


Midtown’s best buildings are signed for. Now, even second- and third-rate offices are fast disappearing from the market, as 5.5 million square feet of workspace is converted for residential use. But there’s a big winner from the crunch: Lower Manhattan.
“Midtown has become incredibly tight for large tenants looking for quality space,” said Jonathan Mazur, a research analyst with Newmark. “Downtown has always been the more cost-effective market and has the most opportunity for large tenants to lease.”
There is lots of room for upside because last year, downtown had the lowest amount of leasing ever recorded. “Those of us in the market are now witnessing and participating in robust activity,” said John Wheeler of JLL, noting that the current pipeline for both subleases and direct deals is huge. “Twelve months from now you will be seeing a lot of stories about leases and ask, ‘Where did that come from?’ ”
Jane Street Capital, for instance, lapped up 983,791 square feet at Brookfield Place with its 600,000-square-foot expansion at 250 Vesey St. This caused the building owners, Brookfield Asset Management, as well as other tenants, to move out of the way. The CollegeBoard for one, will move within the complex to 41,000 square feet at 225 Liberty.
At 1 World Trade, two tenants are nearly doubling in size.
“We became the largest diverse TAMI [technology, advertising, media and information] community in all of New York and are starting to see a higher percentage of deals with finance and for first time, have two leases pending with two law firms,” said Eric Engelhardt of Durst which owns and manages the property for the Port Authority of New York and New Jersey.
One tenant is taking its first city office and another is relocating from the area. “The views and amenities are appealing to them,” Engelhardt said.
Additionally, Axsome Therapeutics subleased an additional 48,000 square feet from Condé Nast bringing its occupancy to 96,000 square feet while BNY Mellon is negotiating a four-year sublease for 200,000 square feet to use while it renovates its headquarters at 240 Greenwich St.
For April, CBRE reported127,000 square feet of leasing with the year-to-date now 1.55 million square feet — up 122% from 2024. Average asking rents of $57.39 per foot are a bargain compared to Midtown’s $82.90. Keep in mind that even downtown, Class A rents will push into the high-$80s per foot or even triple digits for very high floors at 1 World Trade.
“The Manhattan market overall has shed nearly 70% of the sublease space added during the pandemic … quite a bit has been absorbed.”
Jonathan Mazur, a research analyst with Newmark
American Express is still negotiating with Larry Silverstein to anchor a new 2 World Trade Center but everyone says, “it’s complicated.”
Sources familiar with the talks say Amex would take the lower floors of a tower of 2.5 million- to 3 million-square-foot tower and include many amenities for its employees. But the financial firm is still figuring out how much space it will need when it opens some five or more years from now.
Silverstein, who turned 93 on May 30, must also figure out how much square footage he needs to lease to others and at what rent, which could be $150 per foot or more versus current downtown trophy rents in the $80s.
For tax reasons, Amex might sell its current digs and buy its portion of the new tower, similar to what Related did with its Hudson Yards office companies, which created a strong financial model for lenders.
Once they get to the nitty-gritty numbers, the American Express board will have to approve the deal.
Meantime, recent downtown deals include a move by Masterworks from Brookfield’s 225 Liberty St. to 1 World Trade Center in a sublease of 37,000 square feet from Network Capital. Uber also expanded to 351,000 square feet by leasing another 44,000 square feet from Silverstein Properties at 3 World Trade Center.
Expanding tenants and absorption of subleases are helping the overall market. San Francisco-based Stripe opened its first New York office in 2019 at 199 Water St. and a year ago, expanded and moved to 28 Liberty where it subleased 147,000 square feet. When other tenants were faced with negotiations to actually sublease their floors, Wheeler said they “hit the pause button.”
“We’re now seeing sublandlords taking space back for their own needs,” Wheeler said.
In less than two years, Newmark’s stats show available subleases downtown have fallen by 35%, dropping from 6.6 million square feet in the second quarter of 2023 to 4.3 million square feet at the end of April.
“Not every tenant is a Hudson Yards or a Park Avenue tenant and those that are more price-sensitive or looking for an economic transaction are looking downtown.”
Eric Engelhardt of Durst
“The Manhattan market overall has shed nearly 70% of the sublease space added during the pandemic,” said Newmark’s Mazur. “Quite a bit has been absorbed.”
The newly developed 107 Greenwich will soon be 96% leased. While most deals have been single floors, one is now two floors.
On the 18th floor, which has a landscaped outdoor terrace, owner Trinity created a state-of-the-art amenity floor that Wheeler says “was crucial” to tenants deciding to lease there. There are now conference rooms, a full kitchen and café/wine bar area. As another more unusual perk, the building’s lower floor gymnasium and basketball court at Trinity Commons and used for area school programming is open to tenants from 6 a.m. to 9 a.m.
While there is leasing activity on Class A space, much of it for the moment comes from musical chairs — i.e., tenants forced to move due to conversions or upgrading in a flight to quality from other space in Lower Manhattan.
The rehabbed but vacant 1.6 million square-foot 60 Wall St. is also wooing tenants. The white-shoe law firm Sullivan & Cromwell is weighing a move from 125 Broad St. and seeking 500,000 square feet while Moody’s at 7 World Trade Center is looking for 300,000 square feet and Aon, now at 1 Liberty is after 175,000 square feet — but all could renew.
Brokers say Water Street has always been a “value play” for office tenants and there are currently numerous leasing deals pending in the $50s and low $60s per foot.
Tenants like downtown so much, they don’t often move to other parts of the city. S&P Global, a 350,000-square-foot tenant at 55 Water St. window shopped a relocation to Midtown last year but ultimately decided to remain in place.
As buildings slated for conversion are bought or elbowed, their tenants are moving elsewhere. This has resulted in several office tenants over 100,000 square feet to negotiating an exit — be paid off — and seek new digs.
“They are being pragmatic and taking a windfall as part of their lease termination and entering a market that is very attractive,” Wheeler said. “Not a lot of leases have a demolition clause, so most are one-off negotiations with tenants.”
Therefore, these conversions are causing “immediate positive absorption” as remaining tenants relocate, said Engelhardt: “They are moving and gobbling up assets nearby that may have been struggling. But this is a top-down, bottom-up absorption.”
Vanbarton is converting both 180 Water St. and 77 Water which caused Arup Engineering to expand to 99,418 square feet in a move to 140 Broadway.
Among buildings that are being converted are the 1.2 million-square-foot 111 Wall and the over 800,000-square-foot lower portion of 80 Pine which was previously vacated by AIG.
When office buildings are 50% to 60% leased, Spencer Levine of RAL said the owners don’t keep leasing because they think the grass might be greener on the other side.
“Everyone thinks their building can convert but in reality, it is only a small number.”
Brian Waterman of Newmark
But when it comes to selling them to a converter, Levine said there’s still a “disconnect between the seller and their expectations.”
“Everyone thinks their building can convert but in reality, it is only a small number,” he continued. “The amount of money needed to make them livable is untenable.”
Most often, he said, the building bases do not become “great living experiences.” It’s one thing to convert, he added, and another to create a project where people want to live.
To see more leasing velocity downtown, Brian Waterman of Newmark said the rest of the market has to tighten.
“They go there out of necessity, not out of want,” Waterman explained.
But Engelhardt is more upbeat. Because the city’s economic base is so broad, “not every tenant is a Hudson Yards or a Park Avenue tenant,” he said, “and those that are more price-sensitive or looking for an economic transaction are looking downtown.”