LOWER MANHATTAN REAL ESTATE YEAR IN REVIEW

Executive Summary

Lower Manhattan’s steady — if slow — recovery from the Covid-19 pandemic continued in 2022. A year that began under the cloud of last winter’s Omicron wave ended on a far more positive note with foot traffic rebounding, tourists returning in substantial numbers and a raft of exciting new retailers opening their doors. Monthly pedestrian counts increased 79% over the course of the year and transit ridership (while still below 2019 numbers) has rebounded significantly. Most global travel restrictions were lifted in 2022 and visitorship appears to have steadily increased through the year, buoying the hospitality sector. Entrepreneurs have taken advantage of a soft retail leasing market to open new eateries and retailers catering to Lower Manhattan’s affluent and growing residential population. Many restaurants and bars have reported a substantial increase in revenue over the 2022 holiday season.

Steep challenges remain. Commercial vacancy rates are at record highs, with overall vacancy above 22% across all Manhattan office markets. Overall leasing totals increased over 2021 but remain well below the five-year average. Though workers returned to offices in steadily increasing numbers as Covid concerns diminished, it has become clear that hybrid/flexible work schedules are a durable change across a range of industries. Despite the presently-declining Covid infection numbers, high inflation, rising interest rates, mixed economic signals and war in Europe have contributed to an unusual degree of macroeconomic uncertainty.

Office Leasing Improves, But Vacancies Mount

Leasing activity continued to recover from the worst months of the pandemic, with total leasing activity outpacing 2021 by 12% and doubling the totals seen in 2020. However, leasing activity remains sluggish and uneven. Some of the largest leases signed in 2022 were renewals or moves within Lower Manhattan, and new leases were concentrated in Class A properties with new and amenity-heavy space. After two years of uncertainty, the returnto-office picture became clearer in 2022. Hybrid work schedules appear to be increasingly standard practice. Office occupancy stabilized in the second half of the year as many buildings have reported much higher attendance mid-week.

Overall vacancy rates have remained stubbornly high. Vacancy numbers in some older properties and in certain Lower Manhattan geographies are substantially higher than the overall rate. The office market appears increasingly bifurcated, as buildings located further from transit and lacking in amenities have had trouble attracting tenants. That said, smaller tenants have started to take advantage of advantageous lease terms and some properties have reported increasing interest.

Retail and Hospitality Sectors Recover And Reimagine Themselves

The near-universal lifting of travel restrictions and Covid-related entry requirements in 2022 has helped boost visitorship to the city. Tourism numbers had already rebounded significantly in 2021 and while final data is not yet available for 2022, it is expected that the upward trend in tourism accelerated in 2022. In the final quarter of the year, hotel occupancy in Lower Manhattan was up 26% year-over-year, outpacing the citywide average and falling only 9% below the same period in 2019. New hotels opened in 2022 and the district now boasts more rooms than it did prior to the pandemic.

The pace of retail openings in 2022 significantly exceeded that of 2019. Lower Manhattan’s dynamic food scene continued to grow with the addition of Jean Georges Vongretchen’s Tin Building at the Seaport, as well as several other eateries from noted chefs. Longanticipated openings, including the new Urbanspace food hall at 100 Pearl, came into fruition. Creative uses for some of the neighborhood’s unique retail spaces, such as the immersive art experience Hall des Lumières, also opened to popular acclaim in 2022.

Residential Market Rebounds

Strong demand continued to shape Lower Manhattan’s residential market in 2022. Rental prices have surged to new highs, though increasing interest rates slightly cooled residential sale prices. Major new projects finally debuted, including One Wall Street and 7 Dey Street, which contains some of the first new affordable housing built in Lower Manhattan since the pandemic.

This year showed a continued appetite for office-toresidential conversions, with large properties like 55 Broad Street and 25 Water Street inking deals to convert and add a potential new 2,640 units to the neighborhood’s residential inventory. Several other large office buildings, including 85 Broad Street, are also being considered for residential conversion.

Performing Arts Center Nears Completion

The long awaited Ronald O. Perlman Performing Art Center at the World Trade Center neared completion in 2022 and is slated to open to the public later in 2023. The 110,000 sq. ft. cultural center will be a major addition to Lower Manhattan’s arts scene and is expected to attract new visitors to Lower Manhattan.

Other ongoing infrastructure projects included improvements to Water Street and further enhancements to NYC’s ferry service, which has expanded Lower Manhattan’s already extraordinary transportation network.