Office Tenants opt to Remain Downtown Despite Residential Conversion Boom Displacement
According to reported data from a recent industry report, more than 5.5 million square feet of Downtown’s office inventory has been removed since 2020, with another 5.8 million square feet at risk. An increase in Lower Manhattan leasing is being driven by existing tenants in the neighborhood being displaced due to the influx of conversions, with “overall leasing activity this year more than double all of 2024.” The neighborhood’s high vacancy rate and large stock of older office building inventory, with many having the right structure and zoning for residential conversions, make them ideal candidates to take advantage of New York State’s 467-m tax incentive program. Although intended to revitalize the neighborhood, the “program’s tight deadlines create urgency for developers — and displacement pressure for tenants” that become faced with the need to relocate on short notice. “Because Lower Manhattan, in relative terms, still offers the best values,” many tenants opt to stay put, the article by Crain’s New York citing engineering firm Arup and law firm Lewis Brisbois Bisgaard & Smith relocating to 99,418 square feet and 77,655 square feet respectively at 140 Broadway due to the planned conversion of 77 Water Street. Decisions by RXR Realty to move ahead and convert 61 Broadway led to law firms Coffey Modica, Gruvman Giordano & Glaws, and Edelman & Edelman moving their offices “elsewhere in Lower Manhattan, including 14 Wall Street, 90 Broad Street, and 60 Broad Street, respectively.” Although some tenants are offered concessions like relocation assistance, negotiated early lease exits, and even rent rebates, finding a new space that’s not at risk financially or poised for its own conversion presents a heightened challenge, but for some it results in a trading up in the quality of the building