Buying a property in New York City can be a daunting experience, not the least of which because it’s a large city with many wonderful neighborhoods to choose from. If you’re unfamiliar with all of these neighborhoods (or even if you know NYC well) it can be challenging to assess the pros and cons, especially if you live out of town. This is why I want to share what I consider to be one of the most dynamic neighborhoods in New York City, and unquestionably one of the best for an investment right now: Lower Manhattan.
Lower Manhattan is actually made up of several neighborhoods, straddling the southern portion of trendy Tribeca and encompassing the world-famous Financial District (“FiDi.”) Its borders are the iconic Brooklyn Bridge to the north, the tip of Manhattan to the south, South Street Seaport to the east, and Battery Park City to the west. Following the devastation that occurred in this area on September 11, 2001, the city’s powers-that-be made rebuilding and rebranding Lower Manhattan one of their highest priorities. The ensuing renaissance has resulted in a luxury residential development boom, making this area of Manhattan both the newest “it” neighborhood to live in and a great value proposition over the long term.
I chose to move to Lower Manhattan myself back in July 2003, after residing in a post-war co-op building on the venerable Upper East Side for 15 years. I discovered Lower Manhattan’s North Battery Park City neighborhood, bordering Tribeca and just north of FiDi, by chance, while previewing the Solaire, a new, amenity-rich modern luxury high-rise overlooking the Hudson River—and also NYC’s first residential tower built to environmentally friendly standards. I was mesmerized by the water views and sun-drenched apartments. With a short walk to the Chambers Street subway station I could be at my office in Midtown after just three express stops to Times Square on the 2/3 train. I was in search of a change at the time and my gut was telling me: This is your new home and neighborhood!
I. The New Downtown: A Neighborhood Renaissance
I noticed big changes starting to occur shortly thereafter, including the completion of Hudson River Park, which transformed the formerly barren waterfront here into one of the city’s best open-air spaces. But the real jumpstart to the renaissance began when Goldman Sachs broke ground on the construction of its new headquarters at 200 West Street in 2005 and moved in five years later. Goldman then purchased the adjacent Embassy Suites hotel building and began re-tenanting the ground-floor retail space to include upscale eateries, shops and restaurants. They also replaced the existing hotel with a more upscale boutique Conrad Hotel brand.
A year prior to Goldman’s move, Whole Foods opened one of its largest New York City markets at Greenwich Street (between Warren and Murray), along with a Bed, Bath & Beyond and a Barnes & Nobles. Other additions included Soul Cycle’s signature NYC-Tribeca studio (at Warren and West), a Palm restaurant and later, the Asphalt Green pool/athletic complex (at Murray Street and North End Avenue).
New luxury high-rise condo buildings, including 200 Chambers Street and 101 Warren Street, changed the residential landscape. New York by Gehry, the striking, curving tower also known as 8 Spruce Street, was a real test for the FiDi neighborhood: a 76-story, 904-unit luxury rental, located just south of the entrance to the Brooklyn Bridge and east of Park Row. It leased very well (current asking rents are at approximately $97/square foot per annum; averaging about $4,500/month for a one-bedroom and $7,500/month for a two-bedroom).
Then the real wow factor came when media behemoth Condé Nast reached an agreement in August 2010 to occupy 1.1 million square feet in the 104-story One World Trade Center. The company executed a $2 billion, 25-year lease in May 2011, with plans in place to relocate 2,300 employees to its new headquarters from Times Square.
In total, more than $30 billion in public and private investment has poured into Lower Manhattan over the last decade, for the reconstruction of the 16-acre World Trade Center site, the Fulton Center transportation hub, and other new hotels and residential buildings. Ten years ago, Lower Manhattan was known as a place where people came to work, but left in the evening. Today there is new energy on the streets day and night, 24-7.
II. The New Downtown: Retail Renaissance
This new energy is due in large part to Brookfield’s decision to re-brand the former World Financial Center complex as Brookfield Place, a strategy that was necessary in order to attract a new office tenant mix, given the contraction in the financial sector following the 2008-2010 recession.
Brookfield Place has become the de facto “town center” for Lower Manhattan, serving the immediate neighborhoods of Tribeca, FiDi and Battery Park City with some of the finest shopping and eating establishments in the entire city.
The 10-story, glass-vaulted Winter Garden Atrium here already features such high-end fashion brands as Salvatore Ferragamo, Burberry and Omega, while Hermes, Bottega Veneta, Ermenegildo Zegna, Gucci, and Aspinal of London will join them later this year. When Saks Fifth Avenue opens its four-floor, 75,000-square-foot store to anchor the retail complex in February 2016, it will become Lower Manhattan’s first major luxury department store. Furthermore, the north pavilion, located off of Vesey Street, includes such contemporary brands as Michael Kors, J. Crew, Bonobos, Diane von Furstenberg, Theory, Paul Smith, Vince, Lululemon, Posman Books, Vilebrequin, Calypso St. Barth, and Scoop NYC.
Le District, a 30,000-square-foot, French-inspired marketplace (a French “Eataly”), opened in April and features a 7,000-square-foot outdoor dining space on a plaza overlooking the Hudson River. Hudson Eats, a 600-seat food hall, is located on the second floor with 14 fast-casual eateries. Also new here is an Equinox Fitness Center.
Lately, Lower Manhattan has become the new destination for high-end signature restaurants such as Beaubourg, a brasserie-style restaurant at Le District, along with the elegant Le Bar bistro. Highly popular Italian eatery Parm is also newly opened at Brookfield Place, where Jose Garces’ Spanish tapas restaurant Amada, along with celebrated French chef Joël Robuchon’s L’Atelier de Joël Robuchon will debut later this year. The legendary, highly influential Japanese restaurant Nobu recently announced its departure from Tribeca for a 14,000-square-foot space in 195 Broadway’s grand lobby (to open in early 2017). Danny Meyer already has three restaurants in the North Battery Park City neighborhood (Shake Shack, Blue Smoke and North End Grill); Keith McNally and Tom Colicchio will soon open restaurants at the Beekman. Other trendy new dining spots include Racines, Little Park (at the Smyth Hotel), Warren 77, Dead Rabbit and Pier A. The owners of the Spotted Pig are considering a four-story venue at the top of Rose Associates’ new 644-unit apartment conversion at 70 Pine Street.
Westfield World Trade Center, which will open this year, is poised to become an iconic destination for both residents and tourists with 150 stores and restaurants in the Oculus of the World Trade Center transportation hub. This 365,000-square-foot complex will include Hugo Boss, Michael Kors, Banana Republic and Desigual. In addition, the newly redeveloped South Street Seaport, including the multi-level 365,000-square-foot Pier 17 retail, dining and entertainment complex and the eight-screen iPic movie theater in the Fulton Market Building, will serve as yet another a retail magnet for Lower Manhattan, anchoring the northeastern border of the neighborhood.
Joining Brookfield, Westfield and the Seaport, more new retail shops are set to open on Lower Broadway (including Zara, Urban Outfitters and The Gap) in total creating approximately two million square feet of new and repositioned retail space by 2017—a major milestone for Lower Manhattan.
III. The New Downtown: Commercial Renaissance
Following the recession of 2008-2010 and the collapse of the financial firms Lehman Brothers and Merrill Lynch, prospects for filling exiting Downtown office space looked grim. However, with the evolution of our innovation economy, the tide has changed. Lower Manhattan has seen a net gain of more than seven million square feet of office space since 2011 (tenants acquiring 9 million square feet have moved in from other NYC office locations and only 2 million square feet of tenants have relocated out of Downtown). The TAMI (technology, advertising, media and information technology) sector has accounted for 47% of all relocations. More than 800 TAMI tenants are now located below Chambers Street, adding to the vitality of Lower Manhattan. Many TAMI tenants are migrating to Lower Manhattan from Midtown South, in search of lower-cost office space where they have access to a robust transit network, top-notch broadband access, abundant WiFi and flexible workspace. TAMI tenants are reshaping the future of this dynamic neighborhood, once dominated by Wall Street brokerage firms.
Co-working company WeWork opened its third Lower Manhattan location at 85 Broad Street early this year, signing the second quarter’s largest deal in Lower Manhattan and the third largest deal citywide. With a lease of 234,879 square feet at 85 Broad Street, WeWork now occupies more than 744,000 square feet of commercial office space and joins the ranks of Lower Manhattan’s largest tenants.
Prior to the recession, average absorption was approximately 3 to 4 million square feet of office space per year. In 2014, approximately 6.3 million square feet was leased, comprising 12 deals over 100,000 square feet (50% were relocations). Approximately 3 million square feet alone was leased at Brookfield Place, including 700,000 square feet to Time Inc., 400,000 square feet to Hudson Bay (which owns Saks Fifth Avenue), and 346,000 square feet to the Bank of New York. Media Math, a global digital marketing company, executed a lease for 106,000 square feet at 4 World Trade Center and will relocate nearly 600 employees from three separate Midtown locations. Macmillan Science & Education leased 176,000 square feet at 1 New York Plaza, relocating from Midtown South and two other non-New York City locations. High Five Games executed a lease for 87,663 square feet in One World Trade Center, also relocating from Midtown South. Other notable new non-financial tenants include Revlon’s lease of 90,200 square feet at 1 New York Plaza and Hugo Boss’s 73,690-square-foot lease at 55 Water Street, also moving from Midtown South.
The Lower Manhattan office vacancy rate of 10.4% is down 0.8% year-over-year, reflecting positive absorption. Class A rents reached $61.90/square foot in the first quarter, the highest quarter-end asking rent in the market’s history, increasing 49% since the trough of the post-recession, outpacing Midtown’s growth of 24% and on par with Midtown South’s increase. The Class B vacancy rate is 6.5%, down 2.0% year-over-year, reflecting in part the strong leasing from the TAMI sector. Class B rents in Lower Manhattan are on the rise as well, growing to $41.90/square foot, its highest level since the first quarter 2009 and up 9% year-over-year.
IV. The New Downtown: Transportation and Tourism Renaissance
As for transportation to and from Lower Manhattan, the newly opened Fulton Street Center (the “Grand Central Station” of Downtown) provides streamlined access to nine subway lines. The World Trade Center transportation hub will encompass 11 subway lines and the PATH trains to New Jersey, while the East River Ferry terminals provide scenic routes up and down the Hudson River, including to Brooklyn.
All of this development has contributed to Lower Manhattan becoming a major tourist destination. In 2014, the district welcomed 12.4 million visitors—a huge 30% increase from 2013. Currently, there are approximately 15 hotels under construction with another five in the planning stages. In 2015 alone a full seven new hotels will open, growing Lower Manhattan’s current room inventory by 30%. The 189-room Four Seasons Hotel at 30 Park Place will be a particularly welcome addition to the area, the only 5-star luxury brand in FiDi.
V. The New Downtown: Residential Renaissance
Perhaps most notably, the improved infrastructure and transportation hub, wide variety of new shopping and dining options, and many office tenant relocations from Midtown and Midtown South have made Lower Manhattan a dynamic, 24-hour neighborhood, ripe for a growth spurt in residential housing.
Lower Manhattan is now home to more than 60,000 residents, three times the pre-September 11 population, who live in 31,000 residential units spread across 323 buildings. It is projected that 80,000 residents will be living south of Chambers Street by 2017. But the area’s rent and purchase prices are still competitive when compared to more established neighborhoods. It’s also one of the few neighborhoods that is still seeing rising prices, making it a solid investment opportunity.
FiDi’s average price per square foot for condos increased 8% to $1,323/square foot in the second quarter of 2015 from $1,217/square foot in the second quarter of 2014, while the total Manhattan average price per square foot for condos increased 7% to $1,589 from $1,484 during the same period. The median sales price for FiDi’s apartments increased to $1,150,000 in the second quarter of 2015, up from $919,998 a year earlier. In 2014, FiDi’s median sales price nearly doubled (45%) to $999,000 from $505,000 around a decade earlier, while Manhattan’s median sales price hit $1,350,000 in 2014 vs. $961,000 in 2005 (a 29% increase). Hence, over a 10-year period, FiDi outpaced the increase in the median sales price for all of Manhattan. FiDi’s median rent has soared from $2,200 in 2005 to $3,200 in 2014, an increase of nearly 46%. Average rentals for doorman buildings in FiDi currently range from approximately $3,500 to $3,900/month for one-bedrooms and $5,500 to $6,000 for two-bedrooms.
“Buyers and renters have been drawn to FiDi seeking out greater affordability and the newness of an up-and-coming area,” says Jonathan Miller, President of Miller Samuel.
The changes taking place have attracted a diverse group of new buyers who would have never considered going south of Chambers Street a decade ago. For families priced out of trendier Downtown neighborhoods like Tribeca, SoHo and the West Village just to the north, the area offers more space at a favorable price. It is also anticipated that more foreign buyers will show interest in Lower Manhattan as the new inventory of luxury towers, neighborhood amenities, and more high-end shops and restaurants continue to open.
This all explains why in the first quarter of 2015, construction continued on more than 2,300 new residential units in 12 properties (about 865 rental units and 1,138 condos), in addition to more than 2,400 units spread across 16 properties currently in the planning stages, of which approximately 800 will be condos. Prominent new developments opening over the course of the next year include:
- 70 Pine Street, a 66-story, 644-unit luxury rental conversion in the former AIG headquarters and attached to a 132-room extended stay hotel. Opening late 2015.
- 30 Park Place-Four Season Residences, a 67-story, 157-unit luxury condo new construction with 189 hotel rooms, designed by architect Robert M. Stern. Opening 2016, prices from $3.4 million to $29.5 million.
- 50 West Street, a 64-story, 191-unit luxury condo new construction by architect Helmut Jahn. Opening 2016, prices from $1.9 million to $22.6 million.
- 5 Beekman Street (The Beekman Residences), a 51-story, 68-unit luxury new condo construction attached to a 287-room Thompson Hotel. Opening 2016, prices from $2.95 million to $4.35 million.
- 100 Barclay Street (Ralph Walker Tower), a 31-story, 166-unit luxury condo conversion. Opening 2016, prices from $3.2 million to $11.5 million.
Further down the road, high-profile luxury condo projects on the horizon include:
- 111 Murray Street, a 62-story, 154-unit new construction scheduled to open in 2018, prices from $2.0 million to $17.5 million.
- 125 Greenwich Street, a 71-story, 128-unit new construction scheduled to open in 2018.
- 151 Maiden Lane (One Seaport Tower), a 60-story, 74-unit new construction, scheduled to open 2017.
The rapid sales activity of the new condo developments noted above, with prices ranging on average from $2,200 to $3,300 per square foot, is a testament to the validation of the neighborhood. This is a very different environment from a decade ago when high-profile condo projects like 15 Broad Street and 20 Pine arrived on the market, unsure of whether they would sell (they did).
The overwhelming conclusion is that anyone in the market for a New York City residence or investment property should seriously consider Lower Manhattan as a preferred neighborhood. I walk the streets here every day and have witnessed its growth and renaissance first-hand. I also attend real estate industry conferences, access industry market stats, and have ongoing conversations with various real estate players on a regular basis. Everyone is talking about what a great long-term investment this area is.
There is no doubt about it—Lower Manhattan is the future of NYC.