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TAMI, Government Sectors Pace Lower Manhattan Office Market

Source: Jones Lang LaSalle Source: Jones Lang LaSalle

NEW YORK CITY—The level of office leasing activity in Lower Manhattan has risen by a heady 51% in the first half of this year. The increase in lease deals is due primarily to expansions by TAMI (Technology, Advertising, Media and Information) and the government sectors.

Lower Manhattan’s office vacancy rate has fallen to 8.9%, the lowest level since the beginning of 2013, according to a report released by the Alliance for Downtown New York. Leasing activity in the first six months of this year reached 3.07 million square feet, more than 1 million square feet more than the 2.03 million square feet posted at the same time last year and the highest volume posted since the first six months of 2014. In fact, activity so far this year is just a little bit shy of the 3.36 million square feet of office space leased for all of 2016, according to figures supplied by brokerage firm CBRE. Leasing activity in the first half of 2013 totaled 2.46 million square feet, 3.52 million square feet in 2014, and 2.01 million square feet in 2015.

Leasing activity in Lower Manhattan totaled 1.87 million square feet in the first quarter of this year and 1.20 million square feet in the second quarter.

The largest deal in the second quarter of this year was the New York City Human Resources Administration’s relocation deal of 216,000 square feet at 375 Pearl St. Spotify’s 103,020-square-foot expansion at 4 World Trade Center came in second, while Business Insider’s 88,050-square-foot relocation lease deal at 1 Liberty Place placed third for the first six months of this year. The HRA lease deal follows up the first quarter lease deal of 345,000 square feet at 28 Liberty by the New York State Attorney General’s office. The TAMI sector is showing continued strength as Macmillan Publisher’s lease of 261,000 square feet at 120 Broadway started the third quarter in Lower Manhattan on a very positive note.

The TAMI and government sectors combined for 51% of new leasing activity in Lower Manhattan in the first six months of this year, according to brokerage firm JLL.

“Lower Manhattan is a picture of progress. We had another great quarter with staggering growth in the presence of tech and creative companies,” says Downtown Alliance president Jessica Lappin. “From long-standing tenants who are recommitting, to new companies who are diversifying the neighborhood’s economy, it’s evident that Lower Manhattan has become the place to be.”

Other key takeaways from the Alliance for Downtown New York included:

• Six lease deals of more than 100,000 square feet have been signed so far this year in Lower Manhattan.

• The Class A vacancy rate in Lower Manhattan fell 2.3 percentage points from the end of 2016 to the current rate of 10.3%.

• Midtown South’s office vacancy rate was 7.5% at the end of the second quarter, while Midtown stood at 9.8%.

• The overall office asking rents in Lower Manhattan at the midpoint of 2017 were $58.80-a-square-foot. Asking rents were $69.70-a-square-foot in Midtown South and in Midtown the overall rent was $77.60-a-square-foot.

The Alliance for Downtown New York states in the report that Lower Manhattan is the 15th tightest submarket nationwide, just behind Midtown South, but higher than competing tech and creative markets such as San Francisco and Austin, TX.

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