Lower Manhattan Real Estate Market Overview Q1 2016 by Alliance for Downtown New York

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ALLIANCE FOR DOWNTOWN NEW YORK

LOWER MANHATTAN REAL ESTATE MARKET OVERVIEW

Q1 2016

COMMERCIAL OFFICE MARKET LEASING VELOCITY UP YEAR-OVER-YEAR

smaller relocation commitments this quarter. This quarter also saw the addition of several small but notable fashion tenants to the market. Many of these deals were in class B and C space, where strong demand and limited supply have led to significantly increased rents and steadily declining vacancy.

Lower Manhattan’s office market experienced a quiet start to the year, with slow leasing activity and a halt to the trend of rising overall asking rents. New leases totaled just 1 million square feet, down slightly from the first quarter of 2015, which itself was a slow quarter. However, strong leasing velocity (which measures renewals in addition to new leasing) still buoyed the downtown market. A total of 2.1 million square feet of deals were signed, according to CBRE, representing a 61.5 percent increase year over year. Most of this stems from McGraw Hill Financial’s renewal at 55 Water Street. The parent company of Standard & Poor’s Rating Services executed the largest deal Manhattan-wide this quarter and the largest in Lower Manhattan since 2013. Still, with limited overall activity in this quarter, the Class A market saw a slight uptick in vacancy along with stagnant, albeit historically high, asking rents.

KEY TENANTS RENEW Many of the largest first quarter deals reflected renewals by Lower Manhattan’s signature sectors including FIRE and Government. McGraw Hill Financial signed a 900,027-squarefoot early renewal at 55 Water Street, where they are consolidating its Manhattan real estate footprint and will fully occupy the space by 2020. The financial information and analytics company vacated 413,000 square feet in its namesake Midtown building, 1221 Sixth Avenue, and moved into Standard & Poor’s space last year. McGraw Hill has also been consolidating from 2 Penn Plaza where it once had approximately 500,000 square feet but now holds about 85,000 square feet. It will occupy that property until 2020, when the company will fully relocate all operations to 55 Water Street.

A continuing bright spot in the market was provided by the TAMI (Technology, Advertising, Media and Information) sectors, which contributed a 100,000-square-foot expansion and several

LOWER MANHATTAN LEASING VELOCITY, Q1 2015 - Q1 2016 Source: CBRE

2.5 Million

2.1 Million 2.0 Million

1.5 Million

1.5 Million 1.3 Million

1.3 Million 970,000

1.0 Million

500,000

2015 Renewal

Lower Manhattan Real Estate Market Overview| Q1 2016

Q1 2016

New Activity

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Other key deals among FIRE or government tenants this quarter included American Express, which signed a 74,439-square-foot renewal at 200 Vesey Street at Brookfield Place. Headquartered in the building since 1996, it now occupies a total of 1,329,911 square feet or about 53 percent of the building. The Waterfront Commission of New York Harbor, an interstate regulatory agency for the Port of New York and New Jersey, also signed a renewal for 21,200 square feet at 39 Broadway. The Port Authority of New York & New Jersey also renewed a 20,734-square-foot block of space in 115 Broadway, where it currently occupies 124,514 square feet in addition to its 600,000-square-foot office at 4 World Trade Center.

PROFESSIONAL SERVICES TOPS RELOCATION ACTIVITY The Professional Services/Business Services sector accounted for the largest relocation deal as well as largest share of relocation activity (by square footage) this quarter – 41 percent, according to data from Jones Lang LaSalle. ABM Industries, a facility management provider, will relocate from Midtown to 44,025 square feet in 1 Liberty Plaza, where Brookfield Properties is currently marketing about 400,000 square feet of available space. In addition, the nonprofit law firm, Partnership For Children’s Rights, is relocating from Midtown into 11,671 square feet at 88 Pine Street.

CREATIVE TENANTS EXPAND AND RELOCATE Although new activity was slow at 2016’s outset, this quarter did yield some solid commitments from several TAMI (Technology, Advertising, Media and Information) and Fashion companies that were expanding or relocating. Overall, these combined industries accounted for 42 percent of relocation activity by square footage, according to Jones Lang LaSalle. Droga5, a New York City-based advertising agency, accounted for the largest new deal this quarter, with an expansion deal signed for 106,000 square feet in 120 Wall Street. It now occupies 208,000 square feet in the building, making it one of Lower Manhattan’s largest TAMI companies and bringing Silverstein Properties’ 120 Wall Street to 100 percent leased. Rocket Fuel, a California-based advertising technology firm, will be relocating from Herald Square to 41,982 square feet in 195 Broadway, a building that has been popular with TAMI and fashion tenants. 195 Broadway’s signed leases over the past year included an expansion by Namely, a human resources software company. Other significant TAMI leases in the first quarter include Mic Network, a millennial news-focused media company, which signed on for the entire 82nd floor (36,099 square feet) at One World Trade Center. The firm will relocate from the Hudson Square neighborhood. Overall, TAMI accounted for 35.7 percent of relocation activity in the first quarter, according to Jones Lang LaSalle.

Lower Manhattan Real Estate Market Overview| Q1 2016

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NEW LEASING ACTIVITY BY INDUSTRY IN LOWER MANHATTAN, Q1 2016* Source: JLL

CREATIVE TENANTS Fashion &

TAMI + Retail Trade 42%

Q1 2016

Other Services Education, 5% Health Care & Nonprofit 6%

New Leasing Activity by Industry

*By square footage

FIRE 6%

41% Professional Services

Smaller and startup TAMI Companies are also finding the space they want in Lower Manhattan, many in buildings east of Broadway. Among them: ●● Work Fusion, an artificial intelligence startup, is relocating

from Tribeca to 5,803 square feet in 48 Wall Street. ●● GraphNet, a technology company focused on integrated data

messaging technology and services, will be relocating from Hudson Square to 5,335 square feet in 30 Broad Street. ●● Kraftworks, an advertising agency, signed a lease for 3,209

square feet at 50 Broad Street, relocating from SoHo. According to Newmark Knight Grubb Frank, Lower Manhattan, east of Broadway, was one of the most active submarkets for TAMI leases in the first quarter of 2016, on par with Union Square and Flatiron in terms of the number of deals signed. Continued commitments from fashion tenants were another bright spot this quarter. High Fashion tenants Brioni and Bottega Veneta committed to relocate from Fifth Avenue in Midtown to 8,514 square feet, and 16,889 square feet in 33 Whitehall Street, respectively. They join Gucci, also a Kering brand, which is moving into 195 Broadway in early Spring. International luxury brands are not the only fashion tenants taking space in Manhattan. Tommy John, a young and innovative men’s undergarment designer, is relocating from Chelsea and expanding into a 17,608-square-foot space in 100 Broadway.

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CORPORATE RELOCATIONS, 2014 - 2017 Source: Downtown Alliance

McGraw Hill’s deal is only the latest example of tenants eschewing their traditional Midtown roots in favor of Lower Manhattan. Lower Manhattan is becoming the premier New York City location for major companies. Other former pillars of Midtown have already relocated, including Condé Nast and Time Inc. (fully relocated in 2015). Future Lower Manhattan headquarters will include Associated Press (scheduled to move in during 2017) and Hudson’s Bay Company (which will consolidate its New York City operations south of Chambers later this year). These are just a few examples of tenants committing to make Lower Manhattan their New York City or global headquarters in recent years.

Corporate Headquarters Leaving Midtown to Plant their Flag in Lower Manhattan CORPORATE RELOCATIONS, 2014 - 2017

Lower Manhattan Real Estate Market Overview| Q1 2016

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LOWER MANHATTAN TOP LEASES, Q1 2016

Source: Downtown Alliance, CBRE, JLL, CoStar, Colliers International

Tenant Name Location

SF Leased Transaction Type

Sector

McGraw Hill Financial 55 Water Street

900,027 Renewal

FIRE

Droga5 120 Wall Street

106,000 Expansion

TAMI

American Express Company 200 Liberty Street

74,439 Renewal

FIRE

ABM Industries 1 Liberty Plaza

44,025 Relocation

Professional Services

Rocket Fuel 195 Broadway

41,982 Relocation

TAMI

Mic Network One World Trade Center

36,099 Relocation

TAMI

Progenics Pharmaceuticals One World Trade Center

26,558 Relocation

TAMI

The Robert Allen Group 80 Broad Street

25,730 Renewal

Other – Retail Trade/ Textiles

Lovell Safety Management 110 William Street

25,398 Renewal

FIRE

21,200 Renewal

Government

20,734 Renewal

Government

19,342 Moving Within LM

Nonprofit

10 11 12

Waterfront Commission of New York Harbor 39 Broadway The Port Authority of New York & New Jersey 115 Broadway Public Relations Society of America 120 Wall Street

Public Health Solutions 22 Cortlandt Street

18,550 Relocation

Nonprofit

Wade Clark Mulcahy 180 Maiden Lane

17,748 Moving Within LM

Professional Services

Tommy John 100 Broadway

17,608 Relocation

Other – Retail Trade/Fashion

Lucky 8 TV 233 Broadway

17,260 New LM Location

TAMI

Bottega Veneta 33 Whitehall Street

16,889 Relocation

Other – Retail Trade/Fashion

McElroy, Deutsch, Mulvaney & Carpenter 225 Liberty Street

Fullstack Academy of Code 5 Hanover Square

16,720 Moving Within LM 13,950 Moving Within LM

Abt SRBI 180 Maiden Lane

13,607 Relocation

Professional Services

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RENTS Lower Manhattan’s overall average asking rent dropped just slightly to $59.30, down from last quarter when the average reached the highest level in the market’s history. However, a closer look at subclasses reveals a more nuanced story. Class A rents have been relatively flat since the end of 2014 when especially strong leasing activity caused a dramatic spike in rents. Since then asking rents have been hovering around $62 per square foot for the last five quarters, a response to relatively quiet leasing activity among Class A properties. First quarter Class A leasing activity is down 14 percent year-over-year. At the same time, there is ample supply of Class A product south of Chambers Street, making up more than 74 percent of overall available space, according to Cushman & Wakefield. Class B and C space has trended differently than Class A space in Lower Manhattan. The Class B vacancy rate is now 6.4 percent, just half the vacancy rate of the Class A market. This reflects strong demand among value-seeking tenants fleeing dramatic price increases elsewhere in the city, especially Midtown South. Leasing in Class B and C buildings saw 44 percent of this quarter’s activity, while only offering 26 percent of the market’s overall availability ---- resulting in significantly increased pricing year over year. In the first quarter, Class B and C average rents surpassed $50 per square foot for the first time in the market’s history, up 20.5 percent and 34.8 percent year over year, respectively. There are still good deals to be had in Lower Manhattan as average taking rents can be as much as $10 below asking rents, according to first quarter data from Newmark Knight Grubb Frank. In addition, the Lower Manhattan market still benefits from a competitive pricing advantage relative to other markets. Overall average asking rents are $19.10 lower than Midtown and $9.80 below the Midtown South average and these gaps have widened year-over-year, as pricing in those markets has risen even faster.

Education TAMI

Class A Rents in LM:

Lower Manhattan Real Estate Market Overview| Q1 2016

$21.40 $12.70

Less than MT

Less than MTS

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LOWER MANHATTAN ASKING RENTS BY OFFICE CLASS, Q1 2013 - Q1 2016 Source: Cushman & Wakefield

$70 $62.10

$65 $60 $55

$50.90

$50 $45 $40 $35 $30

$50.50 $45.40 $35.40 $32.20

$25 Q1

2013

2014 Class A

2015

Class B

2016

Class C

OVERALL ASKING RENTS BY MANHATTAN SUBMARKET, Q1 2011 - Q1 2016 Source: Cushman & Wakefield

$90 $78.40

$80 $70

$68.60 $62.60

$60 $59.30

$50 $40 $30

$43.80 $39.20

2011

2012 Lower Manhattan

Lower Manhattan Real Estate Market Overview| Q1 2016

2013 Midtown

2014

2015

Q1 2016

Midtown South

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VACANCY Lower Manhattan’s vacancy rate trended up just slightly from last quarter — rising from 9.4 percent to 10.2 percent — in part due to the addition of a large block of space at 375 Pearl Street and lower than average new leasing activity. The Class A vacancy rate rose 1.3 percentage points from last quarter to 12.6 percent but is basically stable from this time last year.

There are several large blocks being marketed in Lower Manhattan. This quarter’s activity in these large blocks includes: ●● Group M’s expansion lease at 3 World Trade Center for

an additional 173,436 square feet closed in early January and the property is now 28 percent committed with 1.81 million square feet available to lease. ●● One World Trade Center announced four new leases and

Despite the overall uptick, there were areas of strength. Robust activity east of Broadway has pushed the vacancy rates in the Insurance and Financial East submarkets down 2.6 percent and 1.9 percent respectively, year over year, to 9.0 percent and 8.4 percent. In the first quarter, they were the only areas to boast positive absorption, in part due to the large expansion lease signed by Droga5 at 120 Wall Street. Other major deals signed east of Broadway over the past year included Vox Media’s relocation to more than 85,000 square feet in 85 Broad Street, Sandbox Studio’s 67,700-square-foot relocation to 55 Broad Street, and more than 127,557 square feet of leases signed at 180 Maiden Lane since the beginning of 2015.

one expansion this quarter totaling over 81,716 square feet in activity. The leases include Progenics Pharmaceuticals, a biotechnology firm that will be opening its first NYC office, taking up the entire 26,558-square-foot, 47th floor. Also, Mic Network, a media company, will be relocating from Hudson Square to 36,099 square feet on the 82nd floor. The 3 million-square-foot tower is now 67 percent leased. ●● 1 Liberty Plaza announced a 44,025-square-foot lease with

ABM Industries Incorporated. The building has 418,000 square feet on the market. ●● Brookfield Place announced two new office leases totaling

29,817 square feet in the first quarter. In addition to American Express renewing, McElroy, Deutsch, Mulvaney & Carpenter LLP committed to 16,720 square feet, relocating from within Lower Manhattan. City National Bank will also be opening a new New York City office in the property. A total of 680,003 square feet is available to lease

Nearly three-quarters (74 percent) of the available space in Lower Manhattan is in Class A buildings, and nearly 40 percent (or 3.56 million square feet of this total) is available at the World Trade Center, according to data from Cushman & Wakefield.

LOWER MANHATTAN’S LARGEST BLOCKS OF SPACE & AVAILABILITY, Q1 2016 Source: Downtown Alliance, CoStar, JLL, Cushman & Wakefield, Silverstein Properties & Brookfield Properties

67% Leased

3.0 Million 2.5 Million

31% Leased

59% Leased

67% Leased

82% Leased

88% Leased

2.0 Million 1.5 Million 1.0 Million

31% Leased

34% Leased

762k SF Available

725k SF Available

87% Leased

0.5 Million 0

1.81 M SF Available

3 WTC

1.05 MSF Available

1 WTC

911k SF Available

750k SF Available

28 Liberty 4 WTC

298k SF Available

148k SF Available

375 Pearl 180 Maiden 1 Liberty 200 Vesey 85 Broad

SF Leased

Lower Manhattan Real Estate Market Overview| Q1 2016

421k SF Available

SF Available

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at the complex, with the largest blocks available at 200 Vesey Street (297,661 square feet) and 300 Vesey Street (150,580 square feet).

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10.2%

Other reductions at large blocks include: ●● 180 Maiden Lane announced three leases totaling around 34,511 square feet. There is now 725,000 square feet available in this Class A property being marketed by Cushman & Wakefield and Murray Hill Properties.

Lower Manhattan’s overall vacancy LOWER MANHATTAN OVERALL VACANCY RATES, Q1 2013-Q1 2016

●● 28 Liberty is marketing 911,000 square feet and

announced one lease this quarter. The property announced that Fitapelli & Shafer will be moving from Midtown South into 5,700 square feet.

Source: Cushman & Wakefield

14% 13%

Other major spaces on the market include 375 Pearl Street, where the 1.1 million-square-foot property’s owner, Sabey Data Center, is completing a major renovation to attract new office tenants. The renovation includes adding floor-to-ceiling glass windows on floors 18 through 31 (where 495,000 square feet is available), a complete lobby renovation and the addition of ground floor retail. Currently, there is a total of 760,000 square feet available at the property to lease. The New York City Department of Finance is reportedly close to finalizing a deal for 175,000 square feet on floors 26-30, and, last year, the NYPD signed a lease for 18,000 square feet. 375 Pearl was formerly a data center, and Verizon Wireless still maintains a space in its office condominium on floors 8-10.

12% 11%

10.2%

10% 9% 8%

8.0%

7% 6%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013

2014

2015

2016

LOWER MANHATTAN VACANCY RATES BY CLASS, Q1 2011 - Q1 2016 Source: Cushman & Wakefield

16% 14% 12%

12.6%

11.9% 10.5%

10% 9.9% 8%

7.3%

6.4%

Q3 2011

2012 Class A

Lower Manhattan Real Estate Market Overview| Q1 2016

2013 Class B

2014

2015

Q1 2016

Class C 7

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COMMERCIAL PROPERTY SALES Office Building Sales ●● O ne office building sold in the first quarter. The Kushner

Companies and CIM Group sold 2 Rector Street, a 440,000square-foot office building to a partnership between Bentall Kennedy, a pension fund, and Cove Property Group for $221 million or $502 per square foot. The previous owners purchased the property in 2013 for $140 million and had debated plans to convert the building to rental apartments.

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●● An unnamed LLC purchased a partial interest in the retail

property at 60 Pearl Street from Rohan LLC for $4 million. The five-story, 7,605-square-foot building currently has three residential units, a 1,491-square-foot office space, and a 1,521-square-foot retail space currently occupied by a restaurant, Bombay’s Indian Cuisine.

Hotel Sales Three hotel transactions took place in Lower Manhattan in the first quarter.

Office Condominiums Two office condominiums traded in the first quarter, including: ●● Nyack College, a private, Christian school, purchased a

166,385-square-foot office condominium in 17 Battery Place from the building’s owner, The Moinian Group, for $49.2 million or $296 per square foot. Nyack College first moved to the building in 2013, after signing a 20-year lease with a purchase option. ●● Mack Cali sold its 525,000-square-foot office condominium

on floors 2 - 16 in 125 Broad Street to Sullivan & Cromwell for $202 million or $385 per square foot. Sullivan & Cromwell has been a tenant in the building since 1970 and now has full ownership of the 1.46 million square foot building. Other tenants in 125 Broad Street include AECOM Technology Corp., AXA Insurance Co. and Continental Casualty Co..

2 Rector Street

●● Hersha Hospitality Trust sold its majority interest in two

Lower Manhattan hotels in the first quarter to Cindat Capital Management. Cindat Capital Management, a China-based investment firm, purchased the majority interest in the 113-room Holiday Inn Wall Street, located at 51 Nassau Street, for $38.3 million or $484,000 per key. Cindat also purchased the majority interest in the Holiday Inn Express Courtesy of CoStar Wall Street, located at 126 Water Street, for $35.8 million or $457,000 per key. Hersha will remain as the minority partner in both of these hotels. ●● The Howard Hughes Corporation purchased the 72-key Best

Western Plus Seaport Inn from Werber Management and Gemini Real Estate for $38.3 million or $531,944 per hotel key. Source of property sales: Newmark Knight Grubb Frank

Best Western Plus Seaport Inn

Retail Buildings and Condominiums Sales Three retail properties traded in the first quarter.

The Howard Hughes Corporation purchased the hotel from Werber Management and Gemini Real Estate.

●● HUBB NYC purchased a 4,211-square-foot retail

condominium in 37 Warren Street, an 18-unit luxury condominium building, for $11.2 million or $2,660 per square foot from Fisher Brothers. The retail condominium is currently vacant and holds 2,847 square feet on the ground level and 1,364 square feet on the lower level.

The sales price was $38.3 million or $531,944 per key.

●● Florida Developers Group purchased a 2,016-square-foot

retail condominium from The Claremont Group at 99 Wall Street for $9.6 million or $4,774 per square foot. The Claremont Group currently owns the rest of the building where it is converting the building to 52 residential condominium units.

Lower Manhattan Real Estate Market Overview| Q1 2016

MAJOR PROJECTS UPDATE

It includes 72 keys at the corner of Front and Peck Slip. Courtesy of CoStar Courtesy of CoStar

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RETAIL MARKET Developments, New Openings and Announcements throughout the District The horizon in 2016 and beyond promises a flurry of momentous retail developments. By 2019, Lower Manhattan will have more than 6.7 million square feet of retail, an expansion of 2.3 million square feet of new and repositioned space. This retail revolution is driven by major development projects at Westfield World Trade Center, Brookfield Place, Fulton Center, the Seaport District, 28 Liberty Street and other projects. The debut of Fulton Center’s 65,000 square feet of commercial and retail space began in late 2015 and will continue in phases throughout 2016. Westfield, the master leaseholder of the transit center, opened several retail tenants including, Irving Farm Coffee Roasters, Pop Karma, Freedom Wine Cellars, Moleskine, Neuhaus, Wasabi Sushi & Bento, Wetzel’s Pretzels and Zaro’s Bakery in the first quarter. Shake Shack plans to open in late spring on the second floor of Fulton Center. WeWork will occupy office space in the Corbin Building and 3rd floor of Fulton Center, opening in early summer. In August 2016, Westfield World Trade Center will become an iconic destination with over 120 stores and restaurants located in Santiago Calatrava’s Oculus and at the base of World Trade Center buildings 3 and 4. Mario Batali’s Eataly will serve as the culinary anchor among many other food, beverage and dining options. The 365,000-square-foot, fully-leased complex recently previewed its retail and dining roster, which includes Hugo Boss, Kate Spade New York, Banana Republic, H&M, and Hawksmoor (the renowned London steakhouse).

Courtesy of Mark Weinberg

The 65,000 square feet of retail in Fulton Center began opening in 2016. More shops and restaurants will appear throughout the year.

At Brookfield Place, contemporary brands continued to roll out after the spring 2015 unveiling of the 375,000-square-foot repositioned retail space. This past quarter, Davidoff of Geneva Cigars, Kamakura Shirts, Hickey Freeman and L’Appart, an intimate dining room within Le District, all opened in the complex. Jose Garces’ Amada launched on Vesey Street in late April and will be followed by True Food Kitchen later this year. Lower Manhattan’s first luxury department store, Saks Fifth Avenue, is slated to open at Brookfield Place this fall. The Howard Hughes Corporation’s Seaport District was active in the first quarter with a number of announcements. iPic Theaters is continuing construction and plans to introduce an eight-screen movie theater this fall in the Fulton Market Building. The developer revealed that David Chang’s Momofuku Group will join Jean-Georges Vongerichten in opening flagship restaurants on Pier 17; this is in

Lower Manhattan Real Estate Market Overview| Q1 2016

Over 120 stores and restaurants at Westfield World Trade Center are expected to open in August 2016.

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addition to Jean-Georges’ 40,000-square-foot market that will occupy the restored Tin Building. Scotch & Soda, the latest fashion brand to sign on, will join popular New York independent bookstore, McNally Jackson Books. Committed to creating a distinct destination, the Howard Hughes Corporation is bringing back the Seaport Culture District, Seaport Studios retail concept store and Smorgasburg food market. The new pier and revitalized historic area will provide 365,000 square feet of retail, dining and entertainment by 2017. After receiving approvals by the city’s Landmarks Preservation Commission to create more than 200,000 square feet of retail below the plaza at 28 Liberty Street, Fosun Property Holdings is continuing construction on the subgrade retail space. Plans include creating a set of glass-enclosed entrances on the plaza and along the black marble walls, which would give pedestrians access to five levels of subterranean space.

Courtesy of Ketch Brewhouse

Ketch Brewhouse opened in the Four Points by Sheraton Hotel at 6 Platt Street.

At the end of the first quarter, Lower Manhattan had a total of 1,118 stores and restaurants – a three percent increase yearover-year. A total of 36 new stores and restaurants opened in the district in the beginning of the year, including: •N um Pang, a Cambodian sandwich shop, at 200 Water Street; •B irch Coffee, a New York City-based coffeehouse, at 8 Spruce Street; •K etch Brewhouse, an American tavern featuring a rooftop terrace, at 6 Platt Street; • Café Patoro, a Brazilian bakery, at 223 Front Street; •1 8|8 Fine Men’s Salon, a membership-based men’s salon, at 20 Pine Street;

Courtesy of Cafe Patoro

Cafe Patoro, a Brazilian bakery, debuted at 223 Front Street in the Seaport.

• Van Court, a high-end, non-toxic nail salon, at 90 Water Street; • Physique 57, a highly-lauded fitness studio, at 55 Broadway; •L eather Spa, a luxury accessory repair & care shop, at 28 John Street.

2.3 Million SF of new & repositioned retail space

Courtesy of Birch Coffee

Birch Coffee opened in New York by Gehry at 8 Spruce Street. Lower Manhattan Real Estate Market Overview| Q1 2016

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TOURISM & HOSPITALITY Record Year for Tourism

LOWER MANHATTAN HOTEL DEVELOPMENT PIPELINE

Coming off a strong 2015, Lower Manhattan is poised to see continued tourism strength throughout the year. The area south of Chambers Street welcomed 14.2 million unique visitors in 20151, up 14 percent from 2014 and up 48 percent from 2013 (which took the brunt of Hurricane Sandy). The upsurge in visitors was buoyed by strong visitorship at the new One World Observatory, National September 11 Memorial Museum and the Statue of Liberty and Ellis Island.

Source: Downtown Alliance

Hotel Development Takes Off At the end of the first quarter in 2016, there were 5,688 hotel rooms in 27 hotels throughout Lower Manhattan — a 12 percent increase over the past year. While Lower Manhattan makes up a fraction (less than five percent) of New York City’s total hotel inventory of 107,000 hotel rooms, approxmiately 20 percent of hotel rooms currently under construction in all of New York City are in Lower Manhattan.

Hotel & Address

Owner/ Developer

Rooms

Floors

Open Date

AKA Wall Street 84 William Street

Prodigy Networks

140

2016

The Beekman Hotel 5 Beekman Street

GB Lodging Group

287

2016

Courtyard by Marriott 133 Greenwich Street

Hidrock Realty

317

2016

Four Seasons Downtown 30 Park Place

Silverstein Properties

189

21 (of 82)

2016

The Artezen Hotel 24-26 John Street

Westbury Realty Associates

2016

Fairfield Inn & Suites 100 Greenwich Street

Jiten Hotel Management

192

2017

Hilton Garden Inn 6 Water Street

McSam Hotel Group

250

2017

Marriott Residence Inn 215 Pearl Street

Lam Group

120 (upper floors)

2017

Courtyard by Marriott 215 Pearl Street

Lam Group

200 (lower floors)

2017

AC Hotel | Marriott 151 Maiden Lane

Fortis Property Group

271

2017

Hotel Indigo 8-12 Maiden Lane

10-12 MLane Inc.

190

2017

Boutique Hotel Battery Maritime Building

Stoneleigh Capital

2017

TBD Hotel 11 Stone Street

Premier Emerald LLC

143

2018

Extended Stay Hotel 17 John Street

Prodigy Networks

106

20188

Moxy Hotel 143 Fulton Street

Tribeca Associates

228

2018

TBD Hotel 130 William Street

Lightstone Group

TBD

12 (of 50)

2018

TBD Hotel 50 Trinity Place

Fit Investment Group

188

TBD

TBD Hotel 120-122 Water Street

NY Times Square Hotel Group

150

TBD

Three hotels opened this quarter: • Four Points by Sheraton at 6 Platt Street, 262 rooms; • The Downtown Association at 60 Pine Street, 36 rooms; • Riff Downtown at 102 Greenwich Street, 20 rooms; Some 3,100 hotel rooms in 18 hotels are currently in the development pipeline. In 2016, inventory is expected to grow by up to 25 percent, as nearly 1,300 rooms in five additional properties will come online this year. If all these projects meet current deadlines, the hotel inventory in Lower Manhattan will reach nearly 6,700 rooms by year-end 2016. Properties scheduled for completion this year include: • AKA Wall Street at 84 William Street, 140 rooms; • The Beekman Hotel at 5 Beekman Street, 287 rooms; • Courtyard by Marriott at 133 Greenwich Street, 317 rooms; • Four Seasons Downtown at 27 Barclay Street, 189 rooms. • The Artezen Hotel at 24 John Street, 89 rooms.

25%

growth in hotel room inventory by year-end 2016

Lower Manhattan Real Estate Market Overview| Q1 2016

Total Hotels in the Pipeline Total Hotel Rooms in the Pipeline 1

18 3,105

Source of tourism estimates: Audience Research & Analysis

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Occupancy and Average Daily Room Rate

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LOWER MANHATTAN HOTEL OCCUPANCY

Typically a slow quarter, occupancy rates in the first quarter of 2016 in Lower Manhattan reached 75 percent, down from the fourth quarter of 2015, but ahead of recent years’ first quarter performance. The occupancy seems to have come at the expense of the average daily room rate (ADR), which fell over previous years. Lower Manhattan’s ADR in the first quarter of 2016 was $204, down 13 percent year over year and 22 percent lower than in 2013. In contrast, New York City’s ADR, has remained relatively steady at $209.

85%

In looking at first quarter hotel performance over the past four years, the Lower Manhattan hotel market has lost some ground. Despite strong growth in tourism and employment, the acceleration of new hotel room inventory has pushed supply growth out ahead of demand. The growth in room inventory is evident in the opening of hotels with lower price points, leading to a greater fluctuation in room rates. Couple with a growing supply of limited-service hotels and the popularity of AirBnB in New York City, these factors have certainly made their mark on Lower Manhattan’s hotel performance. While pricing pressure will likely continue as new supply comes to market, future demand growth is also expected to grow in Lower Manhattan with the addition of new office product, residential buildings and opening of major retail destinations in the next several years.

55%

Source of New York City hotel figures: NYC & Company

RESIDENTIAL

80%

79%

78% 76%

75%

75% 70%

75%

73% 72%

72%

Q1 2014

Q1 2015

65% 60%

50% Q1 2013

Lower Manhattan

Q1 2016

New York City

LOWER MANHATTAN AVERAGE DAILY ROOM RATE (ADR) $275

$250

$248.93

$246.71 $235.15

$225 $209.00 $200

$209.03

$212.38 $202.74

$203.93

Q1 2015

Q1 2016

$175 Q1 2013

Q1 2014 Lower Manhattan

The Four Points by Sheraton opened at 6 Platt Street with 262 rooms.

Lower Manhattan Real Estate Market Overview| Q1 2016

New York City

The Riff Downtown opened at 102 Greenwich Street with 20 rooms.

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RESIDENTIAL MARKET Inventory and Development Lower Manhattan has 30,000 housing units in 321 mixeduse and residential buildings and an estimated population of approximately 60,000. There are currently over 4,500 units in 28 buildings that are under construction or planned for development, of which approximately 62 percent are condos, 32 percent are rental units and 6 percent whose tenure is yet to be determined. The pipeline of residential development includes over 1,500 units in ten buildings under construction (57 percent rental and 43 percent condo) with plans to open in 2016. Among them: •R ose Associates’ building at 70 Pine Street completed the initial units in 2015 and will continue to roll out its 644 rental units throughout 2016. •R udin Management’s 110 Wall Street completed the initial phases of conversion, with WeWork opening both an office and its first residential offering, WeLive. The micro-unit concept, which focuses on establishing a community-driven living concept, will add 232 units throughout the year, eventually housing 600 people. •C onstruction continues on The Beekman Residences at 5

Courtesy of Rose Associates

70 Pine Street Rose Associates began leasing at 70 Pine Street where it is bringing 644 luxury rental units to market. A coffee shop, grocery store, La Palestra fitness center and rooftop restaurant by April Bloomfield & Ken Friedman are expected to open later this year.

Beekman Street, a 51-story tower with 68 condo units. The new residential tower will join the 287-room Beekman Hotel, both developed by GFI Development and GB Lodging. The Beekman Residences are scheduled for completion in mid2016. •S ilverstein Properties’ Four Seasons Residences at 30 Park Place is scheduled to debut in mid-2016. The 82-story tower will offer 157 condo units and 189 hotel rooms. •M agnum Real Estate is converting the top 22 floors at the former Verizon Building at 100 Barclay Street into 166 condo units. Approximately 100,000 square feet of retail is also planned at the base. The tower is expected to open in

Courtesy of WeLive

mid-2016. •C onstruction continues on 50 West Street, a 65-story, 191-condo unit tower. The building, developed by Time Equities, will open in late 2016.

Lower Manhattan Real Estate Market Overview| Q1 2016

WeLive at 110 Wall Street WeWork’s new micro-unit residential concept will bring 232 rental units, focused on communal living, to Rudin Management’s 110 Wall Street. The building also has a WeWork office space.

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The first quarter saw the announcements of five residential properties in Lower Manhattan. • T rinity Place Holdings announced the redevelopment of the former SYMS clothing store at 77 Greenwich Street. The tower will comprise 85 condo units, a public primary school at the building’s base and incorporation of the 19th century landmarked Dickey House at 67 Greenwich Street. The company anticipates a 2019 completion. •C hina Oceanwide Holdings closed the sale of a development assemblage at 80 South Street from The Howard Hughes

RESIDENTIAL

HIGHLIGHTS OF LOWER MANHATTAN RESIDENTIAL DEVELOPMENT Source: Downtown Alliance Address & Building Name

square feet of fully entitled development rights. The site

•H oping to capitalize on Lower Manhattan’s growing residential community, Pace University put its 15-story

• A slew of new construction is proposed in the collection of buildings along Park Row once occupied by J&R Music and Computer World. Demolition is underway for two planned residential towers. o Construction is underway at Urban Muse’s 25-story, 29-condo unit tower at 1 Beekman Street. The tower will have 14,000 square feet of retail space and is scheduled to be completed in 2018. o L&M Development is eyeing a 54-story, 108-condo unit tower at 23-31 Park Row. The tower will have 53,000 square feet of retail and is slated for a May 2019 completion.

Trinity Place Holdings announced plans to build 85 condo units and a public primary school at 77 Greenwich Street. Lower Manhattan Real Estate Market Overview| Q1 2016

Open Date

60 Fulton Street Exhibit

Rental New Construction

120

2017

180 Water Street

Rental Conversion

565

2017

20 Broad Street

Rental Conversion

521

2017

TOTAL

Over 1,400

Condo Units Under Construction 1

19 Park Place

Condo New Construction

2016

12 Warren Street

Condo New Construction

2016

5 Beekman Street The Beekman Residences

Condo/Hotel New Construction

2016

30 Park Place Four Seasons Residences

Condo/Hotel New Construction

157

2016

50 West Street

Condo New Construction

191

2016

101 Wall Street

Condo Conversion

2016

100 Barclay Street Ralph Walker Tribeca

Condo Conversion

161

2016

233 Broadway Woolworth Residences

Condo Conversion

2017

161 Maiden Lane 1 Seaport

Condo New Construction

2017

49-51 Chambers Street

Condo Conversion

2018

1 Beekman Street

Condo New Construction

2018

111 Murray Street

Condo New Construction

154

2018

125 Greenwich Street

Condo New Construction

275

2018

1 Wall Street

Rental/Condo Conversion

262/262

2018

112-118 Fulton Street

Condo New Construction

483

2019

dormitory at 106 Fulton Street on the market. The 75,000-square-foot building could fetch $60 million.

Units

includes 80 South Street, 163 Front Street and air rights from 163 Front Street and 175 Front Street.

Lease & Building Type

Rental Units Under Construction

Corporation (HHC) for $390 million (or $476 per buildable square foot). The lot is capable of supporting 820,000

MAJOR PROJECTS UPDATE

TOTAL

Over 2,000

Condo & Rental Buildings Planned for Development 1

30 Warren Street

Condo New Construction

2017

130 William Street

Condo/Hotel New Construction

188

2018

45 Park Place

Condo New Construction

2018

75-83 Nassau Street

Rental/Condo New Construction

197

2018

23-31 Park Row

Condo New Construction

108

2019

45 Broad Street

Condo New Construction

245

2019

71 West Broadway

Condo New Consruction

TBD

77 Greenwich Street Former Syms site

Condo New Construction

TBD

TOTAL TOTAL UNITS UNDER CONSTRUCTION

Over 400 4,500+

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Residential Rental Market MEDIAN RENTAL PRICE

Source: Miller Samuel/Douglas Elliman $3,800 $3,700

$3,604

$3,600

$3,475

$3,500 $3,400

According to residential statistics published by Miller Samuel/ Douglas Elliman, median rents across several Manhattan neighborhoods saw a dip across the quarter and year over year. In particular, Lower Manhattan’s median rent, $3,475, saw the greatest decrease across comparable neighborhoods1, decreasing almost five percent over the last quarter and two percent year over year.

$3,400

$3,300

Residential Sales Market

$3,200

$3,197

$3,100 $3,000 1Q-2015

2Q-2015

Lower Manhattan

3Q-2015

Downtown

4Q-2015 East Side

1Q-2016 West Side

AVERAGE SALES PRICE ($) PER SF

Over the past year, the difference in sales pricing trends has grown between Lower Manhattan and comparable residential neighborhoods. The spread has become more apparent in mid-2015 and early 2016, as super luxury, new development projects have closed in other parts of Manhattan. As closing activty begins for high-end projects in Lower Manhattan later this year, trends are expected to see upward growth.

Source: Miller Samuel/Douglas Elliman $2,000 $1,900

$1,891

$1,800 $1,700

$1,716

$1,600

$1,598

$1,500 $1,400

$1,392

$1,300 $1,200 $1,100 $1,000 1Q-2015

2Q-2015

Lower Manhattan

3Q-2015

Downtown

4Q-2015 East Side

1Q-2016 West Side

MEDIAN SALES PRICE

Source: Miller Samuel/Douglas Elliman $1,500,000 $1.4 M

$1,400,000 $1,300,000

$1.2 M

$1,200,000 $1,100,000

$1.1 M

$1,000,000

$980,000

$900,000

The Lower Manhattan sales market volume picked up during the first quarter, with the total number of sales up by 36 percent since last year. However, despite a growth in sales activity and steady pricing, the average price per square foot in the district lagged behind comparable markets. Lower Manhattan’s average price per square foot of $1,392 saw an increase of seven percent year over year. The greatest annual increase in average price per square foot was seen in greater downtown (defined as south of W. 34th Street and E. 42nd to the Battery), showing a $500 price differential between Lower Manhattan and greater Downtown. Median sales prices for Lower Manhattan co-ops and condos saw significant decreases at 18 percent year over year. At $980,000, Lower Manhattan co-ops and condos maintain a 20 percent and 12 percent discount over Manhattan’s east and west sides, respectively. Manhattan-wide, median sales price showed strength over the year, rising 17 percent, to $1.14 million. Lower Manhattan defined as south of Chambers Street to the Battery. Downtown defined as south of W. 34th and E. 42nd Street to the Battery. East Side defined as east of 6th Avenue, between E. 96th and E 42nd Street. West Side defined as west of 6th Avenue, between W. 116th and W. 34th Street. 1

$800,000 1Q-2015 Lower Manhattan

2Q-2015

3Q-2015

Downtown

4Q-2015 East Side

Lower Manhattan Real Estate Market Overview| Q1 2016

1Q-2016 West Side

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MAJOR PROJECTS UPDATE World Trade Center (WTC) 4 World Trade Center The 72-story, 2.3 million-square-foot office tower was completed in November 2013. The building is almost 67 percent leased to MediaMath, PadillaCRT, SNY (SportsNet New York), Silver Suites, IEX, Morningstar, the Port Authority and the City of New York. One World Trade Center The 104-story, 3 million-square-foot office tower opened on November 3rd, 2014. One World Trade Center is currently 67 percent leased. Tenants include Conde Nast, the U.S. General Services Administration, High 5 Games, Moody’s, xAd and Servcorp. In the first quarter, millennial media firm Mic inked a 36,000-squarefoot lease, and bio-tech firm, Progenics Pharmaceuticals, signed for 26,500 square feet on the 47th floor. A financial services firm and two tech companies additionally signed deals to relocate or expand in the tower for a total of 15,500 square feet. Three World Trade Center The 2.5 million-square-foot office tower is scheduled to top out in summer 2016 and to be completed in 2018. At the end of the fourth quarter of 2015, anchor tenant GroupM Worldwide finalized an expansion, adding 170,000 square feet to the existing 520,000 square feet signed in 2014. The tower is currently 28 percent leased.

new park will feature the new $35 million, Santiago Calatravadesigned St. Nicholas Greek Orthodox Church. The church broke ground in late 2014 and is expected to be completed in 2017. Performing Arts Center at the World Trade Center (PAC WTC) The Performing Arts Center at the World Trade Center is making progress in its design and development phase. There will be three theaters holding 200, 300 and 500 people, with potential to be combined to create one theater. Additionally, the TriBeCa Film Festival will also call PAC WTC home upon its completion. The Lower Manhattan Development Corporation (LMDC) recently authorized $10 million in funding for design and engineering services, with half of the funding to come from LMDC and the other half to be raised privately. The site for the PAC WTC is currently occupied by the temporary PATH entrance, which will be demolished later this summer. The project is anticipated to be complete in 2020.

Two World Trade Center After over a year of negotiation between Silverstein Properties and 21st Century Fox and News Corp to anchor 1.3 million square feet, the deal was called off in early 2016. Silverstein will postpone work on the tower until an anchor tenant agrees to lease a substantial portion of the tower. The World Trade Center Transportation Hub The 800,000-square-foot World Trade Center Transportation Hub officially opened to much fanfare in early March 2016, providing underground access to One World Trade Center, 4 World Trade Center, Brookfield Place and the PATH trains. Additional underground access will be become available to Church and Vesey Streets (base of future Tower 2) in May and to Fulton Center via the Dey Street Connector in June. The temporary PATH station will be deconstructed in late summer. Underground connection to the World Trade Center E subway station is anticipated to open at the end of 2016. Westfield’s 365,000-squarefoot retail complex will open in August 2016. Liberty Park The Port Authority’s 1.5-acre park, located on the roof of the World Trade Center Vehicle Security Center (VSC), will be opening around Memorial Day. The Liberty Street Bridge, also opening at the same time on the west side of the park, will connect pedestrians to Brookfield Place in Battery Park City. The eastern side of the

Lower Manhattan Real Estate Market Overview| Q1 2016

World Trade Center Transportation Hub The 800,000-square-foot transit hub, designed by Santiago Calatrava, opened its doors in early March, providing underground access to the WTC towers, Brookfield Place, PATH trains and soon Fulton Center. Westfield’s 365,000-square-foot retail complex within the hub will open in August 2016 with 120 stores and restaurants.

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Water Street Rezoning The Downtown Alliance is working with the Department of City Planning and the Economic Development Corporation on a zoning text amendment which would allow 17 buildings on the Water Street corridor to infill their building’s covered arcade spaces with retail in exchange for specific upgrades to the plaza on their property. Additionally, the text would allow café seating in arcade spaces and public programs in plazas. This zoning change would enhance the street not only by providing retail, but by improving the public amenities in plazas and allowing the street to be activated. The text amendment has been approved by the City Planning Commission and at press time is before the City Council for review.

Resiliency City Investment This spring, the deBlasio administration announced that $100 million in City capital funds would be allocated to coastal resiliency in Lower Manhattan as part of a larger resiliency project funded by the U.S. Department of Housing and Urban Development’s National Disaster Resilience Competition. The money will help build a network of flood walls, berms and deployable flood barriers to protect the southern tip of Manhattan from flooding. The project will extend from the Lower East Side, around the tip of the island, all the way to Battery Park City. Separately, the City set aside nearly $15 million, including $6.75 million from the City and State, for preliminary design and environmental review and another $8 million for first-phase flood protection design and implementation in Battery Park. The City’s Economic Development Corporation plans to begin design work for the Lower Manhattan coastal resiliency initiative later this year. South Ferry station The MTA announced the main entrance to the South Ferry station will close for several months (reopening August 2016), as Sandydamaged equipment is replaced and flood mitigation measures are put into place. During construction, the old South Ferry station will remain operational and accessible from alternative entrances. The construction is part of a $194 million contract to rebuild the South Ferry subway station that was damaged in Hurricane Sandy. The station will receive permanent flood protection measures and become wheelchair accessible and will allow entry and exit for all ten cars along the No. 1 line. Completion is expected in 2017.

Waterfront The Battery The Battery Conservancy will celebrate the opening of The Battery Oval—a monumental public lawn at the Broadway entrance to The Battery—by debuting 300 moveable Battery Chairs and creating a midsummer fair of food and flowers on June 25 and 26. Over the past two decades, The Battery has been designed and rebuilt to serve the modern Downtown—with The Oval as the focal point of gathering. The Battery Midsummer Fair celebrates this progress and showcases our region’s emerging producers of agriculture, horticulture, food, and craft with a shared commitment to biodiversity. Lower Manhattan Real Estate Market Overview| Q1 2016

RESIDENTIAL

MAJOR PROJECTS UPDATE

Seaport District Pier 17 was topped out in early April and will continue construction through 2017. Additional components of the Seaport redevelopment plan include space for the South Street Seaport museum, 3 World Tradea reconstructed Tin Building (relocated away from the Center FDR and out of the floodplain), lighting and pavilions under the FDR and an extension of With in Fulton and Beekman Streets onto Pier 17.financing Plans were suspended for the Building, buildinghowever the a residential tower at the site of theplace, New Market is the scheduled be Street to Howard Hughes Corporation finalized sale of 80 to South completed 2018.a residential China Oceanwide Holdings. The company plans toin develop tower at that site. When completed in late 2017, the new pier and signed revitalized historic area will provide GroupM 365,000 square feetaof retail, dining lease for 515,000 and entertainment.

square feet in the 2.5 Transportation Infrastructure Fulton Center

million-square-foot office tower.

The opening of Fulton Center’s 65,000 square feet of commercial and retail space began in late 2015 and will continue in phases throughout 2016. Westfield is the master leaseholder of the transit center. The transportation hub opened in November of 2014, improving connections between nine subway lines and five subway stations. A total of 300,000 commuters, residents and tourists pass through each day. The last piece of the transit complex, the Dey Street connector, (providing underground passage between Westfield World Trade Center and Fulton Center), is expected to open this summer. Once finished, the underground connection between Fulton Center and Brookfield Place will be complete. Citywide Ferry Service In March, Mayor de Blasio announced the Citywide Ferry Service is on track to launch next year, with the selection of Hornblower as its operator. Hornblower will deliver at least 18 new boats, which will all be equipped with WiFi. In addition to the existing East River Ferry, there will be five new routes, providing a total of 21 landings. Routes to Astoria, South Brooklyn and the Rockaways are anticipated for 2017, while 2018 will see routes added to the Lower East Side and Soundview in the Bronx. All routes will have a stop at Pier 11-Wall Street. One-way tickets will cost $2.75, and 4.6 million trips are projected annually.

World Trade Center Transportation Hub

Courtesy of The Battery Conservancy

The Battery

The Battery Oval, a two-acre lawn, will reopen to the public in June with a 100-vendor marketplace.

Visit www.downtownny.com/research for additional publications on the Lower Manhattan real estate market and economy. Documents include a complete list of residential and hotel developments, available retail spaces, a summary of leasing incentives and other research reports including:

Surging Ahead: Lower Manhattan’s Economic Revival and What It Means For New York, a report on the major advances in Lower Manhattan’s economy expected over the next five years as a result of postSeptember 11th investments and the area’s status as a burgeoning center for some of New York City’s highest value, most dynamic industries; The Brain Gain, 2015 Report, updated report on how the region’s shifting demographics continue to favor the Lower Manhattan Business District. Previously released in 2012, updated data shows an even stronger trend; TAMI Takes Lower Manhattan, a report on the growth of technology, advertising, media, and information companies moving south of Chambers Street; Everything Old is New Again: Conversions of Historic Properties in Lower Manhattan, a report on historic properties preserved through significant investment and changs in use; The Golden Age of Transit in Lower Manhattan, a report released on Fulton Center’s opening, describing how the more than $6.4 billion of transit investments made since 2005 benefit a large and growing labor force; Going to the Head of the Class: The Growth of Higher Education in Lower Manhattan, a report on the growth of higher education in Lower Manhattan; A Surge of Bits and Bytes: The State of Tech and Innovation in Lower Manhattan, a report on Lower Manhattan’s growing technology industry.

Alliance for Downtown New York 120 Broadway Suite 3340 New York, NY 10271 212.566.6700 DowntownNY.com Telephone: 212-835-2787 Email: Research@DowntownNY.com