Manhattan: TAMI vs. Downtown Today
The historical epicenter of Lower Manhattan has changed drastically over the past few years. And if you are as knowledgeable about the changing real estate landscape as we are, we know you have especially noticed the shift in the types of professions and businesses taking up commercial and residential real estate in less-frequented places.
According to Cushman & Wakefield, in 2016 alone, their data reports nearly 70 office tenants, representing approximately 1 million square-feet of space, migrated towards an office district that is historically home to Manhattan's financial services corporations. C&W acknowledged the swift move of technology, advertising, media and information (TAMI) sector into the financial realm.
This snowballing effect started with media giants, Condé Nast in 2011 and Time, Inc. in 2014. Thirty-seven percent of the square-footage that relocated Downtown, in 2016, were TAMI sector tenants. This should give you a great indication of how huge this industry is growing and how it will benefit Manhattan's commercial and residential real estate markets.
According to C&W, a decade ago, the percent of the Downtown office market was occupied by 17-percent of TAMI sector tenants. At the end of 2016, that number had skyrocketed to 30-percent.
An executive at CBRE, the real estate firm who handles leasing at the World Trade Center office megacomplex said that two years ago, their real estate brokers would never hear TAMI tenants asking to look at an office space in the building. Instead, they would opt for office space in Midtown South.
And there is more to this story because there is another sector that is blazing the trails and scooping up real estate with fervor and swiftness. Its name is FIRE.
Now, you are probably asking yourself 'What is FIRE?'. FIRE represents the financial services, insurance, and real estate industries and like fire, these industries are ready to engulf New York City. But do not let this scare you because this could be very lucrative for Manhattan's real estate firms.
While TAMI was taking the real estate market by storm, the FIRE sector is growing exponentially and, in the next few years, it is set to lease the most space in Manhattan.
According to The Real Deal's industry data figures, they report that FIRE sector tenants are looking towards the market for roughly 9 million square-feet. But like any great battle, coming in contact with the perfect, ideal office space may take some due diligence and a little bid-warring.
The real question is whether there is enough space for all of these companies? Some of the FIRE sector companies include Alliance Bernstein, HSBC, and BlackRock, who are respectively looking for 600,000 sq. ft., 700,000 sq. ft., and 500,000 sq. ft. On the other hand, TAMI sector firms such as Ralph Lauren, have been on the hunt for 700,000 sq. ft. of space but a representative of the company has debunked this myth and says the firm is not actively looking.
Representatives of MHP Real Estate Services, who represent real estate and legal firms, are seeing companies in various industries diversifying commercial spaces that were not originally welcoming to them.
There are currently more than 500 companies actively looking for approximately 27 million square-feet of commercial real estate. But why are they seeking this space? Maybe it is because their current rental plans are ending soon. The large office transactions in the market have been driven by lease expirations.
New office environment also means introductions to new people with varied ideas and scopes.
TAMI firms on the lookout for a new Manhattan home include companies like Facebook, which is on the hunt for more than 550,000 square feet of space. By contrast, TAMI sector tenants are now currently looking for half of what FIRE is after. But this does not mean that the intensity has subsided.
Manhattan's financial firms are always in need of the most office space because most the country's biggest banks are headquartered in New York City. In fact, these banks occupy millions of square feet in the Manhattan borough alone.
Some of those larger financial banks that are not looking for new space include Morgan Stanley, JPMorgan Chase, and Citigroup. Data from CoStar Group showed that by the end of 2016's first quarter, each of these companies inhabited more than 4 million square-feet in Manhattan.
Trailing behind FIRE and TAMI is the legal and accounting firms, which are seeking 2.4 million feet of office space and next on the list is the apparel, textile, and manufacturing industries, which are looking for 2.3 million sq. ft.
Real estate brokers believe that the overall asking rent prices have gotten to a point of insignificant change but have remained relatively firm. But concessions have gone out of the roof, according to representatives at C&W and Newmark Grubb Knight Frank.
Currently, there are a lot more choices and a lot less competition for those choices. This is great for the tenant but murder for those leasing the property. Many believe that these sort of numbers will adjust over time but it is difficult to say when this will happen.