Lower Manhattan Real Estate Q3 2019

Small and Mid-Size Leasing Drives Strong Third Quarter in Lower Manhattan

Deals for spaces less than 100,000 sq. ft. in Lower Manhattan in the third quarter accounted for approximately 70% of leasing activity. Small-lease deals (less than 25,000 sq. ft.) represented 30% of all new activity. Large deals (100,000+ sq. ft.) at 3 World Trade Center and 55 Water Street were among the top three leases signed, but only accounted for 30% of leasing activity. Activity among TAMI tenants, retail trade and fl exible space providers continued to diversify the district beyond fi nancial services and government.

Strong leasing momentum in Lower Manhattan continued into the third quarter with 1.81 million sq. ft. of new offi ce deals inked. Bolstered by relocations into the market, leasing activity was 38% above the fi ve-year quarterly average. With 5.61 million sq. ft. leased so far this year, this is the highest year-to-date leasing total since 2000, according to CBRE. Leasing during the past three quarters has already surpassed 2018’s year-end total.

Relocations represented 37% of quarterly leasing activity in Lower Manhattan. Of those relocations, more than half were TAMI (Technology, Advertising, Media and Information) tenants. The two largest relocations were from Midtown, while the remaining will migrate from Midtown South as that market sees record-setting rents and lack of quality space.

Midtown Manhattan saw below-average leasing with activity 32% behind the fi ve-year quarterly average — the third consecutive quarter in which the submarket trailed this benchmark. In addition to slow leasing, 12 blocks of space larger than 100,000 sq. ft. became available in the Midtown market. Activity is expected to pick up as several large leases for nearly 3 million sq. ft. are anticipated to close in the coming quarters. Midtown South surged to its highest quarterly total on record, eclipsing the fi ve-year quarterly average by 81%. The resurgence was driven by Google’s 1.3 million sq. ft. lease at 550 Washington Street, which will be part of its $1 billion new Hudson Square campus.

Strong Leasing Continues at World Trade Center The World Trade Center campus continues to drive Lower Manhattan’s leasing success. The new, high-quality offi ce space is particularly attractive to growing companies that are either priced out of other submarkets or in need of modern infrastructure. Three of the top fi ve leases signed during the third quarter were at 3 and 4 World Trade Center (WTC), while another fi ve were signed across One, 3 and 7 WTC.

highest year-to-date leasing total since 2000 5.61 Million Square Feet

A 102,000-square-foot, 17-fl oor, 499-bed (225-unit) student housing building at 55 John Street was sold by Tessler Developments to Education Housing Services (EHS) for $101 million. EHS, which typically manages student housing on behalf of landlords, had been the sublandlord at the building prior to buying it outright.

The sale of 7 Hanover Square from Guardian Life Insurance Company to GFP Real Estate, the Northwind Group and TPG Real Estate Partners offi cially closed. The deal was announced in January 2019. The 846,415-square-foot offi ce building was purchased for $308 million. Guardian Life, which has been a tenant in the property since 1998, is relocating to Hudson Yards. • The building is now undergoing a $250 million modernization and renovation. The new owners are turning the building into two separate portions with addresses at 50 Water Street (building’s base) and 100 Pearl Street (top fl oors). In addition, plans are also in the works to add retail at the base, including a possible food hall. • The owners have already leased nearly 527,000 sq. ft. of offi ce space at 50 Water Street to NYC Health + Hospitals, the largest deal recorded in Q1 2019.

New Openings and Announcements

In the Seaport District, Bar Wayō, a Japanese bar and restaurant by David Chang, and Malibu Farm, a healthy California-based eatery, opened on Pier 17. McNally Jackson Books and Alexis Bittar opened on Fulton Street. A new restaurant by Andrew Carmellini is expected to open later this year on Pier 17.

At Brookfi eld Place, M.M.LaFleur, a women’s boutique, and Pink, a men’s shirt store, opened. Convene will open its 73,000 sq. ft. meeting and events space in early November; For Five Cafe will also open within the space. Later this year, Clean Market, a wellness-oriented store, and Sant Ambroeus, the chic Italian restaurant, will open. Shakespeare & Co., an independent bookstore, anticipates an early 2020 opening.

Westfi eld World Trade Center welcomed new retailers to the complex, including Brooklyn Bleu and Michele Lopriore. More food options are on the horizon with Just Baked, Doughnut Plant and Taco Dumbo in the near future.

Thirty-six new retailers opened in Lower Manhattan in the third quarter, including: • Chikarashi Isso, a Japanese restaurant, at 38 Rector Street; • Gnoccheria, an Italian restaurant and bar, at 100 Broad Street; • Revolution Cantina at 53 Stone Street; • fast casual eateries Cava and &Pizza at 63 Wall Street, Los Tacos No. 1 at 136 Church Street and Blue Bottle Coffee soon at 20 Broad Street; • Blo Blow Dry Bar at 105 Nassau Street and City MD at 20 Broad Street.

Photo by Gary He for Eater

Bar Wayō, a Japanese bar and restaurant by David Chang, opened on Pier 17 in the Seaport District.

Photo by Liz Clayman for Malibu Farm

Malibu Farm, a healthy Californiabased eatery, opened on Pier 17 in the Seaport District.

Courtesy of Chikarashi Isso

MAJOR PROJECTS UPDATE

World Trade Center The Ronald O. Perelman Performing Arts Center (The Perelman Center) Construction continues at the World Trade Center on the Ronald O. Perelman Center for Performing Arts, known as The Perelman Center. The center has raised 84% of its expected $390 million construction cost. The approximately 110,000-square-foot, cube-shaped building will feature three theaters which can be combined in various seating confi gurations for an array of unique performance spaces. The project anticipates completion in late 2021.

Site 5 The Port Authority of New York and New Jersey and the Lower Manhattan Development Corporation (LMDC) recently released an RFP for 5 World Trade Center (aka Site 5 or Albany Plaza). Responses were required by end of September 2019. The parcel can accommodate a 900-foot tower with 1.3 million sq. ft. of commercial or mixed-use development. The square footage could be used for an offi ce tower, or an 800-key hotel, up to 150,000 sq. ft. of convention space and up to 45,000 sq. ft. of retail. The Port Authority and LMDC are also considering residential uses for the site.

3 World Trade Center Transit Lobby The 3 World Trade Center transit lobby opened in September, which will provide employees of the offi ce tower and the public another access point for PATH, subways and the Westfi eld shopping complex.

76 Trinity Place Trinity Real Estate’s 74 Trinity Place, a 26-story, 310,000-square-foot offi ce building, is wrapping up construction. The bottom fi ve fl oors will be for community use, fl oors six through eight will be used for Trinity Church’s offi ces (their move-in date is slated for this spring) and the remaining 17 fl oors will be rentable offi ce space. The existing pedestrian bridge across Trinity Place will eventually reconnect to Trinity Church.

Infrastructure

Robert R. Douglass Pedestrian Bridge

The Robert R. Douglass pedestrian bridge (formerly known as the West Thames Street pedestrian bridge), which began construction in 2017, has opened to the public. Spanning over West Street, the 230-foot bridge opens onto a new, privately-owned public plaza at 50 West Street. The structure replaces the Rector Street pedestrian bridge, which will be deconstructed in the near future.

The Robert R. Douglass pedestrian bridge opened. The bridge spans over West Street and opens onto a new, privately-owned public plaza at 50 West Street. The structure replaces the Rector Street pedestrian bridge.

Photo by World Trade Center

The 3 WTC transit lobby opened, giving workers and the public another access point for PATH, subways and the Westfi eld shopping complex.