As of March 2002, six months after the September the 11th
terrorist attacks, the still-precarious office market in Downtown
is showing some signs of recuperating. Although the condition of
services and transit connections still is short of what the area
needs (and will be for some time to come), some of the financial
heavyweights have started to return operations to Downtown
Manhattan. As recipients of displaced firms, Midtown Manhattan
and New Jersey have been able to capitalize on the situation and
fill much of the vacant space caused by the "dot-com crash" of
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
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
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
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
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)
"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
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
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
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
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
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
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
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
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
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
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
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
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
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.
Whatever the relocation solutions for individual companies, 9/11
teached the hard way the value of dispersion of operations,
with personnel and company data spread out in different locations
to counter the new reality of international terrorism. Many
originally Midtown-based companies are looking to Downtown -- in
addition to locations out of Manhattan -- for the spreading of
their operations. Such recent movers include the Canadian Imperial
Bank of Commerce and the law firm Skadden, Arps, Slate, Meagher &
Flom. The lower rents for office space there are certainly also a
factor, saving notably in costs of operation. CIBC will be looking
for 28,000 m² of space in Jersey City or Downtown Manhattan
and expect to save as much as $12 million in rent expenses. Bear
Stearns is considering moving 2,000 of its employees from Brooklyn
to Downtown Manhattan, having also queried about city tax incentives
for the move -- the alternative being a move to New Jersey. The move
to Brooklyn in 1991, as well as the new office skyscraper on Madison
Avenue, was itself heavily subsidized by the city. At the same time,
many long-time Downtown dwellers, such as the
American International Group and
Bank of New York are dispersing their
offices to New Jersey or Brooklyn.
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
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.
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
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
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
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.
Second Ave. subway underway
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
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
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
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
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.
Info by Newsday, The New York Times, New York Post, New York
Daily News, New York Observer, Gothamgazette.com, Village Voice,
Deccan Herald, Businessweek, Business Wire, Fortune, Reuters, Site
Selection and NAI Direct.com.
See also: Boomin' again - background to
the 1990s construction boom and
Telecommunications and companies