Source: CBRE. 8 million. 7 million. 6 million. 5 million. 4 million. 3 million. 2 million. 1 million

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1 ALLIANCE FOR DOWNTOWN NEW YORK Q COMMERCIAL OFFICE MARKET Leasing Activity Lower Manhattan led the Manhattan business districts in leasing during Q with 987,000 square feet of deals done, a 35% increase year-over-year. Meanwhile, Midtown s year-to-date leasing dropped 39% over Q1 2011, while Midtown South decreased 12%. Household names and businesses from a diverse set of industries signed notable deals south of Chambers Street this quarter. Condé Nast signed a 133,000-square-foot expansion deal at 1 World Trade Center, in addition to last year s 1 million square-foot lease. Investment Technology Group (ITG) completed a 16-year deal for 132,092 square feet at 1 Liberty Plaza, relocating from Midtown. Pace University also signed a 49,200-square-foot lease at 140 William Street. Omnicom, Priceline, and the National Futures Association expanded, and the New York Life Insurance Company renewed at 120 Broadway. Relocations were prominent among the top leases in Q In addition to ITG, nine other tenants signed leases to move their businesses south of Chambers Street, including LOWER MANHATTAN LEASING ACTIVITY (sf) Source: CBRE 8 million 7 million 6 million 5 million 4 million 3 million 2 million 1 million Q1 Year End the New York City Opera and Digital First Media. Relocations totaled 219,000 square feet, or about 22% of total leasing this quarter, and most tenants were in Creative Services or Technology. In total, 350 companies have relocated to Lower Manhattan since TOP TEN LEASES SIGNED Q Source: CoStar, Downtown Alliance Tenant Name Building Address SF Leased Transaction Type Industry The Condé Nast Publications 1 World Trade Center 133,000 Expansion Creative Services Investment Technology Group, Inc. 1 Liberty Plaza 132,092 Relocation Technology Pace University 140 William Street 49,200 Direct Education OdysseyRe Holdings Corp 100 William Street 41,854 Direct FIRE New York Life Insurance Company 120 Broadway 38,529 Renewal FIRE Omnicom 195 Broadway 36,300 Expansion Creative Services Research Foundation of SUNY 61 Broadway 23,750 Direct Education National Futures Association 120 Broadway 21,902 Renewal/Expansion Professional Services Priceline 100 William Street 18,094 Expansion Technology Janney Montgomery Scott, Inc. 1 Whitehall Street 17,882 Direct FIRE 1

2 RELOCATIONS Q Source: CoStar, Downtown Alliance Tenant Name Building Address SF Leased Previous Location Sector Investment Technology Group, Inc. 1 Liberty Plaza 132,092 Midtown Technology Lactalis American Group 77 Water Street 16,400 Midtown Other Ipreo 65 Broadway 16,000 Midtown Technology The Harry Fox Agency 40 Wall Street 15,353 Midtown South Professional Services New York City Opera 75 Broad Street 14,049 Midtown Creative Services Digital First Media 5 Hanover Square 9,850 Midtown Creative Services Goldstein Hill & West Architects 11 Broadway 8,500 Midtown South Creative Services Eye Mall Media 48 Wall Street 4,770 Midtown Creative Services Gotham Holdings 75 Maiden Lane 1,702 Midtown FIRE Argent Software 100 Wall Street 400 Midtown Technology In other leasing news, Morgan Stanley finalized negotiations during Q and signed a lease for 1.2 million square feet at 1 New York Plaza in April. The transaction is the largest lease for a single building in New York since Vacancy Despite a slow quarter of leasing, Lower Manhattan s vacancy rate dropped to 9.2% from 9.5% last quarter and 10.5% last year. Sublease vacancy was stable at just 1.0%. Meanwhile, Midtown vacancy continued to increase, ending the quarter at 9.9%, up from 9.6% last quarter and 10.3% last year. Sublease vacancy is 1.7%. Lower Manhattan maintained its position as the third lowest vacancy rate nationwide. It fell just behind TOTAL VACANCY 16% 14% 12% 10% 8% 6% 4% Midtown South and San Francisco. 1 Rents Lower Manhattan s overall average asking rents were stable in Q at $40.18 per square foot, up 1% over last quarter and 2% over last year. Class A asking rents showed slow but steady growth, increasing 2% over last quarter and 5% over last year to reach $45.24 this quarter. The taking rent index (which shows taking rents as a percentage of asking rents) also continued to improve along with asking rents, showing real growth in rents. It was 88.3% in Q1 2012, nearly one percentage point increase from last quarter. 1 Source of vacancy: Cushman & Wakefield YEAR-OVER-YEAR CHANGE IN RENTS, Q Q % 30% 25% 20% 15% 10% 5% 2% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q Note: Data not available for Midtown South Q1-Q % Class A Overall 2

3 In Midtown, year-over-year increases trended similarly to Lower Manhattan. Overall asking rents in Q were $66.68 per square foot, and Class A rents were $71.22 per square foot. Both rental rates represent a 2% increase over last quarter and 6% increase over last year. Meanwhile, limited availability and increasing demand pushed rents higher in Midtown South. That market saw the greatest pace of improvement, with overall asking rents at $48.45 per square foot in Q1 2012, up 6% from last quarter and 11% from last year. Class A rents reached $67.52, just $3.70 per square foot shy of Class A rates in Midtown. Those changes continue to enhance Lower Manhattan s competitive advantage in pricing. Lower Manhattan offers a $26.50 per square foot difference over Midtown s overall asking rents and $8.27 per square foot over Midtown South. Sales Three sales closed during the first quarter. 2 GB Lodging Group closed on the Temple Court Building at 5 Beekman Street for $64 million or about $500 per square foot. Their plans include renovating the building into a 297-room Thompson brand boutique hotel with 90 residential units. It is expected to be completed in The Federal Reserve Bank of New York purchased 33 Maiden Lane from Invesco for $207.5 million or $376 per square foot. The Fed has been a major tenant in the building, occupying 360,300 per square foot or more than 60% of the building since January The McSam Hotel Group sold the vacant development site at 50 Trinity Street to Trinity NYC Hotel, LLC, for $15 million, or $193 per buildable square foot. OVERALL AVERAGE ASKING RENTS $100 $90 $80 $70 $60 $50 $40 $30 $20 CLASS A AVERAGE ASKING RENTS $100 $90 $80 $70 $60 $50 $40 $30 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q Q3 Q1 Q3 Q4 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q TAKING RENT INDEX Source: CBRE 100% 95% 90% Bank of America finalized negotiations during Q to sell 222 Broadway to a joint venture of L&L Holding and Beacon Capital Partners. The sale closed early in Q at $230 million, or $304 per square foot. The building is currently 99% leased, with Merrill Lynch occupying the majority of the space. 2 Source of transactional information: Massey Knakal 85% 80% 75% 70% Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q

4 RESIDENTIAL MARKET Development and Inventory Today, Lower Manhattan has an estimated 57,000 residents, and 28,775 residential units in 315 mixed-use and residential buildings. VACANCY Source: Citi-Habitats 1.6% 1.4% Construction continues with 874 units in nine buildings scheduled for completion by 2014, including New York by Gehry at 8 Spruce Street. The 76-story building partially opened for occupancy in March 2011, and though the building is still under construction, over 600 units of the 903 total units are leased, and 570 are occupied. Meanwhile, Metro Loft Management neared completion on the 418- unit condo conversion at 116 John Street. The building is scheduled to begin leasing in May for occupancy in June. 1.2% 1% 0.8% 0.6% 0.4% 0.2% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Metro Loft also announced its acquisition of 70 Pine Street and plans to convert the 66-story historic Art Deco building. Two plans are under consideration: Under one plan, a 300- room hotel would be on the lower floors with 700 residential rental units above. Alternatively, Metro Loft would convert the entire building to a 970-unit residential building. Rental Market Over 880 units were added to the active listings in Q1 2012, a 5% drop over last quarter s 935 (the highest in the past year) and 28% increase over last year. Much of this is attributed to the completion and active listing of new development projects. Despite the increase in inventory, Lower Manhattan apartments spent an average of 40 days on market, on par with the Manhattan average of 41 days. 3 3 Source of active listing and days on market: Miller Samuel, Inc. Meanwhile, Lower Manhattan s rental market remained tight with a vacancy rate of just 1.3%. Pricing was stable during Q1 2012, the down season in the residential market when rents usually dip. Lower Manhattan s average rents were $3,866, up 1% from last quarter and 2% from last year. One-, two-, and three-bedroom units trended similarly, while studio apartments showed a remarkable 10% increase over last quarter and 8% increase over last year. 4 Lower Manhattan continues to garner higher rents than the Manhattan-wide average, which ended the quarter at $3,382. Manhattan-wide average rents trended similarly, increasing 1% over last quarter and 5% year-over-year. 4 Source of vacancy and rents: CitiHabitats RESIDENTIAL DEVELOPMENT AND POPULATION GROWTH Source: Alliance for Downtown New York 70,000 60,000 Projected 50,000 40,000 30,000 20,000 10, units population 4

5 Sales Market (Combined Condos and Co-ops) Lower Manhattan s residential sales market trended similarly to Manhattan-wide averages, showing year-overyear improvement, and dipping as the market enters the annual slow season. Lower Manhattan averaged $1,029 per square foot in Q1 2012, up 7.5% over last year but down 7% over last quarter. That average price per square foot remained close to Manhattan s average. The Manhattan-wide average of $1,086 per square foot is an increase of 6% over last year and a 3% drop over last quarter. Despite year-over-year improvements in pricing per square foot, a drop in the average size of apartments (from about 1,200 square feet last quarter and last year to 1,076 square feet this quarter) resulted in a decrease in the average sales price. In Q1 2012, Lower Manhattan averaged $1,107,187 per apartment, down 4% from last year and 18% from last quarter. A total 106 sales transacted south of Chambers Street during Q1 2012, which is stable year-over-year, but down a sharp 12% from last quarter. Over 30% of Q sales were in four buildings: 40 Broad Street, 99 John Street, 123 Washington Street, and 333 Rector Place. AVERAGE SALES PRICE ($ PER SQUARE FOOT) Source: Miller Samuel, Inc. $1,300 $1,100 $900 $700 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Lower Manhattan AVERAGE DAYS ON MARKET Source: Miller Samuel, Inc Manhattan Meanwhile, the average days on market increased to 173 this quarter, the highest in the last year and 16% over Q The Manhattan-wide average showed a greater year-over-year increase (20%), ending the quarter at 152 days on market Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Lower Manhattan Manhattan LOWER MANHATTAN AVERAGE RENTS Source: Citi-Habitats MANHATTAN-WIDE AVERAGE RENTS Source: Citi-Habitats $6,000 $5,500 $5,000 $4,500 $4,000 $3,500 $6,000 $5,500 $5,000 $4,500 $4,000 $3,500 $3,000 $3,000 $2,500 $2,500 $2,000 $2,000 $1,500 $1,500 $1,000 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Studio 1 BR 2 BR 3 BR $1,000 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Studio 1 BR 2 BR 3 BR 5

6 HOTEL MARKET HOTELS UNDER CONSTRUCTION Source: Downtown Alliance Hotel Location Floors Rooms Year Open Owner/ Developer Holiday Inn 99 Washington Street McSam Hotel Group Independent hotel John Street Duc Construction Corp Aloft Hotel 49 Ann Street West Broadway Realty Corp Marriott 30 Fletcher Street Lam Group Homewood Suites 33 Beekman Street McSam Hotel Group Development and Inventory This quarter, the Conrad New York, formerly the Embassy Suites Hotel, reopened with 463 rooms after a year of renovations. This all-suite hotel is the first New York address of the global luxury brand of Hilton Worldwide. With this opening, Lower Manhattan has 18 hotels and 4,092 rooms triple the number of hotels that existed pre- 9/11 and 78% more rooms. That growth continues with five additional hotels under construction scheduled for completion by 2014, three of which commenced in Q At 99 Washington Street, the McSam Hotel Group broke ground on what will be the tallest Holiday Inn in the world, at 52 stories. Excavations began for an 18-story Aloft Hotel at 49 Ann Street, and a 32-story Homewood Suites at 33 Beekman Street. Those projects will bring the inventory to 5,120 rooms in 23 hotels. plans to develop a 28-story hotel slated to open in GB Lodging Group also closed on the Temple Court Building at 5 Beekman Street with plans to develop a 297-room boutique hotel to open in In addition, a joint venture of Crown Acquisitions, the Carlyle Group, and Highgate Holding are in pre-construction on the conversion of 170 Broadway to a 200-room hotel. CONRAD NEW YORK Source: Conrad New York Beyond that, another ten hotels are planned for construction, including a Four Seasons at 99 Church Street, a boutique hotel at the Battery Maritime Building, and a Four Points by Sheraton at 217 Pearl Street by the Lam Group. Additionally, Hidrock Realty and Robert Finvarb Cos. announced the acquisition of 133 Greenwich Street, with ADR & OCCUPANCY Source: Downtown Alliance, NYC & Company Occupancy Q Q Q Q Q Q-o-Q Y-o-Y Lower Manhattan 65% 85% 81% 80% 74% -8% 13% New York City 72% 85% 86% 84% 73% -12% 2% Average Daily Room Rate (ADR) Q Q Q Q Q Q-o-Q Y-o-Y Lower Manhattan $231 $285 $308 $307 $239-22% 3% New York City $214 $231 $245 $283 $198-30% -8% 6

7 HOTEL OCCUPANCY RATES Source: Downtown Alliance, NYC & Company 100.0% 95.0% 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% Q Q Q Q Q Lower Manhattan New York City Occupancy and Room Rates Lower Manhattan and the citywide average trended similarly in Q the down season in tourism dropping considerably over last quarter but showing modest improvement over last year. Lower Manhattan s average daily room rate (ADR) was $239, a 22% drop over last quarter and 3% increase over last year. The district s ADR was considerably higher than the citywide figure of AVERAGE DAILY ROOM RATES Source: Downtown Alliance, NYC & Company $330 $310 $290 $270 $250 $230 $210 $190 $170 Q Q Q Q Q Lower Manhattan New York City $198, which dropped 30% over last quarter and increased 2% over last year. Meanwhile, the average occupancy rate among Lower Manhattan hotels was 74% in Q1 2012, up considerably from 65% in Q1 2011, but down from 80% last quarter. The current occupancy rate was on par with the citywide average of 73%, which was a slight increase over 72% last year, and a significant drop over 86% last quarter. RETAIL MARKET Twenty-one new restaurants, stores, and storefront services opened this quarter in Lower Manhattan, including: Two new restaurants by Danny Meyer, the North End Grill and Blue Smoke, in Battery Park City J&R Jr., a new 15,000 square foot baby and child emporium, adjacent to its namesake, the longtime Lower Manhattan anchor for electronics at 1 Park Row Atrio, a Mediterranean-inspired restaurant in the lobby of the newly opened Conrad New York Affina Beauty & Spa, offering a selection of beauty and wellness services, at 125 Church Street Beans and Greens, a new cafe featuring Stumptown Coffee and organic dairy and greens, at 245 Murray Street Manhattan flagship store at 181 Broadway spanning the basement, ground and second floors. Harry s Italian will also open its second Lower Manhattan location soon at 230 Murray Street in Battery Park City. AFFINA BEAUTY & SPA In other retail news, Aldo signed a lease during Q and began work to open a new 6,000-square-foot Lower Visit for additional publications on the Lower Manhattan real estate market and economy. Documents include a complete list of residential and hotel developments, available retail spaces and a summary of leasing incentives. If you have questions or require additional information, please contact RESEARCH@DOWNTOWNNY.COM.