Prepared by Richard Plehn, Lisa Ann Pollakowski and Vanessa Ollarves.
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SUMMARY OF THE COMMERCIAL OFFICE DOWNTOWN MARKET – Q3 2024
NEW YORK CITY ECONOMY
The United States’ monthly civilian labor force for September 2024 was 168.6 million, an increase from 167.8 million in 2023. However, unemployment increased to 7.2 million (4.1% unemployment rate) in September 2024 from 6.2 million (3.7% unemployment rate) in September 2023 .
NYC’s monthly civilian labor force for September 2024 is 4.3 million, an increase from September 2023’s 4.2 million. However, unemployment increased to 227,900 (5.3% unemployment rate) in September 2024 from 218,400 (5.2% unemployment rate) in September 2023. Although employment is increasing in NYC, the new jobs are predominantly in lower-paying industries.
The U.S. 10-year treasure bill decreased to 3.74% in September 2024 from 4.61% in September 2023. As a result, company valuations will increase, helping real estate owners and companies refinance debt at a lower rate.
ASKING RENT AND AVAILABILITY DECREASED
The availability rate in Downtown decreased to 17.2% in Q3 2024 versus 19% in Q2 2024. The average rental price for this quarter also decreased to $45.94 from $45.98 in Q2 2024.
LEASING ACTIVITY IS GETTING STRONGER EACH QUARTER IN 2024
Leasing Activity per year has been decreasing since the start of the pandemic. In 2021, leasing activity was 5,025,621 rsf. In 2023, leasing activity was 4,656,159 million rsf. Leasing activity for 2024 is 2,000,000 rsf. We are projecting 2,600,000 rsf leasing activity for the year. However, leasing activity has been increasing in each quarter of 2024.
FINANCIAL DISTRICT HAS THE HIGHEST LEASING ACTIVITY
The Financial District has the highest leasing activity out of all the five submarkets in Downtown, with 49.79%; in second place is City Hall, with 26.13%, and in third place is Tribeca, with 15.78% of leasing activity.
CLASS A DOMINATED THE LEASING ACTIVITY
The leasing activity in Downtown is dominated by Class A buildings, with 69.4%, an increase of 26,854 sf from last quarter.
SUBLET AVAILABILITY IS THE HIGHEST IN DOWNTOWN
The Downtown sublet market has been steady since Q2 2022, with 27.33%. Downtown has the highest sublet market out of the three submarkets.
FIVE LARGEST DEALS COMPLETED
Three of the five largest deals were in the World Trade Center submarket, the largest was completed in the Tribeca market, three were direct deals, and four were in Class A buildings.
CONCESSION PACKAGE INCREASED
The concession package(free rent and landlord contribution) was $139 in 3Q 2024 versus $127 in 2Q 2024. The landlord provided $41.64 free rent (ie10 months of free rent) and a $97.35 cash contribution towards tenant’s build out. * Compstack
SUMMARY
The Downtown market will start to recover after Midtown South recovers. Artificial intelligence companies will begin to lease more space in Midtown South. When prime space in Midtown South is leased up, they will look for space in Downtown New York. Midtown availability rates will drop, and rents will start to increase. In addition, Midtown tenants who need less expensive space will relocate to Downtown New York.
