FiDi grapples with rising vacancies

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Lower Manhattan, the country’s best-performing office market, is struggling to hang on to its title as vacancies mount. Though the Financial District fared relatively well during the commercial property slide, demand is no longer keeping up with increasing inventory. Goldman Sachs, American International Group and Bank of America are among the major tenants relocating, which follows the flight of firms like Lehman Brothers after Sept. 11, 2001. Goldman Sachs is moving to its new West Street building and vacating 2 million square feet offices including 85 Broad Street and 1 New York Plaza. AIG last year sold its 70 Pine Street and 72 Wall Street headquarters. Bank of America, meanwhile, is moving its employees into a new Midtown tower at One Bryant Park, and it remains to be seen what will happen to the World Financial Center offices of Merrill Lynch, which it acquired last year. Cushman & Wakefield expects Lower Manhattan’s vacancy rate to hit 14 percent by late next year — the highest since 1997 — and the 4.4 million square feet of office space planned for the two new towers going up at the World Trade Center isn’t helping that metric. “The amount of space that’s potentially going to come to the market will increase availabilities and put pressure on pricing,” said Kenneth McCarthy, who heads New York-area research for Cushman & Wakefield. [Bloomberg]