Vacancies Down Around Ground Zero
Sunday, February 25, 2007; 1:34 PM
NEW YORK -- Rents are up and vacancies are down to pre-Sept. 11 levels in lower Manhattan's commercial real estate market.
The World Financial Center, just across the street from the World Trade Center site, is nearly full. And six years before its planned opening, private investors want to buy the Freedom Tower, the replacement skyscraper often derided as a new terrorist target.
"Six months ago, people would say that would be absolutely inconceivable," deputy mayor Dan Doctoroff said of interest in the long-delayed replacement for the destroyed twin towers. "It's not just one, but several parties that are interested in it."
More than five years after the terrorist attacks created a gaping hole in the Manhattan commercial real estate market, doubts are slowly fading about the return of the downtown financial district.
"We're in a very good situation in lower Manhattan. We really didn't expect to be there," said Kathryn Wylde, president of the Partnership for New York City, a business leaders' group.
The hijacked airliners that leveled the twin towers destroyed 13 million square feet of office space in the trade center complex alone, most of which hasn't yet been rebuilt. Companies in or near the trade center fled to midtown Manhattan, New Jersey and Connecticut.
The vacancy rate for the best office space in downtown Manhattan _ the nation's third-largest commercial market _ hit 17 percent in 2002, according to the Cushman & Wakefield real estate firm. At the end of last year, it was close to 7 percent, Cushman & Wakefield said. Another firm, Colliers ABR Inc., said its vacancy rate was at 6.8 percent last month, its lowest since August 2001 and down from 12.3 percent a year ago.
Monthly rents, around $35 a square foot two years ago, are at $45 today, the firms say. Some developers, including trade center developer Larry Silverstein, are signing $70-a-square-foot deals for space in 7 World Trade Center, which was rebuilt and is two-thirds leased since opening last May.
"To most observers, these signs were not as readable for them as they were for me and for others like me in the business," said Silverstein, who leased the trade center weeks before the terror attack and is building three new towers on the site. "I said to myself, it's just a question of time."
Silverstein and others have several theories why the market has rebounded _ the creation of thousands of new apartments downtown, giving companies the opportunity to have employees work close to home; billions of dollars to rebuild two major transit hubs, although most work won't be complete for at least two years; and the much more expensive, space-squeezed midtown Manhattan market.
"It's the low-cost alternative to midtown," said Melissa Coley, spokeswoman for Brookfield Properties, which owns most of the World Financial Center and other buildings near the trade center. "Plus, there's no space in midtown."
Still, politicians and prospective tenants have continued to express doubts in the success of new office towers at the trade center site, particularly the 1,776-foot Freedom Tower. Several companies have said in recent months they weren't interested, citing higher-than-average prices for downtown and fears that it would become a magnet for terrorism.
But recently, investment banks, hedge funds and others have expressed interest in buying the tower _ which has a construction budget of $2.9 billion _ from the government agency that owns it.
Said Wylde: "I think it's gone from a situation where while people are still not jumping up and down to be the first to move in, increasingly it's seen as a valuable long-term investment."