Big tenants take huge shine to downtown

By Daniel Geiger Crain’s New York Business

The city’s largest office tenants showed a marked preference for leasing space in lower Manhattan last year. Of the 10 biggest deals of 2013, four came from downtown, according to a list compiled by CoStar Group Inc. That includes the largest of them all, Citigroup’s renewal of its lease for 2.6 million square feet of space it occupies in a two-building complex on Greenwich Street in TriBeCa.

In addition to Citigroup’s leases at the two buildings, the advertising and media firm GroupM signed on for roughly 515,000 square feet at 3 World Trade Center, providing the anchor lease that will permit the 80-story, 2.5 million-square-foot tower to rise at the World Trade Center site. And Jones Day signed on for about 330,000 square feet at 250 Vesey St., an office building that is part of the 8 million-square-foot office complex Brookfield Place on the Hudson just west of the Trade Center.

Both GroupM and Jones Day will shift from offices in midtown. And though Citigroup’s deal is a renewal, in one sense it too represents a relocation. The bank is bringing its global headquarters, long stationed at 399 Park Ave. in midtown, to the downtown twins, 388 and 390 Greenwich Street.

“The big story in the leasing market is how well downtown has done,” said Ken McCarthy an economist and leasing-market analyst at Cushman & Wakefield.

Mr. McCarthy also pointed to the different industries downtown that are represented in the top 10, media, legal and financial, as indicative of the neighborhood’s growing diversity.

“The deals show that downtown is getting interest from several sectors,” Mr. McCarthy said. “There are also lots of tenants heading to lower Manhattan from midtown south because the rents are cheaper downtown and it is actually closer to the workforce in Brooklyn.”

Of the total acreage leased in the top 10 deals, more than half of it was in lower Manhattan.

Mr. McCarthy said that the combination of new leases and renewals last year drove downtown leasing to its highest level in a decade. Downtown previously saw record levels of leasing in 1999 and 2000, at the height of the dot-com boom during those years.

Real estate investment trusts netted some of the year’s biggest deals. SL Green owns the Greenwich Street buildings where Citigroup is renewing its space commitment. It also is the landlord of the Graybar Building, which saw another big renewal last year. In that one, Metro-North Commuter Railroad renewed its headquarters lease for a total of 266,000 square feet, in the year’s 10th largest deal.

Rival Vornado Realty Trust, signed the year’s third largest transaction, a roughly 640,000-square-foot deal with Macy’s at 11 Penn Plaza, a building that Vornado owns near Penn Station.

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