Lower Manhattan’s office market saw declining rents and record-low leasing activity during 2009, but ended the year with activity on the rise and vacancies on a recently-rare downward trend, according to the Alliance for Downtown New York’s Real Estate Market Year in Review for 2009 (view the full report below). Rising from 7.4 percent in the fourth quarter of 2008 to 9.9 percent in the third quarter of 2009, office vacancies dropped off to 9.6 percent by the close of the year.
Commercial office tenants in the Downtown market tended to sign on for smaller spaces and shorter terms, according to the report. “Downtown may need to adjust further to compete with low-priced sublease space and precipitously falling rents in the Midtown market,” the report noted.
Still, five of the city’s top 20 leasing deals were in Lower Manhattan last year, including Gap’s 20-year lease for 265,000 square feet at 40 Worth Street and law firm Stroock & Stroock & Lavan’s 10-year lease for 223,000 sqaure feet at 180 Maiden Lane. There were just three commercial sales during 2009, and all were in the latter half of the year. The largest was the combined $150 million sale of 70 Pine and 72 Wall Street, which closed for about $128 per square foot, or an estimated one-third of the price those buildings would have commanded at the height of the market.
In the residential market, sales volume dropped 52 percent over 2008, largely on a decline in inventory. Reduced compensation for potential buyers and banks’ tightening of credit standards also contributed to the fall. Meanwhile, rentals held up relatively well: vacancies in Downtown rental units hovered at around 2 percent, which the report attributed to consistent demand for such inventory.
The retail sector performed best in the Lower Manhattan market. 91 new stores and restaurants opened south of Chambers Street during the year, twice the openings seen during 2008. Seventy-five stores and restaurants closed, giving the neighborhood a net gain of 16 retailers during the year. TRDReal Estate Year in Review 2009