Four months after Hurricane Sandy disrupted America’s fourth largest central business district, Downtown Alliance President Elizabeth H. Berger presented details from its upcoming progress report featuring comprehensive research data across all Lower Manhattan markets.
Hosted by the Downtown Alliance and the Real Estate Board of New York (REBNY), Berger presented the data at a Lower Manhattan business leaders forum to discuss the district’s recovery progress post- Sandy. While isolated restoration work continues, the vast majority of Lower Manhattan – the area below Chambers Street – is back to business:
• 99 percent of commercial office space is open,
• 99 percent of residential inventory is open,
• 96 percent of hotel inventory is open, and
• 90 percent of retailers are open.
“Lower Manhattan’s recovery from Sandy has been vigorous. The Downtown Alliance’s research shows dramatic improvement across of all of Lower Manhattan’s major markets. Moreover, property owners and utility companies have invested hundreds of millions of dollars in the district’s future to protect against the threats of future storms,” said Downtown Alliance President Elizabeth H. Berger. “And the fundamentals of Lower Manhattan continue to draw workers, residents, and visitors from near and far. Leasing activity has gone undeterred since the storm hit, with tenants leasing 1.23 million square feet below Chambers Street last quarter and Lower Manhattan residential rents increased seven-percent from the previous quarter, I am proud to say that Lower Manhattan is thriving as a 21st century, mixed-use central business district.”
Commercial Office Recovery and Leasing Activity
In the weeks following the storm, commercial property owners invested hundreds of millions of dollars to bring damaged buildings back online and to get tenants back into their offices. Landlords replaced damaged floors and walls, dried out air ducts with massive fans, repaired electrical equipment and switch gear, and restored life safety systems. As a result of these swift repairs, data from Jones Lang LaSalle shows the reopening of closed office buildings occurred at a rapid rate:
• 80 percent of commercial office square footage was open 3 weeks after Sandy
• 89 percent was open 7 weeks after Sandy
• 96 percent was open by the end of 2012, 9 weeks after Sandy
• 99 percent was open 16 weeks after Sandy
Undeterred by the effects of the storm, tenants continued to lease office space in Lower Manhattan. In fact, according to CBRE data, tenants signed leases for 1.23 million square feet of office space in Q4 2012, on par with the prior quarter, and 16 percent more than Q4 2011. Nearly all pending transactions before Hurricane Sandy continued in the weeks following the storm, and brokers report that few if any special concessions were required to close deals already in progress, including leases in buildings that had been impacted by the storm. No existing tenants cancelled leases after the storm, and ten tenants based outside of Lower Manhattan signed leases to relocate below Chambers Street.
Residential Recovery and Leasing Activity
While spared the loss of life and widespread property damage inflicted elsewhere in the region, Hurricane Sandy caused disruptions for Lower Manhattan’s 60,000 residents who experienced days without power, heat, and telecommunications. Those living in the minority of buildings that took on floodwater faced even greater challenges. After the storm, Downtown Alliance data shows 5,950 units (20 percent) of the district’s residential inventory were inaccessible. By mid-November, 3,400 of those closed units were back online and by year end, 4,914 of the original 5,950 once-closed units were back online. Four months after the storm, 99 percent of Lower Manhattan’s 30,500 residential units are back online, including 839 units at 2 Gold Street and 203 Pearl Street, which reopened ahead of schedule in mid-February.
Citi Habitats’ data from Q4 2012 shows a tight rental market with vacancy at just 1.21 percent, down slightly from 1.37 percent in the fourth quarter of last year. Rents also increased in the fourth quarter, with average rent up 7 percent over the previous quarter to $4,273, maintaining a consistent 10 percent premium over the city-wide average rent. According to data from Miller Samuel/Prudential Douglas Elliman, the market for owner-occupied units also remained strong post-storm, with a 10 percent increase in the volume of sales in Q4 2012 as compared to Q4 2011.
Impact on Hotel and Tourism Markets
Lower Manhattan’s tourist attractions and hotel properties experienced many storm-related damage and closures. One week after the storm, 36 percent of Lower Manhattan’s hotel inventory, a total of 1,473 hotel rooms, was closed. However, by the end of November, five hotels had re-opened, bringing a 94 percent of the inventory (some 3,855 hotel rooms) back on line. Today, 97 percent of hotel inventory was open, and just two small hotels remain closed, just south of the South Street Seaport.
A week after the storm, 21 of 38 Lower Manhattan attractions were open, including the National September 11 Memorial. By year end, 31 attractions reopened, but prolonged closures caused a 22 percent drop in tourist traffic in the fourth quarter of 2012. Yet the quick recovery of most of the Lower Manhattan tourist market helped close out year with a record 11.5 million visitors. Today, 32 of Lower Manhattan’s 38 tourist attractions are back in operation.
Retail Impact and Recovery
The district’s 1,082 shops, restaurants and storefront services perhaps felt the greatest impact of Hurricane Sandy, as some 30 percent of businesses were closed for more than a week after the storm. The Seaport was hit particularly hard and all 111 retailers were closed for a week or more. Just two weeks after the storm, however, 50 of the total 320 closed stores had already reopened. By the end of December, a total 87 percent of retailers were open south of Chambers Street. Today 90 percent of retailers are open.
Offering immediate assistance after the storm, the Downtown Alliance created a $1.6 million Back to Business small business grant program for retailers located in Flood Zone A. Through the Back to Business program, the Downtown Alliance gave grants to 105 Lower Manhattan businesses in an amount totaling $1,588,913; of this total, $370,949 has been committed to deferred grants for 20 businesses that have not yet reopened.
Widespread data and telecom outages also inhibited some 220 businesses from swiping credit cards or taking delivery orders. To help these businesses, the Downtown Alliance distributed over 100 Square mobile credit cards swiping devices to merchants without credit card swiping capabilities. Of those that have reopened, 94 are still operating without full data or telecom service.
Towards a More Resilient Lower Manhattan
Verizon has made significant investments to upgrade its Broad Street switching station and to replace its copper infrastructure with fiber optic cable. Verizon is moving key equipment at its substations above ground, out of flood-prone areas, and fiber optic cables are unaffected by flooding. The fiber optic upgrades will also give Lower Manhattan the most nation’s most advanced data and telecom service, a boon to the district’s key industries—professional services, financial services, technology and media.
Property owners are also making significant investments to enhance Lower Manhattan’s resiliency, taking aggressive measures to make their buildings less susceptible to flooding and storm damage. The Downtown Alliance found at least 14 properties representing some 14 million square feet of Lower Manhattan office buildings are investing hundreds of millions of dollars to enhance the resiliency of their buildings against flood damage.This data and information from this report is based on Downtown Alliance visual inspections, research, and outreach, with contributions from brokerage firms, utility providers, and other external agencies. The Downtown Alliance’s full report will be available online at www.downtownny.com in the coming week.