Jones Lang LaSalle
More small firms going downtown
Take the place of big tenants that have left the area; fabric maker relocates
Published on May 29, 2006
Small companies have invaded lower Manhattan.
According to a new report on downtown, more than 7,850 private-sector firms called downtown home last year, the highest figure since before Sept. 11. The median tenant occupied a little more than 10,000 square feet and employed 27 workers--a 7% and 10% decline, respectively, from 2004.
The numbers reflect the changes in the makeup of lower Manhattan's business community since the Sept. 11 terror attacks. As some large financial services companies have left the area, smaller companies, including many in the nonprofit, professional services and legal sectors, have moved in.
"The tenants that drive the market right now are smaller and more diversified," says Eric Deutsch, president of the Alliance for Downtown, a business advocacy group that released the annual report last week.
Of course, the trend toward smaller tenants could pose a problem for new office developments, such as 7 World Trade Center, that have large blocks of space to fill. The 52-story tower, which officially opened last week, has leased 270,000 square feet and has another 1.43 million square feet available.
Downtown has also been transformed by a rash of residential conversions, which have forced companies to relocate and contributed to a reduction in jobs, the report found.
The area lost 11,000 private-sector jobs in 2005, bringing the total number of existing jobs in the area to 212,000, according to the report. At the same time, roughly 3 million square feet of office space was converted to residential use, reducing total office space downtown to between 85 million and 90 million square feet.
The redevelopment of Ground Zero and the ongoing attempts to lure businesses downtown could help to counter this trend.
"Since downtown employment has remained proportional to available inventory, commercial development is needed to continue to attract these new businesses and grow the workforce," wrote Mr. Deutsch in the report.
Some factors point to an improving market. The vacancy rate has fallen to its lowest point since Sept. 11--10.6% in the fourth quarter of last year, compared with 13.7% a year earlier. What's more, retail real estate is booming, with average asking rents surging to $85 a square foot in the fourth quarter of 2005 from $73 the year before. This 16% increase far outpaces the 5% hike in retail rents across Manhattan as a whole.
"The big picture here is that the market is getting healthier, with the employment, tourism, transportation and retail sectors all showing marked signs of improvement," Mr. Deutsch says.
--Julie Satow
More small firms going downtown
Take the place of big tenants that have left the area; fabric maker relocates
Published on May 29, 2006
Small companies have invaded lower Manhattan.
According to a new report on downtown, more than 7,850 private-sector firms called downtown home last year, the highest figure since before Sept. 11. The median tenant occupied a little more than 10,000 square feet and employed 27 workers--a 7% and 10% decline, respectively, from 2004.
The numbers reflect the changes in the makeup of lower Manhattan's business community since the Sept. 11 terror attacks. As some large financial services companies have left the area, smaller companies, including many in the nonprofit, professional services and legal sectors, have moved in.
"The tenants that drive the market right now are smaller and more diversified," says Eric Deutsch, president of the Alliance for Downtown, a business advocacy group that released the annual report last week.
Of course, the trend toward smaller tenants could pose a problem for new office developments, such as 7 World Trade Center, that have large blocks of space to fill. The 52-story tower, which officially opened last week, has leased 270,000 square feet and has another 1.43 million square feet available.
Downtown has also been transformed by a rash of residential conversions, which have forced companies to relocate and contributed to a reduction in jobs, the report found.
The area lost 11,000 private-sector jobs in 2005, bringing the total number of existing jobs in the area to 212,000, according to the report. At the same time, roughly 3 million square feet of office space was converted to residential use, reducing total office space downtown to between 85 million and 90 million square feet.
The redevelopment of Ground Zero and the ongoing attempts to lure businesses downtown could help to counter this trend.
"Since downtown employment has remained proportional to available inventory, commercial development is needed to continue to attract these new businesses and grow the workforce," wrote Mr. Deutsch in the report.
Some factors point to an improving market. The vacancy rate has fallen to its lowest point since Sept. 11--10.6% in the fourth quarter of last year, compared with 13.7% a year earlier. What's more, retail real estate is booming, with average asking rents surging to $85 a square foot in the fourth quarter of 2005 from $73 the year before. This 16% increase far outpaces the 5% hike in retail rents across Manhattan as a whole.
"The big picture here is that the market is getting healthier, with the employment, tourism, transportation and retail sectors all showing marked signs of improvement," Mr. Deutsch says.
--Julie Satow
posted by Jones Lang LaSalle NJ News Blog at 9:34 AM
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