Retail, Residential, and Commercial Space All Face Local Headwinds
Multiple Lower Manhattan property markets continue to show post-pandemic lethargy, according to an analysis by the Downtown Alliance. The Lower Manhattan Real Estate Market Report for the first quarter of 2023 notes that the malaise is most prominent in the office sector, where half a million square feet of new leasing in the first three months of this year represented the second consecutive quarter in which leasing activity declined and the lowest quarterly total since the first quarter of 2021. New office leases are now 36 percent off from the fourth quarter of 2022, and remain 51 percent below the five-year quarterly average. For comparison, the Midtown office market (with which Lower Manhattan is often compared) is down only two percent from the final three months of last year, and is running just 31 percent behind its five-year quarterly average, according to the Alliance report. “Lower Manhattan’s vacancy rate remains the highest in Manhattan,” the analysis notes. The dearth of office tenants may add impetus to a local trend that appears to be gathering momentum: the conversion of erstwhile commercial towers into residential buildings.
“Macroeconomic uncertainty continues to affect the recovery of the office market, which has not just manifested in Lower Manhattan but in each of the office markets across Manhattan,” reflects Alliance president Jessica Lappin. “There is good news in that we are seeing positive indicators in other sectors like hospitality, tourism, and the residential housing market.”
On the residential front, Lower Manhattan’s median rent fell by almost nine percent in the first quarter of this year, although at $4,225 it remains close to the all-time record (of $4,634) set in the final quarter of last year and is still nearly six percent higher than before the Covid pandemic. The Alliance report notes, “the first quarter saw an increase in leasing discounts for the first time in a year, and available units sat on the market an average of 22 days longer than in the previous quarter, suggesting that rents may have reached a plateau in the higher end of the market.” This shift came against the backdrop of median rent for Manhattan as a whole reaching a new record high of $4,100, which is 2.5 percent above the last quarter of 2022, and nearly 17 percent higher than pre-pandemic levels.
For the condominium market, Lower Manhattan median sales prices declined to $1.19 million, down more than five percent from the same period one year ago, and more than 42 percent below the record high seen at the end of 2022. At the same time, sales volume rose almost 16 percent relative to the last three months of 2022, but dropped by more than 27 percent from the same period last year.
But residential development in Lower Manhattan continues to proceed apace. More than 5,700 new apartments are currently under construction or in the planning phases, spread across 18 local buildings, the Alliance report notes. This will represent a 17 percent increase over the existing inventory of 34,243 residential units Downtown.
Local retail also remains sluggish. A total of 14 new stores opened in the first quarter, while 25 closed during the same period. In an encouraging development, however, the Alliance notes that another 16 establishments made announcements during the first quarter of plans to open in the near future. Among these are two quondam stalwarts, slated to returned to the local streetscape: Century 21 and Delmonico’s restaurant.