Report: Downtown posts 2.3 million s/f in leases in Q1, the highest in two years

Lower Manhattan recorded more than 2.3 million square feet in leasing transactions in the first quarter of 2017, according to JLL. More transactions were completed Downtown in the first quarter of the year than in any quarter during the past two years. Additionally, deal volume was 44 percent higher than the quarterly average the submarket has posted since 2007.

“In a reversal from this past year, Downtown led activity with five of the largest leases of the quarter, including Spotify’s relocation,” said Tristan Ashby, Vice President and Director of New York research. “Newer, high-quality space west of Broadway and good-value space to the east drove activity in Lower Manhattan. Leasing activity increased throughout New York City following the Presidential election and remained strong through the first two months of the year. Deal volume was slower in March but leases are still filtering through.”

Five of the top 10 leases for the quarter in Manhattan took place in Downtown, including the largest new deal of the quarter — Spotify’s relocation to 4 World Trade Center. The digital music streaming service signed on for 378,000 square feet in a move from 620 Avenue of the Americas.

The other four large deals completed in Lower Manhattan in the first quarter of 2017 include the Royal Bank of Canada renewing 402,000 square feet at 200 Vesey Street, the New York State Attorney General’s office leasing 345,000 square feet at 28 Liberty Street, Aon PLC taking 203,000 square feet at 1 Liberty Plaza and Tullett Prebon PLC signing for 128,000 square feet at 200 Vesey Street.

The boost in deal volume drove down Lower Manhattan vacancy rates. Going forward, 3 World Trade Center will be added to the submarket’s inventory during the summer. That adjustment will add more than 1.8 million square feet of available space to the market, likely increasing both the vacancy rate and asking rent for Downtown.

Downtown’s overall vacancy rate dropped to 10.4 percent this quarter, a decrease of 10.3 percent (or 90 basis points) from 11.6 percent in the fourth quarter of 2016. Year over year, the submarket’s overall vacancy rate fell 6.3 percent (or 70 basis points) from 11.1 percent in the first quarter of 2016. The Class A vacancy rate dropped to 9.7 percent in the first quarter of the year, a decrease of 17.8 percent (or 190 basis points) from 11.8 percent the previous quarter. Year over year, Downtown’s Class A vacancy rate dropped 15.7 percent (or 180 basis points) from 11.5 percent in the first quarter of the year.

Overall average asking rents in Lower Manhattan fell to $56.45 per square foot this quarter, a decrease of 2.1 percent from $57.67 per square foot in the fourth quarter of 2016. Year over year, the submarket’s overall rates dropped 2.2 percent from $57.73 per square foot in the first quarter of 2016. Class A average asking rents fell to $60.79 per square foot in the first quarter of the year, a decrease of 3.0 percent from $62.68 per square foot the previous quarter. Year over year, Downtown’s Class A rates fell 3.1 percent from $62.72 per square foot in the first quarter of 2016.

A surge in leasing activity following the November 2017 election pushed down vacancy rates for New York City office space. Overall vacancy rates dropped slightly to 10.3 percent this quarter, a decrease of 1.0 percent (or 10 basis points) from 10.4 percent in the fourth quarter of 2016.

Year over year, the city’s overall vacancy rate grew 3.0 percent (or 30 basis points) from 10.0 percent in the first quarter of 2016. The Class A vacancy rate fell to 10.9 percent in the first quarter of the year, a decrease of 2.7 percent (or 30 basis points) from 11.2 percent the previous quarter. Year over year, Manhattan’s Class A vacancy rate fell less than 1.0 percent (or 10 basis points) from 11.0 percent in the first quarter of 2016.

Overall average asking rents in Manhattan rose to $71.54 per square foot this quarter, an increase of 1.9 percent from $70.22 per square foot in the fourth quarter of 2016. Year over year, the city’s overall rates increased 1.9 percent from $70.18 per square foot in the first quarter of 2016.

Class A average asking rents rose to $78.48 per square foot in the first quarter of the year, an increase of 1.9 percent from $77.04 per square foot the previous quarter. Year over year, Manhattan’s Class A rates rose 2.1 percent from $76.88 per square foot in the first quarter of 2016.

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