The danger of an uncontrollable fire breaking out within a skyscraper is ever-present and real -- despite the advances in fire-proofing through materials and methods, there is still no fire-proof building (whatever Bradbury claimed in Fahrenheit 451...). Due to the enormous amount of people living and working in a high-rise and the difficulty of rescuing them, especially from the highest floors, a fire in a skyscraper is always a horrible occurrence.

In 1995 the New York Palace Hotel suffered a fire that started from electrical apparatus. No one was hurt and the guests were evacuated safely -- despite confusion and some people not hearing the alarms at all -- but the method with which the fire spread was all too well-known: through vertical service shafts that extend all the way to the top of a high-rise -- in this case wire arcs. Although the fire started in the basement, the worst damage befell the fifth and sixth floors! Moreover, smoke from the fire reached every floor in the building.

Despite the risks, far from all has been done to improve the fire-resistance of high-rises. In Chicago, for example, 1,110 out of 1,400 buildings over 27 m tall (at least eight floors) are without automatic fire sprinkler systems. The National Fire Protection Association has stated that sprinkler systems can deal with 98% of occurring fires. Moreover, retrofitting a sprinkler system to an old building is a relatively inexpensive procedure -- and one that pays itself back not only as a means of saving lives, but also in the form of lower insurance costs and lowered requirements for structural and surface materials as well as a "moral protection" in the case of a lawsuit...

Buildings of eight storeys or more especially require effective means to counter possible fire hazard because normal fire ladders can't reach higher than that eight storeys, or 27 m. If the ladder isn't enough and the service elevators (that are usually the ones used by firefighters) don't function or are unreachable, firemen have to carry their heavy equipment with them all the way up the stairs filled with smoke and toxic gases. In the USA, every year an average of 125 firemen die in these firefighting situations.

The skyscraper poses also several other challenges to fire-proofing and fighting, such as:

• In high-rises the amount of people present makes evacuation more difficult; they have to be moved down through long stairs filled with other panic-stricken people, at the same time allowing firemen to work effectively.
• The presence of a wide range of combustible plastics (for example the plastic coating of all the wires in the building), textiles and other smoke-generating materials creates a potential hazard in case of a fire; most of the annual 5,000 fire victims die to smoke or toxic gases.
• The vertical shafts for stairs and service cores can spread the fire and smoke above if not properly shielded and isolated.
• The large windows allow the fire to spread to the floor(s) above, even if the floors themselves were fireproof.
• Pumping of water to the highest floors requires either immensely powerful pumps on the ground or still-working in-building waterworks.

Despite such building material improvements as liquid-filled columns and flame shielding as structure fire protection, the horrible possibility of a fire in a high-rise must keep the designers on their toes. In the modern sealed buildings, the arranging of escape routes, adequate breathable air and dealing with the increased vertical spread of flame are a constant problem. When it comes to fire safety -- and safety in general -- a skyscraper may not be the best place to start experimenting.

The lack of a unified fire prevention legislation within the US may prevent rapid and uniform responses to new developments and threats, something that the countries with centrally governed building codes can cope with much better. As of 1996, there were no less than 18,000 separate codes in effect in in the US, many outdated. All efforts to produce a nationwide code have been fruitless so far.

Expanded from info mainly by PR Newswire and Archisite.

The terrorist attacks in NYC on September 11th 2001 of course gave a new urgency to studying the effect of fires in skyscrapers. The reducing of the effect of fires (and in the post-9/11 world the threat of additional impact from explosion blasts) after the collapse of three modern skyscrapers has made the experts study the facts behind the collapses in order to reduce the effect of possible future fires. The improved fireproofing and structural changes -- for example, unifying the buildings' frames by reducing the need of transfer trusses that span the large open spaces in the lower floors of many skyscrapers today -- as well as improved security, safety and evacuation measures are seen instrumental in improving the building type in the future.

Just like the 9/11 bared the vulnerabilities of the structural framework of a skyscraper in a fire, also the evacuation procedures and escape route designs were very severely tested. Although tens of thousands of people below the impact points managed to escape -- thanks largely to the type of structural frame of the Twin Towers and of course the emergency professionals -- the people above the fires faced more grim fates. Even though already the 1993 bombing of the WTC showed that a substantial rooftop helipad would be useful in emergencies of this type when 28 people were rescued by air, the antenna tower and other array atop the 1 WTC was re-erected in a way that effectively reduced the usability of the roof for rescue purposes; also at the 2 WTC the small helipad in the middle of the roof was surrounded by antennae. Even if the smoke had made a landing a bad move, a police helicopter hovering above the towers -- of type widely used in search and rescue operations and with a crew trained in rooftop rescues -- would have been able to carry out a hoist rescue of at least a handful of survivors. The unfathomable Port Authority decision to keep the metal doors to the stairs leading to the roofs locked took away even this chance from the people. At the 1 WTC, the first to be hit but standing for over an hour and a half, there would have been ample time for a helicopter rescue effort, even with the 100-meter antenna mast present on the roof. Although the city's fire code requires a means of reaching the roof, as a state agency the Port Authority didn't have to comply with these regulations. As it was, not a single worker above the impenetrable impact areas or visitor unlucky enough to be in the 1 WTC Windows on the World restaurant (luckily, the 2 WTC observatory was scheduled to open only at 9:30) survived. (It seems, however, that at least five people from the upper floors in the 2 WTC managed to escape, after all.)

See also: 9/11: Structural analysis

One part of the proposed building code revision would affect evacuation; the new requirement for the evacuation of a skyscraper would cut the time allowed for emptying a building to 30 minutes from the 80 to 90 minutes for the WTC towers. Also the escape stairs are a target of interest in the improved code: the width of the escape stairwells at the WTC was 1.4 meters, not enough for two files of people to descend simultaneously; the new code would widen the stairs to 1.7 meters and also improve the signage and emergency lighting. The inadequate fire protection of the stairwells themselves has led to calls for concrete-walled escape stairwells as well as special, fire-protected safe rooms for trapped people to await rescue. Also better protected elevator wirings, improved radio communications for the rescue personnel's use and the use of sprinklers in all high-rises are features of interest, with some calling for an even faster full implementation of sprinklers than the 15 years proposed by the Buildings Department. The NYC building commissioner is expected to present the suggested code changes to the Mayor in the early 2003.
29 November 2004: The revision of the city's building code, underway with the work of 13 committees, is expected to affect high-rise design in several ways. All new high-rises would have to have pressurized stairwells to prevent fire spreading through them to other floors, like in the abovementioned N.Y. Palace Hotel fire. With sprinklers expected to counter a part of the fire (and even developers willing to retro-fit 200 to 400 existing high-rises with sprinklers), there are talks of further reducing the requirements for structural fire-proofing from the current two hours (which was four hours in the old skyscrapers), although the idea has met strong opposition, not least due to the lessons of 9/11. These lessons, however, will include power grid-independent illumination for office high-rise exits and stairways as well as impact-resistant stairway walls.

26 November 2002: As so graphically shown on 9/11 with the fall of the 7 WTC, the effect of the fuel stored within buildings for generator operation -- either for additional electricity generation or as a back-up in case of blackouts -- can pose a serious hazard to both the occupants and the building itself. Already a back-up feature in several office buildings, the habit of inserting auxiliary generators and their fuel into a building got "fashionable" with the creation of the telecom hotels in the 1990s, in the wake of the IT boom. In order to generate grid-independent electricity to power the air-conditioning units and to provide back-up electricity, diesel-powered generators were installed into the renovated buildings, in many cases old manufacturing lofts. A case that has especially caught the eye of the fire department and the building code officials, as well as the ears of the neighbouring residents, is a large IT building in TriBeCa, half the size of the 7 WTC, that has a permit for 172,000 liters of diesel fuel, but actually houses over 305,000 liters in around 60 tanks. (As a comparison, another IT building has a permit for no less than 592,500 liters of diesel fuel -- no wonder the buildings have been left unidentified and their information, including location, removed from public records.) According to the fire codes, 1,000 liters per above-ground floor is an allowed maximum, providing that the fire protection is up to the requirements. Now even that existing code may be tightenened in order to face new, post-9/11 realities.
22 March 2003: A fire in the building took an hour and a half to bring under control, graphically highlighting the risks from the in-building fuel tanks.

Expanded from info mainly by The New York Times and The Wall Street Journal.

As a side-step, an area where safety considerations at last led to design improvements was the essential work of window washing -- an activity which caused 50 deaths every year. The installation of a sash swing to the building wall and the use of a cradle has improved safety considerably. Despite improvements, every year a few window-washers fall from heights, mostly to their deaths. The risks are in part lessened by training and letting newcomers to wash windows in upper floors and skyscrapers only after a few years' experience in less dangerous surroundings. Despite the risks -- or partly because of them -- the profession is attractive, not least because the best, and those with a long client list, can make a big buck in the profession.
"Some people climb mountains simply because they are there, and spend lots of money to do so. I climb out on a ledge simply because some windows are dirty. And I get paid to do so." Ivor Hanson

Expanded from info mainly by Nyc24.com

THE FIRE DEPARTMENT OF NYC

Only after some disastrous fires, like that of the Crystal Palace in 1858 (in the place of modern-day Bryant Park), did New York City form in 1865 a modern fire-fighting force instead of separate, even rivalling, bands of volunteers. (In some cases these "fire-fighting" groups could even start fighting with each other at the fire!)

This didn't prevent some major drawbacks from happening, though. In 1911, the fire in Triangle Shirtwaist Co. factory caused the death of 146 woman workers who were customarily locked inside to prevent them from leaving their work... Moreover, the equipment was often less than satisfactory: in very cold weather water could freeze as soon as it came from the pumps.

Today's FDNY (Fire Department of New York City) has a force of 11,000 firemen in its ranks, and they have over 350,000 emergency calls each year -- of which more than 100,000 are fires.

The New York City Department of Finance, with its duties quoted above, has no less than 965,000 properties in its assessment rolls and annually determines the value of these properties. The state of the real estate prior to January each year is used as a basis for the actual tax value calculations.

The properties are divided into four tax classes: Class 1 includes the lower end of residential properties (up to three units per building or condominium buildings of up to three storeys) as well as the vacant land for residential use; Class 2 is for all other primarily residential property; Class 3 is for utility company equipment; Class 4 encompasses all other property.

The amount to be taxed from the owner of the property is based on the estimated value of all of the real estate, ie. the plot of land and the building(s) on it. Department's assessors determine annually the market value involving the replacement value of the property, the recent selling prices of similar properties in the vicinity and the property's revenue-generating value for the owner (rents, sales etc.). A portion of this market value -- normally a fixed 8 (for Class 1) or 45 percent (other tax classes) -- with possible applied abatements, exemptions or limitations for portions of the property forms the taxable assessed value of the property. The value to be paid is determined by multiplying the taxable assessed value by the applicable tax rate for that building class (in 2002, 9.7 percent for class 4 and 11.6 percent for class 1 properties).
(See also PILOT (Payment In Lieu Of Tax) below.)

For a commercial tower block, for example, the department's assessment of the taxation will be performed as follows: the market value is calculated as the owner's income analysis; the assessed value is reached by factoring in the 45 percent multiplier for a Class 4 property; the long-term value changes are included as the transitional assessed value for the last five years; the taxable value of the property is reached after the deduction of taxation exemptions; the final (estimated) tax for the year is reached after multiplication by the tax rate. The Class 4 Empire State Building (B-B-L: 1-835-41), for example, had a 2001-2002 taxable value of 175.8 million which yielded the then-owners Trump Real Estate Partners a total tax of 17.172 million.

24/25 November 2002: The tax increase of 18 percent to counter the city budget deficit ($1.1 billion in 2002-6/2003 and an estimated $6.4 billion in 7/2003-2004) will put major pressure on landlords and property owners. As usually is the case, the rises are, however, likely to be passed on to the tenants and homeowners -- increases to an average homeowner's bill are likely to be $342 a year, a co-op owner's $483 a year and a condo owner's $788. The raise would affect mostly the middle-income homeowners, with a notably smaller impact on the higher-income owners.

The independent New York City Tax Commission reviews applications for correction of errors and inaccuracies in taxation.

As with the other functions within the construction and building ownership spectrum, bribery doesn't seem to be far from the tax assessment either. In May 2002 the owners of 296 office buildings and hotels in the city received notices to pay a total of $19 million in raised taxes, an average raise of 7 percent (with a 10 percent maximum). The case started to unfurl in February 2002, when Albert Schussler, the tax consultant for the owners of the properties, was indicted as a centerpiece of a tax fraud, along with 17 tax assessors. The recipients of the lowered taxes in 562 properties in all included several high-profile developers, including the chairman of the Real Estate Board of New York. Schussler, 85, charging steeply for his services, was known to be able make the city's assessors value the properties at a notably low value -- with the help of bribery, as it has turned out. A total of $10 million changed hands during the four years that the scheme was in action (in 2000 a veteran assessor had admitted receiving $4 million in bribes from Schussler) -- Schussler, an ex-assessor himself, had, however, used bribery in his dealings with tax assessors all the way since his retirement in 1967. The investigation may also lead to additional indictments as it progresses. Although the city gains $19 million with its reassessment of the property taxes, the total lost is estimated at $40 million, partly due to the maximum limit of the tax raise, partly due to the already passed deadline for residential taxation of 150 buildings. And the reassessed taxes are applicable for a commission review...
17 November 2002: Donald Trump has joined the fray by suing the city as well as the "beneficiaries" of the bribery scheme. He demands $500 million in damages from the city as well as lowering of the taxes of his Trump World Tower by $4.5 million, as the assessors involved in the bribery raised the taxes for buildings such as Trump's in order to conceal the lowered tax income from other buildings. This led to Trump having to sell the condos in the tower for lower than originally planned. 15 of the total of 18 indicted assessors have pleaded guilty and Schussler himself will face trial in January 2003.
19 January 2003: With Schussler, the center of the bribery scandal, dying of stroke in early January, solving of the case and the exact nature of the scheme will most likely remain unfulfilled. Schussler was to decide whether to plead guilty on the same day that he died -- rather conveniently for all those who had been involved in the scheme. The city still intends to pursue the case and recoup as much as possible of the millions that were lost, $160 million in the last four years alone.
19 September 2004: In January 2004, a settlement between the city and Donald Trump was reached; the assessed value of the building was dropped by 17 percent and the real estate taxes were cut by $97 million in a 10-year tax abatement program. In return, the Trump World Tower condominium has purchased certificates for the construction of close to 200 units of affordable housing in the Bronx, built by Atlantic Development Group, an affordable housing developer that manages 1,400 residential units.

TAX INCENTIVES
In order to attract companies and make them establish branches or headquarters within the city, the system of tax incentives, ie. reductions to taxation, has been established. The state law about the incentives requires the receivee to sign a document that especially states that without the incentives the company would have not been able to construct a new building or would have been forced to move out of the city altogether.
(The tax incentives are, of course, also used to direct other building activities, like controlling the "quality" of urban construction and public amenities, as well as the renovation of old buildings.)

One type of tax abatement program is the PILOT (Payment In Lieu Of Tax), in which part of the company's real property on the plot is deemed as tax-exempt. The actual tax is calculated by multiplying the assessed taxable value and tax rate with a, third, specially agreed tax exemption rate; the product determines the final amount to pay. The tax is often assessed on a gradual scale (especially in cases of expansion and improvement), with the full tax phased in over several years; the program can also include tax freezes for one or several years to act as a further incentive. The PILOT deals are sometimes used as an incentive for new or revitalizing development or simply as lease payments for city-owned properties a company occupies. The deals are negotiated by the city's Industrial Development Agency, and amount to tens of millions of tax breaks annually (2005/2006 FY figures).

The World Trade Center complex featured a special case of PILOT, with the Port Authority of NY & NJ (or after the 2001 transaction, the lessee) paying annually a fixed amount to the city instead of according to the assessed value of the plot and properties; the WTC was effectively a state enclave within New York City, similarly to the international United Nations complex in Midtown.

On the flip side of gathering top league corporations and their talent to the city -- and, in a way, also profiting the city architecturally -- there is also another reality. While the corporations do pay a small fortune of taxes to the city, the tax breaks themselves also remove a significant amount of tax income from the city's coffers (reductions worth $2 billion for 50 companies in the latter 1990s) and they also tend to move the taxation burden to the small and medium-sized companies, making them suffer proportionately more economically than the corporations that were offered tax bonuses.

Even the significance of tax breaks in keeping large corporations in the city (and making them expand and building new, taxable, offices) has been questioned with the emergence of cases like the Random House development in Midtown Manhattan. Here, the city officials announced that the already agreed-on $28 million tax incentives would be delivered only after a full environmental review was carried out, taking up to a year and delaying the project, the developers bailed out of the deal. Because, in this case, the zoning law does not require a review to be carried out, Bertelsmann could go ahead as planned, but without the tax cuts negotiated with the city. The company stated at the time that it will carry out its own environmental analysis, rather than a full review, and carry on with the original plans, resolving independently any problems that will be encountered.

If corporations afford to build skyscrapers worth hundreds of millions of dollars and at the same time walk away from not-so-insignificant tax breaks, did they need the tax reductions in the first place, or were they, after all, building to the New York City because they wanted to do just that, rather than directly wanting to profit economically. The strongest voices against the tax incentives even call it corporate welfare, especially during the times of economic growth. Many corporations haven't even needed to hint about leaving the city as they have been already approached with a tax break proposition.

The case of The New NY Times Building on Eighth Avenue is one such example that has been criticized as clearcut corporate welfare. The plot at Eighth Avenue between 40th and 41st Streets was part of the Times Square redevelopment area when developer Gary Barnett of Intell Management and Investment, owner of one of the properties on the block, proposed to develop an office tower there in 1998. Although rejecting the proposal in favour of a public auction for the developing rights, the private talks with The NY Times and their developers took over. (Subsequently, Barnett filed lawsuits about the constitutionality of the site condemnation for "non-public" use as well as the lawfulness of the heavily-subsidized deal with the NYT.) After the newspaper "threatened" to move 750 of its employees to NJ in 1999, the initial condemnation price that the city was to seek for the plot was set to only $85.6 million in these talks, even below the $102.7 million the builders were seeking. A majority of the plot price above that figure was to be, moreover, deducted as credits against the PILOT payments that the company will make according to an agreement with the city (approx. $14 million annually after the payments are fully phased in). The PILOT was, however, set notably higher than the builders wanted, $10 per sq.ft as compared to $4 per sq.ft. While not "terribly" below the estimated tax payment value of $11.62 per sq.ft, the calculated tax is based on a low-ish Midtown rent of $52, whereas the developer is planning to sell the space for around 50 percent more. The total abatements for the PILOT credits are estimated at around $80 million; $26.1 million in other tax breaks is also included in the deal. The low cost of the land is more notable if it is compared to the allowable development rights for the site. The NY Times plot will cost $62.50 per building sq.ft, whereas the auction price for the Milstein's plot directly to the north corresponds to $180 per sq.ft. A "norm" price for the neighbourhood is around $100 to $140 per sq.ft.
28 November 2004: The $175 million sale of the newspaper's current building at 229 W 43rd St. has led to calls for a revision in the financial incentive package for its new development. In the original calculations the newspaper stated it would to fetch only $45 million for the sale, less than half the $110 million figure the officials had themselves calculated for the transaction. The city and state financial package was to have paid for the extra costs of constructing an office tower and keeping in Manhattan the 750 employees who would otherwise have been transferred to NJ offices. Even if the cost of leasing back the sold headquarters building for three years is deducted, the profit from the sale would be $90 million. As for the land deal costs for the city, it has been estimated that the city would have to give up to $79 million in PILOT abatements for the part exceeding the $85.6 million.
12 January 2006: The condemnation process may add to the cost for the state; as the displaced owners' claims are being processed in the New York Supreme Court, the owners' representatives claim losses of $129 million in the remaining cases, the state only $45 million. Moreover, the state will have to pay an annual 9 percent interest on the portion exceeding its original offer for compensation.

An example of the constant unstability of the city-to-corporation financial dealings is the late-2002 statement by the Bear, Stearns & Co.: the financial firm threatened to move up to 1,000 of its employees from Brooklyn in NYC to New Jersey unless a substantial new incentive deal, third since 1991, is forthcoming to support a move into Lower Manhattan. The lease in its Metrotech location expires in 2004 and the company expects to get $40 million worth of tax breaks in a New Jersey location. In 1991 the company received $37 million in incentives like sales tax exemptions, property tax abatements and low-cost electricity from the Dinkins administration when it moved to Brooklyn's Metrotech. Even though this arrangement spanned 12 years, six years later an additional $75 million was provided by the Giuliani administration in a deal in which the company promised to remain in the city for 50 years, create 13,300 new jobs as well as keep 5,700 employees in the city (failure would result in millions in penalties, up to double the received incentives). The development of the new headquarters building in Midtown Manhattan was also included in the long-term promises.
19 January 2003: With the city refusing to provide a new incentive deal, the stand-off continues. Bear Stearns would suffer only relatively minor penalties if it moves the 1,000 employees to NJ, but failing to keep less than the 5,187 employees agreed upon in the 1997 deal would hit the bank at approx. $50 million.

The case of Goldman Sachs headquarters differs in being connected to larger issues like the overall Downtown revival and safety concerns around the WTC site. The company had first eyed the site to the north of the World Financial Center and collected various financial incentives, as is customary. After long feet-dragging and pulling out of the Downtown deal altogether in order to look for a Midtown location, the incentives were increased to $150 million of tax credits and $1.6 billion worth of Liberty Bonds. Not bad for a company that made $4.5 billion in profit in 2004. Goldman Sachs first rejected the idea of a sunken West Street that would have surfaced in front of the building, leading the city to drop its West Street plans. After the company made the decision to return, the security-related changes will include part of the sidewalk being taken up by security bollards and the traffic direction on Murray Street reversed to decrease traffic flow past the building. How serious Goldman Sachs really was about Midtown relocation is a matter of conjecture, given the lack of sites for such a large development, especially given the tight time-frame. However, one important aspect that the city and state had to take into consideration was the fact that other financial firms eyeing the WTC and its surroundings for relocation were taken aback by Goldman Sachs not being around, committed to Downtown. This time the financial deal isn't tied to any employment levels or new jobs created, although the company would additionally get $3,000 for each job that it adds to its roster in Downtown.

Not only the strictly corporate activities get offered tax incentives for remaining in the city: the Gulf and Western Industries, which owned the Madison Square Garden and NY Rangers and Knicks in 1982, was offered in excess of $125 million in order to keep the teams in Manhattan as its plan to build a smaller arena over the MTA rail yards in West Side was abandoned.

An example of a tax breaks proposition is the Reuters Building in Times Square, which will be a recipient of up to $62.9 million if all the conditions are met. A "base" compensation of $36.9 million over a timespan of 20 years will be provided for companies that invest -- like build a little skyscraper -- to the Times Square. If all the currently employed 1,800 people are retained, an additional $12.5 million worth of sales taxes will be deducted from equipment purchases; finally, if 2,349 new jobs are created over the next 23 years, $13.5 million will be added to the tally.

The Random House debacle, as isolated an occasion as it seems, may be a hint of city officials turning the weapon of tax incentives around, using them to make receivees carry out wanted procedures in order to get the bonus. In the case of Random House, the making of a full environmental review (about such factors as the effect on present traffic volumes or on neighbourhood conditions), in lieu of the more commonly used and less thorough environmental analysis. To counter neighbourhood opposition and possible lawsuits, the city said; to have a reason to pull the tax breaks, the company said. Some fear that the city may use the tax incentive card to force the developers carry out lengthy environmental reviews in order to obtain tax breaks. Introduced already in the mid-seventies, the extensive review requirements in the form of the Unified Land Use Review Process (ULURP) and environmental review are dreaded by the developers due to their high cost and the time they consume, 18 months and a million dollars being not at all unusual. Constant lobbying and political contributions are an integral (and expensive) part of being a NYC developer, but something that the local developers have, nevertheless, learned to cope with.

A change of plans for a building during a lengthy development, and after an environmental impact statement or review has been conducted, can provoke further opposition. For example, the Committee for Environmentally Sound Development, opposing the new (AOL) Time Warner Center, has estimated that the complex has grown 33% after the environmental impact statement was made back in 1997 (due to the difference between gross floor area and "usable" -- non-technical or basement -- space, the builders state). The result has been a request for another review and possible halting of the construction until the discrepancy is resolved.
4 Mar 2002: A 2001 lawsuit by the committee was unsuccessful in halting the construction, but the State Supreme Court nevertheless stated that the city should ensure that the original volumes are not exceeded, despite the city having already accepted the builders' calculations about the space usage. The battle still goes on, even as the twin towers are rapidly rising to their 230-meter height.

Corporations like Bertelsmann AG, the third largest media company in the world, may still afford to carry out the building projects, tax breaks or not. Even in the highly politicized and expensive backdrop of New York, New York. Or maybe just because of what it is.

TOP PROPERTY TAX DEALS IN 2006

For the fiscal year 2005/2006, the city's property tax abatement deals with 238 companies amounted to a total of $48.2 million, while they paid $61.4 million in PILOT payments. Of the total monetery value, 70 percent consisted of the 10 largest-valued deals -- the largest being the 1989 MetroTech deal with the Chase Manhattan Bank, then still an independent banking entity, valued at $8.7 million. The second largest was the 1993 Morgan Stanley deal for the 750 Seventh Avenue at $8.1 million, followed by a 1988 NBC deal ($5 million), Visy Paper's 1995/2003 deals ($3 million) and Larry Silverstein's early-1990s deal for the 120 Wall Street ($2.2 million).

RESIDENTIAL TAX INCENTIVES

Tax abatements are also an instrument used in coaxing developers or real estate owners to build residential buildings and restore old ones to modern-day standards. To make such construction tempting, the city has expanded the rent-stabilization, normally connected to lower rent categories or lower quality dwellings, also to the more luxury-brand residential buildings.

Under the program, owners of vacant or nearly-vacant plots will continue to pay only the taxes for undeveloped land for any such previously vacant, but subsequently built-over portion of a plot with a new residential building. Gradually, the taxation is increased to equal the actual value of the new property -- that takes place after a 10 to 25-year period of the reduced taxes.

Also renovations to old residences receive similar abatements, with the extra taxes for the improved real estate value only introduced after a period and even then reduced from the actual value.

In order to gain from the offered tax abatements, landlords have to maintain the featured residences rent-stabilized for the whole duration of the building's low-tax status. NYC's Rent Guidelines Board will then determine the maximum annual increases in rents, which cannot be exceeded. After the period determined for tax breaks is over, rent-stabilization is removed and the landlords are again free to make unrestricted raises to rents.

In the Manhattan Exclusion Zone, between 14th and 96th Streets, there are also other methods to gain the abovementioned, connected to the need for low- and moderate-income (40 to 60 percent of the median income in the NYC metropolitan area) residential construction. In a so-called "80-20" scheme, if at least 20 per cent of residences in a new building in the area are reserved for these tenant groups (or a whole building in another area), the developer gets 20 years' worth of tax benefits. A developer building to the area can also gain these benefits for 10 years by buying special certificates from the developers of these affordable apartment buildings -- a sort of commercial tax abatement "air rights" transfer.

After 9/11, the use of Liberty Bonds to finance development in NYC (originally meant for Downtown revitalization, but later expanded to other areas) was a sought-after means due to their tax free status. The original $1.6 billion total of residential Liberty Bonds were divided 50-50 between the city Housing Development Corporation and the State Housing Finance Agency. The city made its portion subject to a fee worth 3 percent of the bonds' value, used to subsidize a portion of new or renovated residential projects all over the city for affordable housing, usually requiring 20 percent of apartments to be available for low- or middle-income tenants. The state, on the other hand, requires the bond recipients to directly reserve 5 percent of the development for tenants making at most 150 percent of the area's median income.

Out of the US top 500, 45 corporations had their headquarters in New York City -- as compared the 1994 tally (49), the number has remained about the same. Many corporations have left the city, despite tax breaks, partly due to the lack of rentable office space, as the vacancies are in their low-tide and rents accordingly high. Acquisitions and mergers have also changed the map: the Citicorp (of the Center) was replaced by Citigroup after its acquisition by Travellers Group.

The "basic" NYC services of financials/banking, telecom infrastructure and insurances (as well as tobacco...) have retained their in-city supremacy (Bell merging its way into the top 25), with entertainment remaining in the 100s (non-NYC General Electric with its NBC in no.5) and advertising with Interpublic and Omnicom risen over 100 places. Also, Barnes & Noble has risen from their no.518 position to the list as 489th, perhaps a reflection of the book chain's online retailing and diversification of sales articles? On the other hand, the general slump in petroleum refining industry, with profits falling no less than 49%, explains the fall of Amerada Hess by 90 places...

As the list represents only the American companies with their HQs in the city, the US HQs of such international giants as Sony and (upcoming) Bertelsmann have been omitted, although they certainly have their effect in the city's economics and "prestige" value.

Below are the list entries for corporations with their HQs in New York City (all "happen" to be in Manhattan, BTW), with the ranking in the 1999 Fortune list (last year's ranking in parethensis), the industry it represents and the headquarters location in the city. As can be seen, the HQ addresses rather well reflect the entries on this skyscraper site, "which was nice". Note the car sales & services skyrocketeers United Auto Group's leap of modest 350 places -- no wonder, after all, they're housed in the Seagram Building...

The mid-2001 was a relative lull in the real estate market as the economic bubble had burst and the rents went down in unison with the indexes, the increased activity in the discount market balancing the loss of high-paying dot-commers. The office space market with its excess of 480,000 m² of space was beginning to reel with the landlords offering tempting new lease deals and, in case of subleases -- space leased to a third party by the primary lessee -- hefty discounts in price. The office space rents continued to run at the healthy $60 and $47 (per sq.ft.) level for Midtown and Downtown, respectively. Even though many companies in Downtown and Midtown South had either called it quits (in the early 2001, over 93,000 m² of space was vacated in the dot-com-land of Midtown South) or downsized their staffs and relocated some of their "back-office" operations out of Manhattan, the market seemed to be relatively under control as the companies still held onto much of the (empty) office space they had, keeping the market prices higher. The pre-9/11 office market in NYC, the tightest in the US, had only an average of 7.4 percent vacancy rate.

Acquisitions such as the Deutsche Bank's deal on the 60 Wall Street after it was vacated by the merged JP Morgan Chase were keeping also Downtown Manhattan in the game. New areas, such as the Midtown West in Hell's Kitchen/Clinton were studied as an expansion of the Midtown corporate enclaves that were getting increasingly filled with new office skyscrapers.

The situation was still just a balancing act that could be changed by a single occurrence like a drastic change in the economic situation -- more likely for the worst. And that occurrence came flying literally right through the heart of the NYC financial center in Downtown on September the 11th, 2001.

As Downtown Manhattan lay in ruins and under an acrid cloud, the financial firms that had already relocated much of their "back-office" operations to other locations on and off-Manhattan -- some unfortunately into the World Trade Center towers -- had to flee the whole affected Hudson River front of Downtown for other locations. An estimated of 650 companies and up to 100,000 employees were displaced by the attack and 1.4 million m² of space destroyed and 1.1 million m² damaged (in all, 30 percent of all Downtown office space).

Two-thirds of the companies displaced by the attack moved to other parts of Manhattan, only 9 percent remaining in Downtown. Many dispersed their operations even further; American Express moved their 3,000 workers into 63,300 m² of space in three locations in New Jersey and Connecticut, being HQ'ed in NJ. Of the ten large-scale relocation deals in the first ten days after the attacks, half of the volume went to Midtown Manhattan and the other half to NJ and Connecticut. In all, up to 30,000 jobs were relocated into suburbs from Downtown after 9/11.

An example of a relocation carried out by a major Downtown investment bank was the Midtown-bound move of Lehman Brothers. Located at the World Financial Center just across West Street from the WTC, the firm not only had to evacuate its 6,000 employees, but also had to take care of the latest computer data stored in its servers. The presence of a fully-duplicated backup location in Jersey City and a high-speed data connection between it and the WFC headquarters allowed the data, especially firm's algorithms and financial models used in financial analysis, to be transferred before the Manhattan data center was rendered inoperable. Notably, the IT branch reacted fast and ordered 900 kilometers of fiber-optic cable on 9/11 -- by the next day the Department of Defense had reserved all the fiber-optic supply for itself to deal with the Pentagon reconstruction. The direct income loss due to off-business time until the end of November was $400 million, and with the WFC expected to be out of action well into the next year, the firm had to assess the inventory for claims, get the operations underway and relocate staff. To deal with the immediate relocation needs, 37,000 m² of space at the Citicorp Center as well as substantial space within the Sheraton Manhattan and Sheraton New York Hotel and Towers hotels was leased for 600 personnel, largely empty as the hotels in Manhattan were at that time. The Jersey City location took 1,000 personnel and further 2,000 worked from their homes. Immediately after the relocation, and before a new NYC headquarters could be acquired, the London Canary Wharf location took over some of the firm's data operations as a backup site. In October 2001, just one month after the terrorist attacks, Morgan Stanley sold its almost complete 745 Seventh Avenue at Times Square to Lehman, thus allowing the firm to consolidate its operations in a Manhattan location. Morgan Stanley had also lost 22 floors of office space at the 2 WTC and three more at 5 WTC. The transaction took place because the functions planned for the new building weren't suitable for the displaced WFC-sections of the company, but undoubtedly also the newly-found need for dispersion played a part in the decision, located as the new tower was just across the crossroads from the firm's 1585 Broadway headquarters and adjacent to the offices at the 750 Seventh Avenue. The building transaction and post-9/11 refitting was helped by Lehman's $700 million total insurance payment, paid in large part within seven months, much sooner than in most of the post-9/11 cases. Lehman Brothers moved into the building in January 2002.

Of the displaced firms (as determined by the CoStar Group analysis), about 500 were small to mid-sized companies (of 125 or less employees and with space usage of 2,250 m² or less) that had over 3,500 different choices for new office space in Manhattan. The large companies with larger staff and space needs, however, had in all only 268 options available in Manhattan. That's one of the reasons that the large corporations opted to relocate operations out of Manhattan.

Of the new leases for office space of over 4,600 m² for the displaced, 65 percent were for spaces in Midtown, 17 percent in New Jersey, 9 percent in Brooklyn and Queens and 5 percent in Westchester and Connecticut. Of all leases, over 75 percent have been for locations in Manhattan.

In March 2002, the vacancy rate is 9 percent in Midtown (In June, almost 11) and 14 percent in Downtown, which translates into over 3.4 million m² of unleased office space. That is a million m² more than just before the attacks. The tenants' subleasing of excess space and the placing of recaptured office space into market, as well as the competition from cheap (a relative term) office space off-Manhattan have led to the increased amount of unleased space in Manhattan. In Downtown, as much as half the space available is in the sublet category, whereas in Midtown the figure is around 30 percent.
19 September 2002: The vacancy rate in Downtown is 16 percent (up from the 3.8 percent at the end of 2000); 20 percent if the vacant space not actively marketed is included into calculations. The World Financial Center, for example, has no less than 232,000 m² of vacant space.
25 December 2002: An Insignia/ESG study of the Downtown market in October showed a 14.5 percent vacancy rate in terms of unoccupied space; the figure for actually unleased (non-paid) space was approx. only 9 percent, though. These figures don't show the 24,000 m² in leases signed after the study.
12 May 2003: The mid-April deals in Dowtown dropped the vacancy to 12.7 percent (Cushman & Wakefield). The Midtown figure is 11.1 percent. Both are in fact lower than in any other major business district in the US.
21 June 2003: Midtown's Class-A space availability is a steady 10.2 percent, while Downtown fell to 12.3 percent since April (Colliers ABR).
30 November 2004: After the merger of Wachovia and Prudence, and the resulting excess of office space, the Downtown vacancy rate shot from 14.7 to 15.3 percent (CB Richard Ellis).
12 February 2005: The vacancy rate in Downtown is 15.8 percent and the average rent $30.15 per sq.ft, whereas in Midtown the figures are 10.7 percent and $50.29, respectively (CB Richard Ellis).
14 November 2005: With vacancy rates declining across the board, in October the office vacancy rates were 11.8 percent for Downtown and 8.7 for Midtown markets. The overall availability figure for Manhattan was 9.4 percent. Class-A vacancy for Manhattan was 8.2 percent. (Colliers ABR).
31 January 2006: In 2005, the Midtown vacancy fell to 7.8 percent, Midtown South to 7.4 and Downtown to 10.6. Overall Manhattan vacancy level fell from 11 percent at the end of 2004 to 8.4 in 2005, the lowest it has been in six years. Downtown Class-A vacancy fell by 43.5 percent to 10.1, although the volume itself was still the lowest in the market since 1992. Asking price for all of Manhattan rose to $40.58 per sq.ft and there were $15.1 billion worth of real estate investment sales in 2004. (Cushman & Wakefield)
21 March 2006: It is estimated that the office vacancy rate in Manhattan will decrease below 5 and 3 percent by 2008 and 2009, respectively. Despite ongoing or finished office developments, the construction of new office space has fallen drastically in the recent years, partly due to increased costs, partly due to the lack of suitable sites -- ones preferably with ample development rights as well as availability of public transport, a combination that is getting very difficult to find. The resulting increase in demand is expected to lead to rent increases, up to a whopping $90 per sq.ft. The problem is exacerbated by the fact that every year approx. 850,000 m² of leases is due to expire for the next 10 years; with existing leases facing considerable price hikes, it is feared that many of the affected 500 companies will eye locations outside NYC. (CB Richard Ellis)

See also: "So, whose Manhattan office market numbers do you believe?"

A serious consideration in the post-9/11 Downtown office market is the fact that the buildings directly affected, such as the destroyed World Trade Center complex and 7 World Trade Center and the evacuated World Financial Center, 130 Liberty Street and the 1 Liberty Plaza formed no less than 60 percent of the first class, modern office space in Downtown. These buildings with their modern cabling and wiring as well as large floor plates are/were well-suited for the activities of the financial firms. The loss of all that premium space has its effect on the area, although the previously-vacated space in other modern, major skyscrapers, such as the 55 Water Street, helps to deal with the immediate demand.

The development in Midtown after World War Two and the extensive construction of modern office buildings there (in the decade after the war more office space was built in Midtown than was in all of Chicago) was taken to Downtown only in the early 1960s when the Chase Manhattan Bank rose to the heart of the Financial District. The development was continued by the idea and subsequent construction of the World Trade Center as a hub for new financial and corporate clients, just like the pre-war Rockefeller Center in Midtown. All three developments also happened to be driven forward by the Rockefellers, although the WTC didn't for a long time attract very much interest from clients despite the cheap rents afforded by its status as state-owned real estate.

Although the World Trade Center (which was well filled and slightly above the Downtown average with its $50 rent by 9/11) was mainly a "back-office" location for most of the financial heavyweights under discussion in this section -- with the companies rather opting for their "own" namesake buildings -- Cantor Fitzgerald was one that was headquartered in the 1 WTC itself (and where they lost 658 of the 1,050 employees there).

The second large office complex in Downtown, World Financial Center, also on state-owned land, had the non-fortune of being finished just as the 1987 crash hit the market. Vacancy in Downtown hit almost post-1929 Depression levels at 22 percent and many buildings went into bankruptcy. The continued bad times led to such measures as the conversion of office buildings into apartments and the introduction of the Lower Manhattan BID.

The old reason for all the financial trader companies being located in Downtown, to be physically near the Stock Exchange for the completion of deals, was no longer necessary after the introduction of electronic communication with the exchange and from 1980 on the requirement of "presence" was discarded by the NYSE. For example, the First Boston bank made the move to Midtown Manhattan after it was discovered that the firm spent no less than $2 million every year on cab fares uptown. Some of the factors that affect clients' choice of a Midtown location over Downtown are the relative difficulty of reaching Downtown by mass transit, the lack of high-quality restaurants and the prior relocation to Midtown of other companies, ie. the potential clients.

The difficulty of getting Midtown-level rents in Downtown has discouraged the developers from building more office buildings into Downtown, whereas a number of high-profile skyscrapers have risen from the late-1990s onward in Midtown. The amount of construction in New Jersey has been largely due to the cheaper cost of land acquisition and construction (which must be cheaper about anywhere as compared to NYC...!). Both have indeed claimed office space users from Downtown even before 9/11.

After years of relocating into this more affordable space in "tech towns" like Jersey City across Hudson River, the early 2002 may, however, show signs of the tenants' flow to NJ slowing in favour of Midtown Manhattan. In many cases, companies are even relocating back into Downtown after having left the devastated southern Manhattan for Midtown and off-Manhattan locations. The returning firms to Downtown in the early 2002 include the following financial heavyweights:

Merrill Lynch and American Express are relocating a large number of their employees -- 6,000 and 4,000, respectively -- back into the 2, 3 and 4 World Financial Center next to the WTC "Ground Zero". On Merrill's (of the displaced the firm with most office space in Downtown, 290,000 m²) 2 and 4 WFC, even the previously vacant 42,000 m² has lately been the target for prospective tenants.
8 December 2002: With the law firm Thacher Proffitt & Woods choosing the 2 WFC over the 32 Old Slip, 12,800 m² of the Merrill sublease space has been taken off the market; the deal is also a coup in the east-west waterfront battle in attracting potential tenants.
8 February 2003: The property management firm Jones Lang LaSalle opens a branch in the building, to act as a base of operations for its Downtown business.
25 July 2003: A 9,300 m² deal with the State Street Bank will all but remove the surplus Merrill Lynch space in the building.
26 November 2004: American Express signed a lease for 14,400 m² at the 3 WFC; the company will vacate a total of 18,500 m² of space in the 40 Wall Street before its lease in the building terminates in 2009.
15 November 2005: American Express has taken 18,600 m² off Brookfield Properties at the 3 WFC. Brookfield, which owns half of the 195,000 m² building (Amex itself owns the other half), reports that it has now 21,400 m² left unrented. The Merrill Lynch sublease space at 2 WFC is now almost completely taken. Similarly, Brookfield's and Merrill Lynch's 4 WFC is fully occupied.

Aon Corporation from 2 WTC (losing 200 of its employees) is another company that is seeking relocation back to Downtown (125 Broad Street as one possibility) after occupying space in Midtown (685 Third Ave.) and off-Manhattan locations.
26 May/28 July 2002: The company has, after all, rejected a $5 million grant and will move permanently 800 of its employees to the Midtown Park Avenue Plaza (to be renamed the Aon Plaza) for a rent of about $58 per sq ft., occupying 25,000 m² of space. A small contingent will be left in Downtown.

Cantor Fitzgerald, reduced to 350 employees in the attack on 1 WTC, will stay in Midtown, as will Keefe, Bruyette & Woods (787 Seventh Ave.) and Sandler O'Neill & Partners (919 Third Ave.), both from the 2 WTC.
21 June 2003: The WTC leaseholding company is suing the firm for over $1 million in back rent for the time before 9/11; the firm has denied any obligation for a settlement.

Lehman Brothers, located at the 1 and 3 WFC (65,000 and 102,200 m², respectively), leased space from 399 Park Ave. in Midtown (as well as rented the whole 665-room Midtown Sheraton Manhattan Hotel for its displaced employees immediately after 9/11) and bought shortly afterwards the 9/11 the Midtown building that Morgan Stanley had been constructing as their new headquarters at 745 Seventh Ave.. Morgan Stanley themselves had already 46,000 m² of vacant space in Midtown after previous downsizing and the 3,700 from 2 WTC will probably be dispersed to the various locations in NYC and Jersey City.
12 February 2005: Lehman has finalized the deal for 28,500 m² of space in the 1301 Sixth Ave. The new space will be connected to the 745 Seventh headquarters through the Rockefeller Center underground concourse.

As a sidenote, the British Standard Chartered Bank, which moved its NYC offices to NJ after the destruction of the 7 World Trade Center, was put off by the hefty $75 sq.ft. price of space in the nearly completed 5 Times Square in Midtown and moved to the approx. $30 (per sq.ft) cheaper 1 Madison Avenue in Midtown South.

The engineering company DMJM+Harris/Arup is in March 2002 the first major occupant to obtain new office space in Downtown Manhattan; three floors in the 20 Exchange Place will house as much as 300 of the joint company's workers. The space has been subleased for 12 years from the Internet advertising firm Agency.com for a low-ish rent well below the $40 average price in Downtown (the corresponding price in Midtown is over $50).
10 November: The company has leased approx. one floor of additional space from Agency.com in the building, at $36 per sq.ft.

26 May 2002: KPMG, the third-largest accounting firm in the world, as well as the law firm Richards Spears Kibbe & Orbe are other two companies set for the Downtown, both into 1 WFC -- the latter having already closed the deal for 8,400 m². KPMG (currently based in the 345 Park Avenue) is eyeing 46,500 m² of space in the tower, previously occupied by the relocated Lehman Brothers. A total of five companies with over 10,000 employees are currently in discussions about Downtown office space deals.
26 June: The KPMG deal has, after all, fallen through as a result of something resembling an internal power struggle within the landlord Lehman Brothers. The nearly-finished deal on 41,800 m² of space within the 3 WFC (changed from the 1 WFC) has been changed to a hunt for Midtown space for the firm's 2,500 relocated employees, although there is still an effort to lure the firm to the Downtown. That could include the purchase of Lehman's space within the 3 WFC by the largest Downtown landlord, Brookfield Financial Properties, which in turn could lease the space to KPMG.
19 September: The fat lady is yet to sing: With city incentives worth $30 million, and Brookfield obtaining Lehman Brothers' 51 percent ownership of the building for $158 million, the company is once again eying the 3 WFC.
10 November: Still no deal; the company will wait "until after the election".
10 February 2003: The company will, after all, remain in Midtown, having struck a deal for space in the 345 Park Ave. -- a building it has occupied since 1968 -- for the next 20 years. There is an option for an expansion to up to 37,000 m².

1 January 2004: The expansion deal has been now signed, adding two floors to the company's space; the space was vacated by the law firm Morgan & Finnegan which left for the 3 WFC. The asking prices in the building vary from mid-$50s to $60, depending on lease status.

3 July 2002: The law firm Pillsbury Winthrop is negotiating a move away from Downtown, its home for 150 years. The target of relocation is the Times Square Tower and a portion of the space vacated by the Andersen Consulting, the building's main tenant. The company's 14,800 m² lease in the 35-storey 1 Battery Park Plaza expires in 2004. The move would be a further loss for the efforts to keep companies committed to Downtown Manhattan.
22 March 2003: A deal for 18,580 m² of space within the Bertelsmann Building is close to signing.

1 September 2002: New York Life Insurance Co. has relocated its Midtown sales branch with 222 personnel to the Silverstein-owned 120 Broadway. The new Manhattan General Office is located in a 4,100 m² sublease from Credit Suisse First Boston.

7 October 2002: Bear Stearns, HIP and CIBC are all eying the 55 Water Street. The companies are all looking for an approx. 25,000 m² swath of space -- the building should be able to accommodate them all as J.P. Morgan Chase has recently vacated 111,500 m² of space within the building. The asking rents are quoted as "the mid-high $30s".
12 May 2003: The Midtown health care insurer Health Insurance Plan of N.Y., or HIP, signed a 46,500 m² lease in the building in mid-April, the largest single deal in Downtown since 9/11. The deal received $10 million in federal grants.
29 November 2003: HIP is claiming even more space within the building by leasing the whole of 12th floor of the main tower, 5,600 m² of space, to supplant its holdings in the sloped northern annex.

8 December 2002: Deutsche Bank will finally move its headquarters into the 60 Wall Street, long after having obtained it. After being unable to unload it post-9/11, the bank took the $34.5 million cash grant and moves 5,500 of its personnel to the building.

11 December 2002: The city's Health and Hospitals Corp. will move 455 of its employees to 11,700 m² in the 160 Water Street. The public sector agency is not eligible for the cash grants offered to private companies. The rent difference between the Midtown premises and the new location is quoted as $10 per sq.ft.

12 May 2003: The Downtown law firm Cadwalader, Wickersham & Taft is seeking options in lieu of the 100 and 125 Maiden Lane, preferably in a single 46,500 m² space. The Downtown options in that scale are the 1 and 3 WFC.
17 February/22 March 2004: The firm has settled on a 20-year lease of 42,500 m² within the 1 WFC, in a deal worth a quoted $350 million. Lehman Brothers' available space within the building has shrunk from 65,000 to 13,000 m² since 9/11.

21 June 2003: Oppenheimer Funds has leased 18,600 m² at the 2 WFC for 10 years, returning to the WFC after their departure after 9/11. The deal leaves 14,000 m² of the building on the market.
Another significant decision was Goldman Sachs's five-year renewal of its 46,000 m² lease at 1 N.Y. Plaza, discarding NJ move plans.
13 December 2003/13 February 2005: Greed is good: As if constructing a 42-storey office tower in NJ (tenants: zero, tax breaks: $160M, plans: to occupy a quarter of the tower) wasn't enough, the investment bank is now seeking to erect another one, this time a 140,000 m² building in Lower Manhattan, catty-corner to the WTC site. Despite new construction without an anchor tenant in the immediate vicinity, the bank is adamant on building its own headquarters tower -- with the complimentary Downtown development financial aids expected in the tow ($1 billion worth of Liberty Bonds, $30 million in cash grants, tax breaks and discount electricity). The move does, on the other hand, make sense when considering the reluctance of workers to move to a NJ location and firm's the need to consolidate into a single main location in Downtown from its spaces in nine buildings (1.2 million m²).

2 July 2003: Thacher Proffitt & Wood is moving its 300 employees back to Downtown, to 13,000 m² of the 2 WFC, across the street from firm's former offices at the 2 WTC. The move will take place in the Fall of 2003.

17 February 2004: Morgan & Finnegan signed a 30-year lease for 9,300 m² of office space on the 20th and 21st floors of the 3 WFC, the first law firm to move downtown since 9/11. The firm was first eyeing Lehman Brothers' sublet space within the neighbouring 1 WFC, but the space was eventually taken by Cadwalader Wickersham & Taft. The rents are quoted as starting near $40 per sq.ft.

12 September 2004: J.P. Morgan Chase is seeking ways to dump 46,000 m² of space in Downtown, a consequence of downsizing after a merger with Bank One -- another block of similar size will be put on the market with lease expiration of the 2 Chase Manhattan Plaza in 2006. The volume represents a fifth of the bank giant's whole Downtown inventory. Space (candidly) on the market is from 75 Wall St., 95 Wall St., 4 N.Y. Plaza and 1 Chase Plaza, the last two owned by the bank. Entities like the Securities and Exchange Commission, TD Waterhouse and Newsweek are reported to be seeking space in Downtown, where the vacancy rate is approx. 13 percent.

Also Citigroup is upsetting Downtown revitalization balance: over 1,000 employees, mainly technical and back office personnel, will be moved to NJ from Lower Manhattan, although the bank has promised to refill the vacancies with better-paying jobs. Moreover, 750 employees are to be moved from Midtown to a new tower capable of holding 1,500 employees in Queens' Long Island City, next to the bank's 48-storey office tower. The bank expects not to vacate any of its office space in Downtown.

28/30 November 2004: The merger of Wachovia Securities with Prudential Financial has led to a glut of free space in Downtown. 55,700 m² of space vacated by Prudential at the 1 N.Y. Plaza will become available in the early 2005. Morgan Stanley is said to be interested in 18,500 m² of that, with another 18,500 m² for the firm's Dean Witter portion. Both are expected to move from 1 Hudson Square where they relocated from the WTC after 9/11. The rent is said to be in the $20s. Also, 37,000 m² of ex-Wachovia space at 199 Water St. is partly leased.
12 February 2005: Morgan Stanley has leased a total of 41,500 m² on six floors of the 1 N.Y. Plaza. The firm will relocate 1,450 employees from Midtown into the new space during the summer.

In Downtown Manhattan, a vital consideration has always been the transport to and from the Financial District. After 9/11, several subway lines leading to the area faced limited access and six months later the PATH line to New Jersey is totally out of order, although only one MTA subway line leading to the southern tip (through the destroyed WTC site) is not functioning. Reconstructing the mass transit into Financial District is important especially for the masses of employees commuting from across Hudson River -- and with the possible integration of the Long Island Rail Road, also from farther Long Island. That's simply one of the essential basics that a functioning Downtown can't do without if it is to continue attracting corporate clients.
26 June 2002: The $1.8 billion of Federal aid for Downtown transport reconstruction will be stretched to the limit even if only a portion of the proposed improvements -- in addition to the essential rebuilding -- are to be realized. So much so that the NY Senator Charles E. Schumer has proposed the incorporation of the $3.1 billion that was left over from the original GZ rescue and clearance package to be used for Downtown infrastructure. Whatever happens, the total bill for the works is estimated at approx. $7.4 billion. In addition to the rebuilding of the destroyed subway lines and stations, enlargement of the South Ferry station and connections to the ferry terminals will cost an additional $400 million and a connection between the Rector Street stations will add $80 million more. Overall security improvements to the subway will cost as much as $1.3 billion. The planned $750 million underground rail hub that connects the Downtown subway stations would be located either on the north-eastern corner of the WTC site or, alternatively, two blocks to the east, on a hitherto low-rise block at Broadway between John and Fulton Streets. The reconstruction of the PATH station at the WTC site -- with moving walkway connections to the nearby subway stations and a tunnel to the Fulton Street rail hub -- will cost $2 billion (notably more if the station will be moved to the location of the rail hub). Other studied actions would be the submerging of West Street along Battery Park City for $750 million (to $2 billion) and the extending of the Long Island Railroad and/or Metro-North to Downtown from Brooklyn and Grand Central, although the railway connection is very preliminary, $200 million would go just into studying its possibility.
17 August 2002: $4.55 billion of federal aid has been provided for the construction of a transport hub in Downtown, comprising of the original $1.8 billion for transport rebuilding and of $2.75 billion originally meant for the site cleanup. The latter is controlled by the Federal Emergency Management Agency (FEMA) and wouldn't normally be available for new constuction, only emergency rebuilding; the NYC redevelopment will, however, make an exception. The abovementioned reconstruction and improvements in Downtown Manhattan (not counting the actual construction of the Downtown rail links) are estimated to cost a total of $8.7 billion. The individual projects will be funded through applications to FEMA, with other funds provided by the Federal Transit Administration. The use of insurance proceeds from the subway and PATH rail insurance is also a possibility.
15 October: The advocates of the Downtown-Long Island rail link have presented proposals that range from a shuttle-type solution to a full-fledged Downtown rail terminal, with costs ranging from $2 billion to $5 billion.
22 March 2003: The WTC PATH rebuilding will receive $92.4 million in FEMA grants (part of the total of $400 million expected from the agency to the Port Authority), to cover half the costs of a temporary outdoor station, expected to open in December. The finalized station would cost $190 million, and the possible Fulton St. terminal would add $235 million more.
24 October 2003: On 22nd, the first test train pulled to the new, completed WTC PATH station after a Hudson crossing, marking the resumption of passenger service to the station two years after the station was destroyed and the tunnels flooded on 9/11.
17 February 2004: The station has regained much of its ridership since 9/11, with a daily average of 30,000 commuters using the station, about 12,000 more than the Port Authority had expected at this point. The figure is still, however, less than half the number that used the station prior to the attacks and the subsequent destruction of the WTC PATH station.
19 March 2005: According to a Congressional tax analysis, the Federal tax credits offered for the rail link from Downtown Manhattan to the JFK airport -- via LIRR tracks currently terminating at Atlantic Avenue in Brooklyn -- will yield only $727 million and not the full $2 billion that the city and state had been estimating -- or rather, hoping -- so far. The $2 billion would still be only one-third of the estimated total cost of the project. The MTA is willing to put in $400 million, provided a state approval for its capital program is forthcoming; the airport operator, Port Authority, gives an additional $560 million. The rail link under East River is estimated to be completed by 2013 if all goes well and used by 4,000 to 5,000 airport users and 100,000 LIRR commuters daily.

As for the city's finances, the loss of the World Trade Center and the lengthy stay of the World Financial Center out of the market will rob the city of a total of approx. $135 million in property taxes alone. Even the federal aid from Washington, $5 billion as an economic stimulus package, could also lead to the city losing because the NY city and state taxation is based on the federal taxes. The tax abatements, meant to bolster economic growth in general and thus in the long term to lead to increased taxation, could add to a loss of $300 million in 2002-2003, something that doesn't help the city's present precarious financial situation. Another much-discussed portion of the federal aid is connected to the $500 million cash grant program, the World Trade Center Business Recovery Grant Program, meant to bolster the finances of Downtown-located firms; it is feared that the economic handouts would in many cases benefit companies that are in fact heading out of Downtown. Many would prefer a program that improves the infrastructure, transport and services in the area, rather than straight financial support for specified companies. Lehman Brothers and Citigroup are such firms that are seen to undeservedly profit from the program; they'd be able to resell office space currently under their lease to other clients without need to lower the asking price as the new lessees' grants would pay for the price difference. The brokers, in fact, value the cash grants at approx. $10 per sq.ft, advising the potential lessees to apply for the financial incentives for Downtown companies...

The financial incentives package will provide companies south of Canal Street with a bonus of $3,500 per employee, rising to $5,000 for firms located near Ground Zero, like the World Financial Center and 1 Liberty Plaza.

(2 May/26 June 2002: The federal grant program for Downtown companies will have a "clawback provision", a condition that is designed to fulfill the program's aim of retaining jobs in the area. If a company fails to keep the specified number of jobs in the area for the designated time (an average of nine years), it has to pay back the money -- and with an interest, 16 percent for the time being.)

8 December 2002: In the 12 month period, $210 million worth of grants have been passed to 62 companies and schools with more than 200 employees. Criticism for handing out to companies that were either coming back anyway (like Amex, $25 million) or had already obtained property for relocation (Deutsche Bank, $34,5 million, with 1,000 personnel already present in Downtown) has been accompanied by worries about the insufficiency of the cash grants in the first place.

1 January 2004: The Empire State Development Corporation will be reclaiming $1.2 million of excess payments made to 66 recipient companies. The reimbursements have been mainly due to financial figures that haven't held up in audits made after the cash grant decisions have been made, leading to full or partial repayments. In addition to audit-based reimbursements, the fate of special reopening grants and businesses that have not reopened within a year of receiving the grant is still open and cases will be handled individually. A total of $558 million was paid to 14,215 businesses in the lower Manhattan, an average of approx. $40,000 per company -- generally higher for financial entities and lower for stores or restaurants.

Despite the financial incentives, $70 million expended so far, by late May 2002 only about 148,000 m² out of a total of 1.66 million m² of vacant office space in Downtown was leased. That despite the, in average, $15 per sq.ft cheaper rents in Downtown as compared to Midtown Manhattan (resulting in several millions' increase in annual rents, for example, $6 million extra for the Aon at Park Avenue Plaza) and the expanding of the cash grant program to the previously out of bounds companies like law firms (at least two Midtown law firms are planning to move all their operations to Downtown). The fact that the grants given are most likely not large enough to turn the heads of companies that have made up their minds about leaving Downtown, with the emotional and practical (transport, infrastructure) problems adding to that determination.

3 July 2003: As the gloom over Downtown is slowly turning into hopeful expectation, the Empire State Development Corp. has estimated that the grant program has helped to draw approx. 8,500 jobs to Downtown from outside NYC. The residential market in Downtown has also benefited from the financial aid, as well as from the extensive cleanup operations and the repair of services. The residential vacancy in Downtown is merely 1 percent, as opposed to the citywide 4 percent figure.

Even the venerable Wall Street institution, The Wall Street Journal may be permanently moving out of Downtown. Present in Downtown Manhattan since 1889, after 9/11 the newspaper's operations had to be dispersed into various locations from its offices at the 1 WFC. Although the seven floors used by the newspaper and the paper's parent company, Dow Jones (four of which are now, moreover, earmarked for subleasing to other tenants), are leased until 2005, the company is allegedly looking for new office space to recollect the newspaper again under one roof. Locations like the 55 Water Street on the other side of Downtown or even some Midtown office building are claimed to be under consideration. Should the newspaper move to, say, Midtown Manhattan, the move could be seen as a significant indication of the Downtown Financial District's unattractiveness for even that Wall Street's traditional voicepipe.
29/31 July 2002: "Downtown will always be our home." The Dow Jones company has returned to the WFC, collecting some of its operations back under one roof. Within a month, 400 of the original 800 employees will return to seven floors of the 1 WFC. 250 will remain in South Brunswick, NJ and a part will relocate from NJ to SoHo.

14 April 2005: The statements by the vice president of another Downtown fixture, the AMEX (American Stock Exchange), undoubtedly reflect the feeling of corporate majority in the area -- a perceived need for commuting and "quality of life" improvements in order to prevent (even more) job losses due to company relocations. Although craving for improved commuting options is laudable, a reality of increased private driving unhampered by delivery vehicles -- which, after all, "fuel" entities like these large financial firms -- or a Metro-North extension all the way to Lower Manhattan seems like a rather tall order. Even more so as the promised Federal financial support for Downtown reconstruction and improvements seems to have dwindled since 2001.

See also: Boomin' again - background to the 1990s construction boom and Telecommunications and companies