By Sarah Trefethen
Millions of square feet of available office space haven’t deterred real estate investors from placing their chips on Lower Manhattan, and brokers predict leasing will justify their confidence in the country’s fourth largest central business district.
Almost 10 percent of the 83 million s/f of downtown office space has changed ownership in the past year, Adam Foster, SVP in CBRE’s downtown office, told reporters at the brokerage’s quarterly press conference on Monday.
“All of a sudden Downtown has become the ‘it girl’ for the investment community,” he said.
The fourth-quarter sale of 1 Chase Manhattan Plaza to the Chinese investors, Fosun International, is an indication of what may be a new trend of international interest downtown, where, CBRE analysts note, there are more opportunities to purchase full interest in office properties than can be found in Midtown, where trophy assets are more likely to be shared between multiple investors.
The brokers confirmed that international investors are showing additional interest downtown, but they were tight-lipped about the names and counties of origin — with one exception.
“Fosun isn’t finished,” said Bruce Surry, an executive vice president at CBRE.
The investor activity is a response to a strong leasing market as well as opportunities for residential conversions, according to the brokers.
“Capital follows momentum,” Foster said.
Lower Manhattan saw a total of 6.9 million square feet of leases in 2013, of which 5.7 s/f were new leases and 1.2 were renewals, according to CBRE.
Asking rent remained relatively flat in the neighborhood, ending the year at an average of $46.47 psf, but that number will go up next year when 1WTC opens for business and is added to the statistics, Sheldon Cohen, a senior managing director at CBRE, predicted.
The first quarter of this year should bring several new downtown leasing announcements, according to the brokers. “I can’t remember when a first quarter has shown as much momentum as we’ve seen,” Foster said.
They also indicated a pipeline of new tenants that will continue to increase Lower Manhattan’s newfound diversity.
“I think we’ll continue to see the total transformation in the tenant base downtown … and the continued diversification related to the industries such as publishing, media, tech, service firms,” Surry said.
“And I think some new leases that will be signed in the first quarter will also demonstrate the commitment of industries that have never located Downtown that will be making big commitments.
“These are big brand names, international brand names.”