GLOBAL RESEARCH AND CONSULTING

Downtown Manhattan | 2014

A Market Transformed

January 2014

Historically known as Manhattans financial district, Downtown

Manhattan is now a thriving mixed-used market and a highly
desirable place to live. The area offers todays workforce
what it wants: an amenity-rich urban setting with access to
public transportation and a sense of community. The arrival
of Downtown is reaching its tipping pointled by significant
new office, residential, hotel, retail and transportation development. Although the feeling of old New York persists, the
transition has long-term implications for the office leasing
and investment markets, as well as the retail, residential and
hotel markets. Downtown remains a value proposition, and is
now also a place people want to be.
The Manhattan office markets center of gravity has shifted.
The growing technology and creative sectors exhibited a
decided preference for the unique space that fits their culture
in Midtown South. Rezoning initiatives opened up the area
around the Hudson Rail Yards for development of an office
district on the West Side. And companies from a wide range
of industries, as well as new residents, are discovering opportunities further south.

CHANGING DEMOGRAPHICS
The face of Downtown has changed; where previously bankers and lawyers working in the area represented the majority,
families and millennials now proliferate. From 2000 to 2013,
the residential population more than doubled, growing from
24,600 to 53,200. Children increased from 11% of the
population to 14%, while the 25 to 34 age group increased
from 27% to 32%. This labor pool is also highly educated, as
79% of adult residents have attained a bachelors degree or
higher, more than the overall New York City level of 33% and
the U.S. level of 28%.1
Downtown: Did You Know?

Click above to watch Pamela Murphy, Senior Vice President, Global

Research, discuss the diversification of Downtowns tenant base,
its transformation to a 24/7 environment, and forward-looking
transportation and construction projects unfolding in the near term.

Figure 1: Key Demographics

2000

2013

Population

24,600

53,200

Median Age

33.6

32.7

Ages 17 and Under

2,700 (11%)

7,300 (14%)

Ages 18-24

3,900 (16%)

6,000 (11%)

Ages 25-34

6,600 (27%)

17,100 (32%)

Ages 35-64

9,600 (39%)

19,500 (37%)

Ages 65 and Over

1,800 (7%)

3,300 (6%)

Downtown Manhattan | 2014: A Market Transformed

INTRODUCTION

Source: CBRE Research, Claritas, Q4 2013.

Figure 2: Education Level Among Adult

Population Over 25 Years

83 Million Sq. Ft. of Office Space

Source: CBRE Research.

According to the Downtown Alliances Brain Gain Report,

from 2000 to 2010 there was a 31.6% increase in residents
employed in creative and professional industries ages 18-44
living within 30 minutes of Downtown. These demographic
changes give companies a larger and more diverse talent
pool than Lower Manhattan had to offer in the past.

Bachelors Degree or Higher

Downtown

79%

Manhattan

58%

New York City

33%

United States

28%

Source: CBRE Research, Claritas, Q4 2013.

2014, CBRE, Inc.

January 2014

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Year Built

Size (MSF)

Avail. (MSF)

225 Liberty Street

1987

2.7

1.4

4 World Trade Center

2013

2.3

1.0

180 Maiden Lane

1984

1.1

0.8

250 Vesey Street

1986

1.9

0.6

85 Broad Street

1983

1.0

0.6

199 Water Street

1984

1.1

0.3

32 Old Slip

1987

1.1

0.3

200 Liberty Street

1986

1.6

0.2

1 World Trade Center

2014*

3.0

1.3

3 World Trade Center

2017*

2.5

2.0

2 World Trade Center

TBD**

2.8

2.8

Source: CBRE Research, Q4 2013.

MODERN OFFICE PRODUCT

Newer buildings generally offer better infrastructure design (mechanical, electrical and telecom/data), resulting in more energyefficent space and reduced construction costs, and Downtown
offers an abundance of new office space. There is currently 26.3
million sq. ft. of office product built after 1980 in the Downtown
market, including 5.5 million sq. ft. of available space. There
are also eight buildings built after 1980, each with more than
100,000 sq. ft. of space available. In addition to space already
on the market, there is an additional 5.5 million sq. ft. of combined office space under construction at 1 and 3 World Trade

Figure 4: Building Age

Average Building Age (Years)

*Under Construction **Proposed

Manhattan

60.4

Midtown

54.3

Midtown South

87.9

Downtown

53.8

Downtown West

18.3

Downtown Manhattan | 2014: A Market Transformed

Figure 3: Downtown Large Blocks of Space

in Post-1980 Buildings

Source: CBRE Research, Q4 2013.

Figure 5: Manhattan Rent Growth

Manhattan
Midtown

Average Asking Rent by Market ($ Per Sq. Ft.)

Midtown South
Downtown

$95

$80

$65

$50

$35

$20
03

04

05

06

07

08

09

10

11

12

13

Source: CBRE Research, January 1, 2014.

2014, CBRE, Inc.

January 2014

Page 3

+36%
More Costly
+28%
More Costly

$6.5
Million

$4.6
Million
Downtown

$7.3
Million

Center, representing more than 70% of the total office construction activity in Manhattan. 2 World Trade Center will bring an additional 2.8 million sq. ft. of modern office space to the market.
The weighted average office building age in Manhattan is 60.4
years. In contrast, the average age Downtown is 53.8 years,
compared to 54.3 for Midtown and 87.9 for Midtown South. The
Downtown West submarket (formerly the World Trade Center/
World Financial Center) average age is 18.3 years, the youngest
in Manhattanmeaning Downtown will have modern buildings
to offer tenants for years to come.

VALUE OF OFFICE PRODUCT

Midtown
South

Midtown

Source: CBRE Research, Q4 2013.

Although Downtown properties are now able to compete

on more than just price, value remains a benefit in relocating. As of January 1, 2014, the average asking rent for the
Downtown market was $46.47 per sq. ft. 36% lower than
Midtown ($72.85 per sq. ft.) and 28% lower than Midtown

Downtown Manhattan | 2014: A Market Transformed

Figure 6: Average Cost of 10-Year Lease

for 10,000 Sq. Ft.

Figure 7: Lower Manhattan Leasing and Financial Incentives

Program

Benefit

Eligibility

$2.50 per sq. ft. real estate tax abatement for

Pre-1975 building, south of Murray Street; tenant

up to five years

must meet required improvement expenditures

Exemption or reduction in commercial rent

Tenant with annual rent payment over

tax payment for up to five years

$200,000, located south of Canal Street

Reduced energy costs for up to 12 years

Building must be improved by owner or devel-

Commercial Revitalization
Program (CRP)
Real Estate Tax Abatement

Commercial Rent Tax

Special Reduction
Lower Manhattan Energy
Program (LMEP)

Industrial & Commercial

Abatement Program (ICAP)

Lower Manhattan Relocation

Employment Assistance
Program (LM-REAP)

Sales Tax Exemption

Job Creation and Retention
Program (JCRP)

oper and be located south of Murray Street

Property tax abatement for new or improved

Renovated, constructed, or rehabilitated building

commercial or industrial buildings for up to

that meets required expenditure level

25 years
$3,000 tax credit per employee per year for

At least one employee must be moved from a

tenants that move to Downtown from outside

location outside NYC, improvement expendi-

of NYC

tures must be met

Exemption from sales tax on goods purchased

Building must be located south of Murray Street

for build-out of space

with a 10-year lease

Discretionary grants based on the number of

Commitment to retain 200 jobs or create 75

new or retained full-time jobs

new jobs (new to NYC) south of Canal Street

Source: Downtown Alliance, Q4 2013.

2014, CBRE, Inc.

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17 Institutions of Higher Learning

Source: Downtown Alliance.

South ($64.58 per sq. ft.). Based on a 10,000-sq.-ft. lease

over a 10-year term, this average value represents $2.6 million savings compared to Midtown and a $1.8 million savings
compared to Midtown South.

LOWER MANHATTAN LEASING AND

FINANCIAL INCENTIVES
Incentive programs may be available for businesses that
relocate to Lower Manhattan. These programs include the
Commercial Rent Tax Special Reduction, the Lower Manhattan
Relocation Employment Assistance Program (LM-REAP) and
the Lower Manhattan Energy Program (LMEP). Although in
July 2013, a bill to extend certain incentives was not signed
into law by the State Legislature, sources familiar with the
programs expect the expiring incentives to be extended when
the legislature reconvenes in 2014.

Traditionally known for its tenant base of Financial, Insurance

and Real Estate (FIRE) companies, the market is now more
diverse. In 2005, 57% of Downtown office space was occupied by FIRE tenants. In 2014, that share decreased to 45%,
while media, technology, nonprofit and education tenants
increased their footprint during that time.
There have been 5.7 million sq. ft. of relocations to
Downtown since 2011. Major relocations from other areas
in Manhattan include the 1.2-million-sq.-ft. Cond Nast
lease signing at 1 World Trade Center, the effects of which
are being felt on the market in ways that echo Cond Nasts
1998 lease signing in Times Squarewhich served as a
catalyst for transforming the tenant mix in that area. Also,
GroupM has signed a 516,000-sq.-ft. deal in 3 World Trade
Center, allowing Silverstein Properties to move forward on
construction. Other notable non-FIRE relocations include
HarperCollins Publishers at 195 Broadway and Nielsen
Media Research at 85 Broad Street. Brookfield Office
Properties repositioning of the World Financial Center as
Brookfield Place has also played a role in increasing tenant

Downtown Manhattan | 2014: A Market Transformed

INCREASED TENANT DIVERSITY

Downtown: Did You Know?

Figure 8: Tenant Diversity | Percentage of Occupied Sq. Ft. by Industry

3%
1%

FIRE

Media

Education

Technology

Healthcare

Professional

Government

Nonprofit

Transportation

Other

2%
2%3%
3%

5%

3%
2%2%

5%
3%

14%

2005

2014
57%

3%

12%

45%

16%

5%
14%

Source: CBRE Research, Q4 2013.

2014, CBRE, Inc.

January 2014

Page 5

Tenant

Industry

Building

Moved From

Cond Nast

Publishing

1 World Trade Center

4 Times Square

Sq. Ft.
1,268,132

and 222 Broadway

GroupM

Advertising

3 World Trade Center

498 Seventh Avenue

516,000

Jones Day

Law

250 Vesey Street

222 East 41st Street

330,210

WilmerHale

Law

7 World Trade Center

399 Park Avenue

210,841

HarperCollins Publishers

Publishing

195 Broadway

10 East 53rd Street

180,748

The College Board

Education

250 Vesey Street

45 Columbus Avenue

145,446

Nielsen Media Research

Media

85 Broad Street

770 Broadway

130,693

American Media Inc.

Publishing

4 New York Plaza

1 Park Avenue

99,054

Arup

Engineering

77 Water Street

155 Avenue of the Americas

97,412

Droga5

Advertising

120 Wall Street

400 Lafayette Street

91,442

GfK

Consulting

200 Liberty Street

75 Ninth Avenue

75,020

New York Film Academy

Education

17 Battery Place South

568 Broadway

73,321

Downtown Manhattan | 2014: A Market Transformed

Figure 9: Select Non-FIRE Tenants Relocating Downtown

Source: CBRE Research, Q4 2013.

infrastructure improvements mean that Lower Manhattans

fiber-optic lines have been significantly upgraded.

Downtown: Did You Know?

$118,936 Median
Household Income
Source: CBRE Research, Claritas.

diversity, with Jones Day, The College Board, GfK and

Institute of Culinary Education already signed on to relocate.

TECH INDUSTRY DYNAMICS

The support of the tech industry has played a role in reshaping
the face of the office market Downtown. Incubator and coworking spaces are abundant, led by Regus, WeWork and the
Hive at 55. LaunchLM, developed by the Downtown Alliance,
fosters the tech community by bringing together innovators in
the area, while Hire + Expand in Lower Manhattan (H.E.L.M.)
awards cash grants to companies seeking to open an office
or expand. Programs such as these have been successful
in attracting tenants to Downtown Manhattan. Also, recent

Several prominent tech industry firms have made the move to

Downtown in 2013. Epsilon, a digital marketing company,
relocated to 199 Water Street from Midtown South, signing
a 34,800-sq.-ft. deal. Epiq Systems expanded into 21,800
sq. ft. in 88 Pine Street, and later subleased an additional
49,500 sq. ft. at 4 New York Plaza. Since 2011, there have
been 20 significant tech relocations. Signings such as these
have led the tech migration Downtown, suggesting many
more will follow.

INCREASED INVESTOR ACTIVITY

Downtowns energy has also invigorated investor interest. As
in the past, investors seeking Manhattan trophy properties
looked to Downtown for value. There are also more options to
purchase full interest in office properties Downtown, whereas
in Midtown most trophy investment options are for minority
interest only. Foreign investors that may have been unlikely to

2014, CBRE, Inc.

January 2014

Page 6

More than $3 Billion in Office

Sales Volume in 2013
Source: CBRE Research.

consider Downtown previously are tied to significant property

investments in the area, such as 1 Chase Manhattan Plaza.
Interest in office properties along William Street has been
especially vibrant, with several buildings on the market or with
recent or pending sales, including: 100 William Street, 110
William Street, 123 William Street and 156 William Street.
Not only have these buildings returned to a value where
investors feel comfortable putting them on the market, but
the soon-to-be-completed Fulton Street Transit Center nearby
also adds long-term value potential.
Residential and hotel investment property segments are also
gaining traction. More than 17 million sq. ft. of office space
has been converted to other property types since 1995, which
has helped to transform the community and benefit the office
market by increasing the labor pool. Many buildings along
Wall Street formerly occupied by FIRE tenants have been

converted, including 37 Wall Street, 45 Wall Street, 55 Wall

Street and 75 Wall Street. The former world headquarters
for AIG, 70 Pine Street, will be converted into ultra-luxury
rental apartments. Further transformation of Downtown as a
mixed-use community will increase investor activity in these
secondary property types and possibly lead to additional
conversions, since new development capacity is limited.

RESIDENTIAL DEVELOPMENT
The arrival of new residents to Lower Manhattan has supported speculative development, with eight buildings comprising
1,600 total units under construction at the end 2013, according to the Downtown Alliance. The Alliance also reports that
in 1990, there were only 7,400 units in Lower Manhattan,
a number that has grown to 30,500 in 2013. They project
32,000 residential units Downtown by 2015, with an additional 1,100 units planned for future development.2

Downtown Manhattan | 2014: A Market Transformed

MORE THAN 17 MILLION

SQ. FT. OF OFFICE SPACE HAS
BEEN CONVERTED TO OTHER
PROPERTY TYPES SINCE 1995

Downtown: Did You Know?

Figure 10: Select 2013 Downtown Office Sales Transactions

Building

Date

Buyer(s)

Price

1 Chase Manhattan Plaza

Q4 2013

Fosun International Limited

$725 Million

195 Broadway

Q4 2013

J.P. Morgan Asset Management

$498 Million

140 West Street

Q4 2013

Magnum Real Estate Group, CIM Group

$274 Million

101 Murray Street

Q3 2013

Fisher Brothers, The Witkoff Group

$223 Million

1 North End Avenue

Q4 2013

Brookfield Office Properties

$200 Million

100 William Street

Q4 2013

Manulife Financial

$167 Million

346 Broadway

Q4 2013

Peebles Corporation, Elad Group

$160 Million

180 Water Street

Q3 2013

Emmes Group of Companies

$151 Million

100 Broadway

Q3 2013

Northwood Investors

$150 Million

2 Rector Street

Q2 2013

CIM Group, Kushner Companies

$140 Million

123 William Street

Q4 2013

East End Capital, GreenOak Real Estate Advisors

$134 Million

5 Hanover Square

Q3 2013

CIM Group

$104 Million

49-51 Chambers Street

Q1 2013

Chetrit Group

$89 Million

156 William Street

Q4 2013

William Macklowe Company

$63 Million

Page 7
2014, CBRE, Inc.

January 2014

Source: CBRE Research, Q4 2013.

32,000
Units

30,500
Units
Federal Hall

Source: NewYorkNatives.com.

7,400
Units
1990

2013

2015
(Projected)

Source: Downtown Alliance, Q4 2013.

Downtown Manhattan | 2014: A Market Transformed

Figure 11: Residential Development

Downtown: Did You Know?

Fourth Largest CBD in U.S.

Brookfield Place Waterfront

Source: CBRE Research.

Source: TheProvince.com.

HOTEL DEVELOPMENT
The Four Seasons Downtown at 30 Park Place will bring an
ultra-luxury 189-room five-star hotel to Lower Manhattan, as
well as 157 high-end condominium apartments. This is only
one notable hotel development underway; there are 23 hotels under construction, which will deliver 3,800 new rooms
to visitors within the next two years.3

South Street Seaport

Source: SouthStreetSeaport.com.

Major attractions such as Federal Hall, Wall Street, South

Street Seaport, the Statue of Liberty and Ellis Island brought
11.5 million visitors to Lower Manhattan in 2012. Accelerated
tourism around the opening of the National September
11 Memorial & Museum, and retail destinations such as
Brookfield Place and the World Trade Center, will continue to
drive hotel development.

RETAIL DESTINATIONS

National September 11 Memorial & Museum

Source: Inhabitat.com.

Downtown has historically been an area underserved by retail. Now more than one million sq. ft. of retail opportunities
are creating more shopping options for residents, visitors
and office workers. Among them are two projects receiving media attention: Westfield WTC and the renovation of
Brookfield Place.

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January 2014

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14 Subway Lines, 6 Ferry Terminals,

30 Bus Routes
Source: Metropolitan Transit Authority.

Westfields project will feature more than 700,000 sq. ft. of retail and dining space anchored around the World Trade Center
Transportation Hub, designed by Santiago Calatrava and
known as the Oculus. A collection of high-end retailers has
been reported to have signed leases, and official announcements are expected soon. Brookfield Place is currently undergoing a $250 million renovation of its retail and food court
space. The project will include a 30,000-sq.-ft. European-style
marketplace. Committed tenants in the dining gallery, which
will feature a 600-seat dining area with waterfront views, include Chopt, Dos Toros Taqueria, Mighty Quinns Barbeque
and Num Pang Sandwich Shop. Apparel tenants already on
board include Herms, Michael Kors, Salvatore Ferragamo
and Theory. Additionally, Bright Horizons Early Education and
Preschool and Equinox have taken space.
Among other retail changes Downtown, the South Street Seaport
is undergoing a significant renovation and is expected to open in
2015. When completed, restaurants, movie theaters and entertainment will overlook the East River waterfront. The renovation

of the Fulton Street Transit Center will also create 65,000 sq. ft.
of new retail managed by Westfield. Additionally, Fairway will
compete with Whole Foods at 270 Greenwich Street by opening
a 52,000-sq.-ft. store at 255 Greenwich Street.

TRANSPORTATION IMPROVEMENTS
Downtown Manhattan is known for its public transportation
optionsit can be reached by most of New York City and
parts of New Jersey without transferring trains. Modernization
is adding to the efficiency of the transportation options: the
Fulton Street Transit Center is expected to be completed
by June 2014, and the World Trade Center Transit Hub is
targeted for completion in 2015. The transportation improvements will give a one-seat ride to Lower Manhattan from
many areas in the tri-state region.

CONTINUED MOMENTUM
Even New Yorkers may not realize the changes that have occurred Downtown until they see them first hand. Significant
projects that are helping to transform Lower Manhattan will
be complete within the next three years, when the in-progress
office, retail, residential, hotel and transportation development projects come online. The completion of these projects
will spur Downtowns momentummaking it an increasingly
desirable location for owners, occupiers and investors across
industry sectors for decades to come.

Downtown Manhattan | 2014: A Market Transformed

Downtown: Did You Know?

Source: meunierd/shutterstock.

2014, CBRE, Inc.

January 2014

Page 9

Downtown Manhattan | 2014: A Market Transformed

SOURCES
1. CBRE Research/Claritas.
2. Downtown Alliance.
3. CBRE Econometric Advisors.

Cover Images
1. Brookfield.

7. Roman Slavik/shutterstock.

2. Downtown Alliance.

8. John A. Anderson/shutterstock.

3. pisaphotography/shutterstock.

9. Port Authority of NY & NJ.

4. www.theolinstudio.com.

10. SeanPavonePhoto/shutterstock.

5. pio3/shutterstock.

11. stockelements/shutterstock.

6. Christopher Penler/shutterstock.

12. SeanPavonePhoto/shutterstock.

Video Images
1. www.wtc.com.
2. ForgeMind Archimedia.

CONTACTS
For more information about this report, please contact:
Matt Maison
Manager, Research and Analysis
t: +1 212 984 8154
e: matt.maison@cbre.com

Franklin Wallach
Senior Research Analyst
t: +1 212 618 7081
e: franklin.wallach@cbre.com

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2014, CBRE, Inc.

January 2014

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