Downtown New York remains financial capital of the world. A new report released by Jones Lang LaSalle demonstrates that five years after the events of Sept. 11, 2001, Lower Manhattan remains the financial capital. A wide variety of data underscores the fact that Downtown New York has achieved a level of performance few expected even nine months ago.
"Lower Manhattan has surpassed nearly everyone's expectations in just how quickly and thoroughly the submarket has regained its vitality," said Peter Riguardi, president of Jones Lang LaSalle's New York office. "Viewed from any angle rental rates, availability rates, leasing activity, and residential and retail growth Downtown remains a vital central business district."
In fact, there are so many businesses looking for space in Lower Manhattan that the submarket may soon see its overall availability rate fall below 10 percent for the first time since the second quarter of 2001. There are four large leases, totalling 120 thousand square metres of Downtown office space, nearing completion. If these deals close as expected, Lower Manhattan's overall availability rate will decline to 10.3%, putting a single-digit overall availability rate within reach by the end of the year.
The Jones Lang LaSalle report, "Lower Manhattan Five Years Later: The Impact of September 11," reviews the status of Lower Manhattan five years after the terrorist attacks, comparing details on the submarket at crucial points in time: the second quarter of 2001, a few months prior to Sept. 11, 2001; the first quarter of 2005, the low point of the downturn in the real estate market; and the second quarter of 2006.
Several dynamics underscore the ongoing strength of Lower Manhattan. The city of New York experienced job growth in the second quarter of 2006 that significantly surpassed the national average. New York's employment growth of 1.3% was twice the 0.6% growth rate posted nationally. This expansion has been broad-based, cutting across all industries and neighbourhoods, including Lower Manhattan, which saw its first significant increase in job growth since Sept. 11, 2001.
The lack of available space and the high rents in the tight Midtown market have caused increasing numbers of businesses to consider locating in Lower Manhattan. Space users have also begun to take a second look at the area following a number of high-profile tenants that have already leased Downtown office space.
Downtown posted an overall availability rate of 11.3% in the second quarter of 2006. Class A space also recorded an availability rate of 11.3%. Just 18 months earlier, the submarket posted an overall availability rate of 13%, and a Class A availability rate of 12.6%. While this change may appear small, the improvement is especially significant considering that the rates were somewhat skewed by the fact that the 180 thousand square metres 7 World Trade Center was added to the submarket's office inventory in the second quarter of 2006.
Building owners have taken advantage of Downtown's rising fundamentals by significantly raising rents. Lower Manhattan recorded overall average asking rental rates of $393 per square meter in the second quarter of 2006, an increase of $75 per square meter from rents seen in the first quarter of 2005. Downtown Class A office space posted an average asking rental rate of $465 per square meter, an increase of $91 per square meter from rates seen in the first quarter of 2005.
Source: Jones Lang LaSalle