month, signed a deal to take 11,425 square feet on the 11th floor of Cohen Brothers Realty’s 3 Park Avenue, a 936,000-square-foot building between 33rd and 34th streets.

Cushman & Wakefield brokers David Glassman, Bruce Mosler, Arthur Mirante and Joseph Cabrera represented the landlord, but declined to comment. The tenant was represented in its move from 420 Lexington Avenue by Roberta Panos and Guilherme Tepedino, CoStar showed.

The deal may have helped to chip away at Midtown’s availability rate, which fell by .4 points in the second quarter to 12 percent, figures from Cassidy Turley showed. Asking rents for Midtown meanwhile, were up by $0.30 per foot over the last three months, to $56.10 per square foot.

The Nomura deal at Worldwide Plaza at 825 Eighth Avenue represents an significant expansion over its space in the World Financial Center, but the exact figures were not available.

But even as the overall market is tightening, some skeptics believe the situation is still weak for smaller parcels of space on the West Side — particularly between 27th and 42nd streets in the average price range.

“The activity for office space in the $40 to $50 per square foot range, or even less, is tepid, it’s lukewarm,” Grant Greenspan, a principal with landlord Kaufman Organization, said. “I don’t believe there is a lot of positive absorption going on [in this specific area].”

Midtown South

While Midtown may lure technology firms from time to time, Midtown South is still the heart of the city’s Internet community.

CoStar showed that Interactive Partners inked a new lease for the entire 10th floor of 100-104 Fifth Avenue. The asking rent was $55 per foot for the 5,405-square-foot space.

“You have health care expanding and Internet and related technologies expanding [in the area], that is the positive absorption,” Greenspan said.

Sign Up for the undefined Newsletter

The Kaufman Organization was also near a deal with another technology firm that was negotiating to lease floors 14 and 15 in the building, located between 15th and 16th streets, he said.

And it wasn’t just tech firms that were taking space in the market.

New York University’s Langone Medical Center inked a five-year deal for 10,000 square feet at 104 East 25th Street in the Flatiron District. Cushman brokers Mosler, Josh Kuriloff and Mark Mandell represented the school, but declined to comment.

But it was not all positive in Midtown South, Greenspan noted. Many nonprofits and public sector unions that receive government funding are contracting because of city and state budget cutbacks.

“When a landlord looks at these companies, [he is] more suspect of where the sustained funding is coming from,” he said.

The availability rate in Midtown South dropped sharply in the second quarter, the Cassidy Turley figures revealed, falling by 1.1 points to 10.4 percent.

The average asking rent rose by $2.27 per foot to $40.48 per square foot.


The Downtown market has lagged since the recovery began in Manhattan. And last month it was dealt a double blow — at the World Financial Center, which is owned by Brookfield Office Properties.

Normura Holdings, which had been subleasing space there from Bank of America, inked a (ITS) deal in Worldwide Plaza in Midtown. Meanwhile, Bank of America is shrinking its overall footprint in the building to just 750,000 square feet, from the 4.6 million square feet it now has, which expires in 2013. (It inherited the 4.6 million square feet from Merrill Lynch when it acquired that company in 2009.)

Lower Manhattan has been feted over the past two months because of the 1 million-square-foot Condé Nast lease at One World Trade Center.

But two other enormous leases — which were agreed to in 2006 with the City of New York and the Port Authority of New York and New Jersey — reached a bit of a milestone as well last month.

CoStar loaded the leases (which together totaled about 1.2 million square feet) into its database for Silverstein’s 4 World Trade Center, which is about 50 percent complete.

The City of New York is expected to take about 582,000 square feet and the Port Authority about 600,000 square feet, data from Cassidy Turley showed.

The new information was supplied to CoStar by Silverstein’s leasing agent CB Richard Ellis, the data firm told The Real Deal, although it did not provide further details.

A spokesperson for Silverstein declined to comment.

Insiders said it amounted to a clerical notation, memorializing what most brokers already knew about that Lower Manhattan space.

“I think at the end of the day, it was catching up some of the information and getting it over to CoStar,” Studley’s Shapses speculated.

Yet even with the big chunks of space taken off the market, there is still a lot of inventory Downtown.

“I think there is still plenty of space to choose from. [But] I will say, when you are a 200,000- or 300,000-square-foot tenant, your options are more limited,” Shapses said.

The Downtown market was the only market to see asking rents decline in the second quarter, but they fell in part because of expensive space at 7 World Trade Center, which had some of the top rents in the market, being taken off the market, Sammons said.

The availability rate in the market fell a sharp .9 points to 12 percent in the second quarter, while asking rents dropped by $0.27 per foot to $37.46 per square foot, Cassidy Turley figures showed. The shrinking of Bank of America space was not reflected in the data for the second quarter because the space is not yet available.