Downtown Manhattan's $30B Comeback
Evidence of the tsunami of public and private investment is everywhere: The world's cutting-edge media, advertising and tech firms now call Downtown home, and the area's infrastructure has been completely reinvented.
It’s a transformative time for Downtown, according to Alliance for Downtown New York president Jessica Lappin, who made the opening remarks at our Four Annual Future of Downtown Manhattan event on Tuesday at 150 Broadway. Recent examples: One World Trade Center opened last month, and the first wave of employees started to occupy that iconic structure. The Fulton Transit Hub also opened, serving 300,000 passengers each day--and it’s a grand civic space. On the whole, Downtown isn’t you father’s FiDi any more.
The Alliance for Downtown is taking a full floor of 150 Broadway, which is going to be the site of LMHQ--a collaborative space for tech and creative companies, Jessica says. “We hope it will serve to strengthen the creative industries that are already growing in Lower Manhattan,” she says. There will also be events in the space (the first being our event Tuesday in LMHQ's raw space).
Lower Manhattan certainly has office market mojo. Our office speakers (including Woods Bagot principal Jeffrey Holmes, who moderated the panel, Brookfield SVP David Cheikin and CBRE SVP Adam Foster) kicked off things by rattling off some stats to prove it. So far this year 44% of office leases over 100k SF Downtown were relos from Midtown. Also, in the last three years, tenants taking 9M SF have moved in from other markets, while users of only 2M SF have moved out. Diversification is real: since 2010, TAMI (tech, advertising, media and information) have taken more space than anyone else, with finance and insurance still a strong second, followed by nonprofit and educational concerns.
Pictured: JLL managing director John Wheeler and Cushman & Wakefield superbroker Tara Stacom. Total absorption of office space used to be 3M SF or 4M SF during non-recessionary years, the panel noted. This year it’s going to be 7M SF, and likely that much next year. Office vacancy now averages 9.8% and, with absorption that high, vacancy could be 6% by 2016, putting upward pressure on rents. All the while in the next five years, the mix of tenants is going to become more diverse, with increasing numbers of tech and international companies coming Downtown. Even so, financial services isn’t going away, as evidenced by Citicorp moving Downtown.
Downtown’s infrastructure has become a lot more robust in the wake of Sandy, our panelists also said. (Snapped: MHP Real Estate Services CEO Norman Sturner and JEMB Realty principal Morris Jerome). For instance, all of Verizon’s fiber network has been hardened to resist the next 500-year storm. If Sandy happened now, the system would be operational the next day. Buildings have also taken steps to harden their infrastructure against another disaster of that kind--redundancies have been added, new fuel systems readied, flood gates installed. Recovery will be exponentially faster next time. Landlords are willing to spend on improvements because their assets are so valuable.
Snapped: Anchin Block & Anchin partner Marc Wieder, who moderated the residential and hospitality panel, and Hidrock Realty CEO Abraham Hidary. As recently as the '90s, the panelists said, Downtown was a B residential market at best, but in the last decade or so it’s evolved into a place where people want to live, even if they don’t work there. It’s not a second choice neighborhood anymore, and it doesn’t shut down with the closing bell. About 1,700 residential units are under development there now, with about half condos, half rentals--and prices for both are still low by Manhattan standards, but they’re going up because there’s a shortage of rentals throughout the borough.
GB Lodging president Bruce Blum, Rose Associates chief development officer James Hedden and the Albanese Organization president Christopher Albanese were also on the residential and hospitality panel. In the Downtown hotel market, full-service used to be the only properties that could get financing, but now the spectrum is larger as more tourists flow into the area to see the 9/11 Museum, Pier A and other attractions, and the base of business travelers diversifies (Lower Manhattan isn’t just for finance types anymore). The area has 4,700 hotel rooms, with another 3,700 scheduled. Downtown used to be an overflow market for when Midtown was full, but now the neighborhood is a destination in its own right.
Pictured: Alliance for Downtown SVP Nichole Larusso, who moderated the retail panel, and Howard Hughes Corp senior EVP Christopher Curry. Lower Manhattan’s retail landscape is being revolutionized, our panelists asserted. The Seaport, World Trade Center and Brookfield, for instance, used to have specialized niches: tourists, commuters and local trade, respectively. Now they’re refocused to appeal to a wider variety of shoppers with a wider variety of shopping experiences. WTC, for instance, attracts all of those groups, and even residents from other parts of New York. Retail is one of the driving factors in remaking Downtown as a destination, as it knits together the experience of being here from river to river.
The role of transit in the revival of Downtown retail is critical, our speakers pointed out (pictured, retail panelists Massey Knakal director Will Suarez and Westfield World Trade Center SVP Ron Bondy). The area’s now more of a transit nexus than it ever was, with easy access to and from the rest of Manhattan, Brooklyn and New Jersey. It’s easy to get to, easy to get around, and now offers food and cultural offerings as well. As residents and visitors demand more of a cool factor in their retail--and New Yorkers are very demanding in that way--Downtown’s going to provide it in the form of unique stores you can’t find elsewhere.
JEMB principal Jacob Jerome detailed the story of 150 Broadway, which includes the raw space in which the event was held. Originally built in 1924, the building was Westinghouse Electric's HQ in NYC. JEMB has owned and operated it since 1982.
