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Downtown report finds COVID impact worse than 9/11 or financial crisis

Ninety percent of workers from New York’s financial heart are still operating from home.

Nearly half of Lower Manhattan’s population has left, and three hotels and over 160 retail business have closed for good, according to a new report from the Alliance for Downtown New York.

Jessica Lappin

“By the numbers, the short-term economic impact of COVID-19 is deep and troubling. We are doing what we can at the Alliance to help our struggling businesses keep the lights on and look towards a better day,” said Jessica Lappin, president of the Alliance for Downtown New York.

Nearly a year after COVID-19 arrived in New York City, the Alliance reports that the pandemic has had a “profound” effect on the area that traditionally hummed to a harmony of white collars, tourists and locals.

Before the onset of the pandemic, Lower Manhattan office leasing had reached an all-time high with promise for continued momentum. That success came to a crashing halt as the area recorded nearly 70 percent less leasing year-over-year and marked the lowest annual total on record with 2.25 million square feet of office space leased in 2020.

For comparison to other historically impactful times in Lower Manhattan, annual leasing activity following the September 11 attacks was 5.6 and 4.5 million square feet in 2002 and 2003, respectively. Office leasing following the global financial crisis was 3.1 and 2.9 million square feet in 2008 and 2009, respectively.

Office vacancies, compounded by a sharp rise in sublet spaces, hit a 20-year high at 13.7 percent. Only 10 percent of office-occupying workers in Manhattan returned to their desks as of year’s end, with the majority primarily opting to continue working remotely.

But the Alliance says financial services companies haven’t given up on the neighborhood long-considered the financial heart of New York.  The Securities and Exchange Commission (SEC) relocated from Vesey Street to  241,171 s/f at 100 Pearl Street; Fred Alger Management  signed for 50,040 s/f 100 Pearl and; American International Group (AIG)  finalized plans to move from 175 Water Street to 217,638 s/f at 28 Liberty Street. 28 Liberty Street is now 96% leased.

Though AIG is maintaining a footprint in Lower Manhattan, its headquarters will move from 175 Water Street to 359,000 s/f. at 1271 Avenue of the Americas in Midtown; another 228,000  s/f office will open at 30 Hudson Street in Jersey City. The three moves are expected to occur in late 2021. AIG once occupied approximately 1.1 million square feet across Lower Manhattan.

Jessica Lappin tours the neighborhood with Ric Clark, of Brookfield which created Brookfield Place, still commonly referred to as the World Financial Center,

According to Alliance research, an estimated 40 percent of the local population left amid the pandemic. These shifts, coupled with the ability to work remotely, created downward pressure on the residential rental market, pushing rents down 18 percent to nearly $3,300 – the lowest since 2011.

While it has been estimated that some 7,000 fled the area in the days and weeks following the September 11 attacks, a report from the City Planning Department said the worst-ever terror attack on American soil “only temporarily upended” the housing market and the development boom that had already been underway soon continued unabated, bringing over 10,000 new apartment units within 10 years.

Both retail and hospitality businesses in Lower Manhattan were hit hard by the initial COVID shutdown in March (about 75 percent were temporarily closed) and the subsequent decline in tourism.

As a result, three hotels and over 160 retail businesses, or 12 percent of the total, permanently closed, ranging from institutional department stores and buzzing restaurants to a litany of small businesses like nail salons, dry cleaners and coffee shops.

Lappin noted, “This past year, we focused on awarding grants, promoting our storefronts, helping businesses move online and transform their physical spaces to meet new COVID regulations. While it’s still too early to say exactly what the lasting effect will be on Lower Manhattan, there are reasons for hope on the horizon. We’ve seen this neighborhood overcome obstacles time and time again.”

Among notable developments cited by the Alliance were the expansion of the city’s Open Streets program to include Pearl Street, a new dedicated bike lane on Broadway and the announcement that the Brooklyn Bridge will convert a vehicular lane to bicycle-only use.

There was also significant growth in outdoor dining, as businesses evolved to meet demand. Currently, about 140 Lower Manhattan restaurants offer al fresco dining in everything from curbside yurts, mini greenhouses to heat-lamp flocked benches.

The Alliance has been working with retailers and restaurants to come up with innovative ways to bring in business during the pandemic.
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