Prepared by Richard Plehn, Lisa Ann Pollakowski and Vanessa Ollarves.
Please click on the slideshow below for the full report. Alternatively, you can also follow the links on the button to read it on PDF or Powerpoint format.
SUMMARY OF THE COMMERCIAL OFFICE DOWNTOWN MARKET- 2Q, 2024
NEW YORK CITY ECONOMY
The U.S. unemployment rate increased from 3.6% in June 2023 to 4.1% in June 2024; however, the New York City unemployment rate in June 2023 was 5%, and in June 2024, it decreased to 4.8%. The following areas experienced increased employment in New York City: Healthcare and Social Assistance, Professional and Business Services, and Leisure and Hospitality.
Landlords are having difficulty refinancing their office buildings because the U.S. treasury rate increased last year from 3.8% in June 2023 to 4.3% in June 2024. If a landlord is refinancing a mortgage, their new interest payment may be greater than the net income of the building. As a result, the landlord has a couple of choices:
- ·The landlord works with the lender to extend the loan for a few years.
- ·Pay down the mortgage and refinance.
- ·Renegotiate the mortgage with the lender
- ·Give back the office buildings to the lender
- ·Sell the office building
ASKING RENT VS AVAILABILITY
The availability rate in Downtown has been steady since Q1 of 2022, 18.2%, the same as in Q2 of 2024. Rents have steadily decreased from $58.66 in Q1 2019 to $45.98 in Q2 2024. From Q1 2024 to Q2 2024, rent has decreased by $0.53.
LEASING ACTIVITY TRENDING DOWNWARD
Leasing activity in Downtown has been trending downward since Q4 2019 when 3.1 million rsf was leased. In Q2 2024, 682,701 rsf was leased. However, leasing activity increased by 144,802 rsf since Q1 2024.
LEASING ACTIVITY WAS CONCENTRATED IN TWO SUB-MARKETS
Downtown has five submarkets, and 45.65% of all leasing activity was in the Financial District, even though the Financial District is 31.6% of the Downtown market. The second most active market is the World Trade Center Market, which had 31.77% of all leasing activity.
LEASING ACTIVITY BY CLASS
Like Midtown North, a majority of tenants are leasing space in Class A Buildings, it was reported that 65.7% of all leasing transactions were completed in Class A buildings.
SUBLET AVAILABILITY IS THE HIGHEST IN DOWNTOWN
The Downtown sublet availability rate is 27%, which is higher than Midtown and Midtown South. The Availability rate has been steady since Q4 of 2022.
5 LARGEST DEALS COMPLETED
Five out of the five largest deals were completed in Class A buildings. Four out of the five largest deals were relocations. Tenants are relocating from other markets to Downtown. For example, Stripe relocated from Midtown South, and Kroll Associates relocated from Midtown to Downtown.
SUMMARY
The Downtown market does not show signs of recovery yet; However, office buildings are going to be converted to residential, which will lower the inventory and decrease availability. Typically, when tech companies need to find large floor plates and cannot find them in Midtown South, they look in Downtown. If the trend continues and AI companies keep growing in New York City, Downtown will benefit from this trend.
Note: If you want to see more reports, please click below, you will find Manhattan, Midtown, Midtown South and Overall market reports.
