Rents Spike While Condo Sales Lag and Office Vacancies are in Near-Record Territory
The annual Real Estate Year in Review report from the Downtown Alliance offers a farrago of indicators for local property markets. The analysis notes that rents for apartments soared in 2023 to a record median of $4,768 (15.6 percent higher than they were in late 2019, prior to the Covid pandemic), before tapering to $4,612 in the fourth quarter.
Prospective homebuyers “have been forced back into the rental market as interest rates have increased over the course of the year,” the report says, “which helps to explain the relatively low sales volume and prices.” In the market for condominium and cooperative apartments, “Lower Manhattan ended the year with a $1.17 million median sales price, 43.6 percent below last year’s median.” A total of 303 units were sold during 2023, which represents a 13.4 percent decline from 2022 and a 41.73 retrenchment from 2021.
Lower Manhattan currently has 34,831 residential units in 346 buildings, the Alliance documents, with another 5,188 apartments under construction or planned for development in 16 buildings. Of these, 56 percent are intended to be rentals and 44 percent are slated to be condos.
The office sector in Lower Manhattan continues to exhibit acute distress. Leasing activity for the year totaled 2.83 million square feet, “a decline of 9.1 percent compared to 2022 and 22 percent below the five-year average,” the report notes, adding, “this reverses a two-year trend of post-pandemic leasing growth in the area.”
The total amount of office space leased for the year is dwarfed by the square footage that remains vacant. The Alliance report notes that ten largest blocks of unrented office space total almost five million square feet. This tabulation does not include empty office buildings that have given up trying to rent space, such as the vacant tower at 111 Wall Street, which contains one million square feet and went into foreclosure last summer after a $100-million renovation. Adding this parcel to the previous total means that there are at least six million square feet of empty offices in Lower Manhattan, or the equivalent of more than two Empire State Buildings.
For Downtown as a whole, office vacancies are in near-record territory, at 23.7 percent of square footage. This ties with Midtown South, and is slightly worse than Midtown (which is struggling with a 22.3 percent office vacancy rate), in spite of the fact that Lower Manhattan rents, at $55.74 per square foot, are almost 30 percent cheaper than either of the other markets.
More encouragingly, the local economy continues to recover from the Covid pandemic, as indicated by multiple yardsticks. The Alliance report notes that 81 retails businesses opened in Lower Manhattan last year, almost double the 42 that closed. Other upbeat metrics include pedestrian counts (up by 7.85 percent), return-to-office tallies (reaching a midweek high of 71.5 percent of pre-Covid occupancy in the fourth quarter), and hotel occupancy (peaking at 85 percent in the fourth quarter). Local hotels also posted their highest-ever average daily room rate (of $345) in the fourth quarter of last year.
“While office leasing continues to face headwinds, there are many signs for optimism,” Downtown Alliance president Jessica Lappin said. “Visitors are back filling up hotel rooms, workers are returning to their offices at rates not seen since the pandemic and more New Yorkers than ever are making Lower Manhattan their residential neighborhood of choice, which is reflected by our steadily increasing population and diversifying dining and entertainment options.”
When it’s not parsing local real-estate trends, the mission of the Downtown Alliance is to enhance Lower Manhattan for businesses, residents and visitors. In furtherance of these goals, the Alliance not only operates the local Business Improvement District, but also provides local security and trash pickup. Among the services provided by the Alliance that Lower Manhattan residents especially prize is the Downtown Connection shuttle, which ferries passengers free of charge between more than 30 local stops that link residential areas with business and shopping districts, as part of a partnership with the Battery Park City Authority. The Alliance and its sister organization, the Downtown-Lower Manhattan Association, also produce research, information, and advocacy designed to brand Lower Manhattan as a global model of a 21st century central business district.