Is Lower Manhattan The Next Big Thing?
07.29.2013 | Real Estate Finance & Investment

Is Lower Manhattan The Next Big Thing?

Savvy New York investors are taking a closer look at commercial properties in Lower Manhattan, driven by more than $30 billion of investment in the area’s infrastructure, tenant migration toward lower rents and the expansion of Hudson River Park. “New York is unique in its ability to see submarkets evolve quickly,” says David Cheikin, v.p. of leasing at Brookfield Properties.

The trend is also being seen on the residential side. Steven Witkoff’s purchase last week, along with the Fisher family, of 101 Murray St for a whopping $223 million is a testament to that. He plans to raze the property and turn it into mixed-use residential.

RXR Realty is looking closely at Lower Manhattan investment opportunities. “There’s a possibility for a real market upturn, and a pipeline of potential sales starting to build. A lot of people find that interesting – including us,” said Bill Elder, managing director.

So far, interested parties seem to be local investors with the know-how to chase opportunistic, off-market deals. Last week East End Capital reportedly teamed up with Green Oak Real Estate to acquire 123 William Street, a half vacant office building in Lower Manhattan, for $133 million, or $244 per square foot.

David Peretz, managing principal at East End, declined to comment specifically on the deal, but noted that the firm is under contract to buy a 550,000-square-foot building in Lower Manhattan. “We are actively looking at other opportunities. There have been billions of dollars of infrastructure investment spent between the Fulton Transit Hub, Brookfield Place and the World Trade Center,” he said.

Brookfield, for its part, is embarking on a multi-million dollar effort to reposition its flagship downtown office complex at Brookfield Place. After a number of high-profile tenant departures-including Merrill Lynch’s imminent exit from three million square feet of space-the firm is wooing tech startups and media firms that have been priced out of hip submarket Midtown South.

“I’m telling anyone who will listen that it’s time to invest in Downtown,” said Dan Fasulo, managing director at Real Capital Analytics. “You have a situation whereby when Downtown re-prices this time , that historic spread that has always been there between Downtown and Midtown might close-not completely-but there could be a structural tightening of that spread indefinitely,” he said.

Still, one investor who is looking at Lower Manhattan said he is luke-warm on the submarket. “I would personally rather be in Midtown, for no other reason than Downtown has an older feeling,” he said, adding that Lower Manhattan assets have to be priced at a discount to get people down there. -Eleanor Duncan