Week of November 26, 2001
Snapshot from the Field
Most Displaced Tenants Pick Manhattan, but Available Space Up in All MarketsBy JACK LYNE
Site Selection Executive Editor of Interactive Publishing
NEW YORK -- "More than two-thirds" of the tenants displaced by Sept. 11's World Trade Center attacks have relocated in Manhattan, according to Insignia/ESG's (www.insigniaesg.com) recently released "i on the market" report.
Midtown New York has been the most popular destination for relocating firms, according to the report. Midtown in October recorded 2.59 million sq. ft. (233,100 sq. m.) in leasing activity, the market's highest monthly total since March 2000. October's 2.59 million sq. ft. more than doubled the 1 million sq. ft. (90,000 sq. m.) leased in the Midtown market during September, according to Insignia/ESG.
"To date, more than half the Manhattan office space leased by displaced Downtown tenants has been in Midtown," the report noted.
Despite Strong Tallies, Available Space
Not unexpectedly, the largest increase in available supply was in the Downtown market. Downtown's availability jumped nearly 4 percent to 11.3 percent, according to Insignia/ESG. By contrast, Midtown South's availability increased 0.8 percent to 11.6 percent, while Midtown's rate was up 0.7 percent to 8.6 percent.
Manhattan's average asking rents were a mixed bag in Insignia/ESG's October market report. Downtown asking rents rose US$1.48 per sq. ft. to $42.02 per sq. ft., primarily because "much of the new available space was priced at $50 per sq. ft.," according to the report. On the other hand, Insignia/ESG reported that asking rents "dipped marginally" in both Midtown and Midtown South, reaching $59.49 per sq. ft. and $41.23 per sq. ft., respectively.
Large blocs of space remain "in relatively short supply," the report found. As described earlier in SiteNet Dispatch, the dearth of large available parcels has spurred a number of firms with large concentrations of displaced employees to relocate outside Manhattan. Insignia/ESG, however, reported, "A handful of large blocks became available last month in each market. There are four contiguous blocks larger than 250,000 sq. ft. (22,500 sq. m.) available in Midtown and Downtown, and just two in Midtown South."
The "i on the market" report chronicles where some prominent displaced firms have relocated in Manhattan, as well as detailing some of the largest spaces added to the market. Here's a capsule look at the report's findings on the Downtown, Midtown and Midtown South markets through the end of October.
Midtown and Midtown SouthMidtown: Midtown's total annual leasing through the end of October reached 10.88 million sq. ft. (972,000 sq. m.), the report noted. "The most significant transactions," Insignia/ESG reported, included Lehman Brothers, which, after being displaced from 3 World Financial Center and 4 World Trade Center, signed a long-term lease for 408,000 sq. ft. (36,720 sq. m.) at 399 Park Avenue. Lehman Brothers also reached agreement (expected to close in mid-November) to purchase from Morgan Stanley the 1 million-sq.-ft. (90,000-sq.-m.) office building at 745 Seventh Avenue. (Since there was no net change in occupancy, Lehman Brothers' acquisition is not reflected in Insignia/ESG's statistics.)
Midtown South: The Port Authority of New York & New Jersey signed one of October's biggest new leases in Midtown South, Insignia/ESG reported. The World Trade Center site owners took 302,000 sq. ft. (21,180 sq. m.) at 225-233 Park Avenue South. In other major signings, The Bank of New York took 137,000 sq. ft. (12,330 sq. m.) at One Hudson Square and 113,000 sq. ft. (10,170 sq. m.) at 63 Madison Avenue. (After the release of the Insignia/ESG report, Morgan Stanley, the largest World Trade Center tenant until Sept. 11, also took space in One Hudson Square, on Nov. 26 subleasing 150,000 sq. ft./13,500 sq. m. from Getty Images.)
Midtown South's 2001 leasing through October's end tallied 4.96 million sq. ft. (446,400 sq. m.), down only slightly from 2000's 5.32 million sq. ft. (478,800 sq. m.) for the same period. Despite October's strong leasing totals, however, Midtown South registered negative net absorption of 540,000 sq. ft. (48,600 sq. m.) for the month. That result, said the report, was due to "many companies, looking to accommodate tenants displaced from Downtown, offer[ing] an array of previously unavailable sublease space. As a result, availability rose to 11.3 percent . . . well above the 4.3 percent recorded a year ago." New sublease opportunities included a 150,000-sq.-ft. (13,500-sq.-m.) sublease from Nextira at 601 West 26th Street.
Downtown: Negative Absorption
"Downtown's leasing totaled 402,000 sq. ft. (36,180 sq. m.) in October, and is somewhat constrained as tenants await news of the pending government financial aid package," the report noted. The Financial District accounted for 90 percent of October's activity, with most leases "for smaller blocks of space," Insignia/ESG reported.
Parsons Transportation Group's taking 64,000 sq. ft. (5,760 sq. m.) at 100 Broadway, a planned relocation from 110 William Street, was Downtown's largest private-sector lease since Sept. 11, the report noted. On the other hand, it added, "New available space continued to surface, including 526,000 sq. ft. (47,340 sq. m.) made available by Merrill Lynch at 2 World Financial Center."
Some Wait and See on DowntownIn an event unrelated to the Insignia/ESG report, a downtown business leader earlier this month called for government officials to blunt a business exodus from the city. Employee-retention issues are now a major concern, said Carl Weisbrod, president of the Alliance for Downtown New York.
"Companies in lower Manhattan are facing tough decisions. These are employee-driven," Weisbrod told a meeting of the Young Mortgage Bankers Assn. Day-to-day downtown air-quality changes "are a constant reminder of Sept. 11," he said.
However, Caleb Koeppel, president of Manhattan-based KTR Newmark Real Estate Services, noted at the meeting, "In the last two weeks, tenants are returning to the marketplace downtown." Other brokers have reported that a substantial number of prospective Downtown tenants are postponing decisions to see what government incentives will be offered.
An incentive package Congress is considering would provide companies that remain Downtown with $4,800 in tax credits for each employee for two years.
©2001 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.