The psychological wall that separated hip Midtown South office tenants from their stuffier Downtown counterparts is showing signs of coming down, the New York Observer reported.
Traditionally, “creative” industries such as technology and media eschewed Downtown, which was thought to be the refuge of financial services and law firms. But with major deals such as Conde Nast’s 80,000-square-foot lease at L&L Holdings’ 222 Broadway, experts say the divide is quickly becoming a thing of the past.
Indeed, WeWork, which provides creative workspaces for tech and media companies, was quick to spot the trend, inking a 120,000-square-foot deal at 222 Broadway last month.
L&L’s David Berkey told the Observer he noticed the shift in 2011, when HarperCollins inked a 185,000-square-foot deal at 195 Broadway, another L&L property.
“Before that, I was seeing financial firms, I was seeing law firms and insurance,” Berkey said. “That’s over.”
“The wall that used to exist along Canal Street is gone,” Ken McCarthy, chief economist at Cushman & Wakefield, told the Observer. Despite Hurricane Sandy wreaking havoc in the area and a year marked by rising office vacancies, Downtown “is continuing to exceed everyone’s expectations,” he added.
Indeed, the area experienced a terrific first quarter, with five of the city’s top 10 new leases being signed there and total leasing activity of 1.7 million square feet, the highest since 2004, according to Cushman & Wakefield data seen by the Observer. Downtown beat out both Midtown and Midtown South for the first time in several quarters, as competitive pricing gave it an advantage and vacancy rates declined to 8 percent from 9.2 percent. [NYO] –Hiten Samtani