Downtown Manhattan is turning the tables on Midtown a bit this year, leasing a significantly larger chunk of office space than it has all cycle. Leasing activity has been particularly robust with noteworthy commitments from companies in sectors ranging from non-profit to tech.
CoStar preliminary data pegs mid-year leasing figures at 4.7 million square feet, a high for this cycle. Cheaper rents in quality buildings, enhanced transit connectivity and an improving retail component have all played a factor in luring tenants to Lower Manhattan.
Of the three most active leasing clusters in Manhattan: Midtown, Midtown South and Downtown, Midtown has by far the most office inventory, and historically commands more than 60% of Manhattan-wide leasing activity.
In Downtown, the 17 completed office lease transactions over 50,000 square feet completed in the first half of 2019 marks a moderate uptick compared to the 12 recorded deals from the same time period last year, playing a significant part in this shift.
Market conditions in Downtown's neighboring clusters have played a part as well. In Midtown, much of the new construction in the Hudson Yards development has already been pre-leased in years prior, and as a result, the number of sizable deals there has lessened in 2019. The robust leasing activity from creative firms in Midtown South in recent years has left only a handful of large blocks of available space, limiting the number of major deals that can take place in the area.
Since the start of the cycle, Downtown has accounted for an average of 17% of all leasing activity during the first two quarters. Only once in the past nine years has this figure risen above 20% of New York leasing activity, which makes the current marker of 24% overall all that more important. It shows the Downtown market is quite healthy, despite not garnering the amount of attention as its northern clusters.
Some of the key Downtown leasing transactions in 2019 include:
JustWorks relocating from Chelsea to the Financial District submarket for 265,000 square feet;
EmblemHealth signing a long-term renewal for 438,000 square feet;
WeWork growing its presence in the Insurance District, with 201,000 square feet; and
NYC Health + Hospitals consolidating their city-wide presence into a new 527,000-square-foot Downtown location.