The Downtown office market is in even worse shape than widely reported data indicate, according to several major dealmakers.
One of them, an industry legend not given to doom-and-gloom scenarios, told us that huge amounts of space are quietly up for sublease even at the World Trade Center and Brookfield Place Lower Manhattans best-performing properties.
Most brokerage firms cite FiDi-area availability including space currently vacant or soon to be — at between 20% and 23%, compared with around 16% uptown. But so-called shadow space cited by the market insider could raise the total much higher.
Not every building is in trouble. The districts grim overall data are skewed by two particular enormous properties Paramount Groups transitioning 60 Wall Street, where most of 1.6 million square feet are yet to be leased, and 111 Wall Street, an entirely empty 1 million square-foot address thats now in foreclosure.
But other struggling buildings are also on the downbound train, such as 40 Wall Street. The landmark tower is about 30% empty and its plight will likely worsen as the Trump Organization skyscraper is at risk of seizure by state attorney general Letitia James.
Even more vulnerable are Downtowns large number of pre-war, Class B-minus buildings that few tenants want at any rent and which cant easily convert to residential use.
Yet hope might be on the way. According to VTS, the national real estate technology platform that uses AI to monitor and interpret market office-space tours — look-sees by companies eyeing a move or expansion have recently been higher Downtown than in Midtown or Midtown South.
Lower Manhattan saw 40% more so-called tire-kicking visits in the months of December 2023 through February 2024 than it did between September and November 2023.
A 43% increase in tours month over month easily beat Midtowns 25% and Midtown Souths 11%, according to VTS. Much of the tenant interest Downtown was by companies seeking 50,000 square feet or more.
VTS chief strategy officer Ryan Masiello said, I think generally, companies are starting to realize were at the bottom of the market right now. More companies are exploring to try to take advantage of lower rents, especially downtown, he said.
But one highly accomplished downtown market-watcher was skeptical of VTS findings.
They can only be true if theyre including the smallest users. It definitely is not true of tenants looking for more than 20,000 square feet, the insider said.
Manhattan leasing in all submarkets hit the mute button in the first quarter, according to Savills which cited a dearth of large deals.
The first quarters 6.8 million sf of transactions was 6.6% lower than in the first three months of 2023, Savills said.
Interestingly, three of the largest office deals were renewals and/or expansions by major retailers — including for Michael Kors, Burlington Stores and David Yurman, which tallied a total of nearly a half-million square feet.
At least one major landlord saw some positive news. At SL Greens 485 Lexington Ave., four recent new leases and one renewal totalled 64,303 square feet.
Leasing director Steven Durels said, Our recent success at 485 Lexington confirms that well-located buildings are experiencing increased tenant demand.
In the two largest new leases, RSC Insurance Brokerage took 27,964 square feet on the entire 17th floor and Exponent, Inc., an engineering and scientific consulting firm, took 14,383-square feet on the 22nd floor.
Smaller deals include capital markets company William ONeil & Co. for 4,797 square feet and Graham Holdings Company signed for 3,006 square feet.
In addition, Tegna, Inc., a broadcast, digital media and marketing services company, renewed its 14,078-square-foot lease on the 27th floor.
