Condé Nast Lists 350K SF At 1WTC For Sublease Amid Increased Downtown Leasing Pressures
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Condé Nast has listed 350K SF for sublease in the United States' tallest building as part of its plan to reduce its 1M SF lease in the building, Bisnow has learned.
The sublease listing comes as downtown landlords continue to battle for tenants in the supply-heavy market across the city. Following last year’s run of blockbuster leases — including Spotify’s deal for 463K SF at 4 World Trade Center — the Downtown office market has slowed down to start 2018.
First-quarter leasing activity Downtown totaled 818K SF, according to Cushman & Wakefield data, a fall of 60% from the same period in 2017. That rate was the lowest of the three of the major submarkets, and nearly 40% below the area's 10-year historic average.
Experts told Bisnow that, while one slow quarter does not necessarily indicate an unhealthy market, there is no denying that steeper asking rents and an increasing amount of space puts extra pressure on landlords.
“There’s not an abundance of cheap space any more, that used to be [Downtown’s] calling card,” CBRE Director of Research and Analysis in the Tri-State Region Nicole LaRusso said. “Landlords are now very eager to make deals … it’s a competitive market.”
Downtown’s average asking rent, according to CBRE’s figures, was at $62.20 per SF in the first quarter. LaRusso said that although Lower Manhattan does still offer a cheaper alternative to other parts of the city, the price gap is the narrowest it has been.
Stock exchange IEX has reportedly agreed to pay rents in the $80s per SF for space at Silverstein Properties’ 3 World Trade Center, for example, and Brookfield Place asking rents are said to range from the mid $50s per SF to the low $70s per SF.
Midtown South, by comparison, had an average asking rent of $77.20 per SF in the first three months of the year, CBRE found.
Downtown availability was at 14% at the end of last quarter, according to CBRE, with more sublease space due to hit the market. The Port Authority is planning to sublease part of its space at 4 World Trade Center, sources said, where it took nearly 600K SF in 2014.
While Silverstein and One World Trade Center's landlords, the Durst Organization and the Port Authority, will still be collecting rents on the space available on the sublease market, the availabilities left at their skyscrapers will now be competing with their tenants' spaces.
One World Trade Center, where Newmark Frank Knight recently took over for Cushman & Wakefield as the leasing team, is still looking to fill 25% of its unleased space, although a protracted lease-up is common for buildings with similarly massive footprints.
While major leases like Spotify’s lease at 4 WTC and McKinsey’s deal to take 200K SF in 3 World Trade Center grabbed headlines in 2017, the largest downtown deal in Q1 was Omnicom Group’s renewal for 288K SF at 195 Broadway.
Last week Brookfield Property Partners inked leases for research organization MDRC and TK IQVIA to take a combined 101K SF at Brookfield Place.
“In April, we’ve already seen five leases greater than 20K SF close, that will help the numbers as we move into the second quarter,” C&W Tri-State Research Director Richard Persichetti said.
Across Manhattan, he said, there have been only four office leases signed above 250K SF, compared to 10 by this time last year.
He said that when 3 World Trade Center comes online later in the year, Downtown’s availability and rents may be pushed up further, but the area still has significant attractions for tenants.
“Downtown benefits from the fact that there is Fulton Station, there is Occulus — transport has drastically improved,” Persichetti said. “You have that live-work-play community that didn’t necessarily exist 10 years ago.”
Between the first quarters of 2011 and 2018, the average asking rent downtown jumped 70%, according to Colliers International’s figures. It gained more than 4,000 new residents and saw 8M SF of new tenant migrations.
“We’ve seen tenants migrate to Lower Manhattan, and not just for new construction,” said Colliers International Research Group Managing Director Franklin Wallach. He said Downtown, like the rest of the city, is grappling with the fact that supply is outpacing demand. “This is the case for all the markets. Leasing activity certainly needs to increase in order to absorb the blocks of space that we have begun to see come online.”