Nevertheless, C&W president Bruce E. Mosler, commenting on the prospect of any commercial center approaching the stature that Downtown has always enjoyed, leaves no doubt of the firm's commitment and confidence in the future of Lower Manhattan. "Downtown remains one the largest and most vibrant office markets in the country--post September 11--second only to midtown and Chicago in size. I don't believe that any other regional marketplaces are competitive."
Yet, if there are any upstarts looking to get a leg up on Downtown, they won't be found among neighbors such as New Jersey, Connecticut or even our own suburban enclaves. While those areas have absorbed some former WTC tenants, markets such as Chicago, Washington DC, San Francisco, Boston and Houston should not be ignored as potential competition, the study says. While Wall Street is unlikely ever to meet its match in the financial arena, and in the end, most New York firms are here because they want to be here, C&W stresses that creative land-use solutions and quality development will be crucial factors in maintaining Downtown's status as the leading commercial office center.
The 12.5 million sf of class A office space destroyed when the World Trade Center towers fell is roughly equivalent to that of the entire central business districts of Atlanta or Miami, the study says. There were 39 tenants in the towers occupying more than 50,000 sf and 26 of those tenants had spaces of 100,000 sf or more.
However, the report adds that there were 67 blocks of vacant Manhattan office space exceeding 50,000 sf and 30 spaces of 100,000 sf or more when the attacks occurred. So, excepting a few of the largest tenants, the study concludes that most displaced firms have relocation options elsewhere within the city. Some large financial firms have already set up shop in Midtown and while short-term leases are tiding many companies over while they consider their futures, many big firms inked long-term deals that could keep some world-class business out of the Downtown submarket for good.
Many financial, law and insurance firms are loath to abandon their Lower Manhattan client and vendor base, however, and will settle for nothing less than Downtown space within spitting distance of Wall Street, the study says. But other firms are redeploying their work force to multiple locations throughout the city, suburbs and surrounding regions. Still, C&W maintains that despite recent reports, such decentralization is a trend established long before September 11.
Relocations to existing vacant space are keeping the city employed in the face of disaster. And sources at C&W say that Manhattan vacancy rates ultimately will remain largely unaffected by the tragedy and rents are not expected to fluctuate greatly. But it's the long-term outlook that C&W finds challenging.
"Our most important and highest priority is to reinvest in downtown by creating incentives through the city, state and federal government so tenants can stay and grow," Mosler says.
Despite the highest development pipeline in the last decade--there's more than 7.5 million sf of office space currently under construction in Manhattan--nearly 95% of it is pre-leased in build-to-suit properties, mostly in Midtown, the report says. Manhattan tenants looking for class A office space in newly constructed buildings currently have almost no options in the city, much less Downtown. Meanwhile other first- and second-tier cities across the country continue to bring class A office space onto the market.
Developments conceived here during the hot markets of 1999 and 2000 were shelved when the economy soured. And while some of those projects may find tenants and get back on track, most of the available sites are in Midtown. The trade center parcels notwithstanding, Downtown offers few sites suitable for office development. According to the report, only one new Downtown office property has been developed over the last decade and there is no office development currently under construction.
The biggest question mark, of course, is the trade center site, the development of which will doubtless be the center of widespread debate and arduous planning. As it considers its options, the study suggests the real estate and development communities look at the whole of Downtown, which still boasts more than 100 million sf of inventory.
"What should happen is not a public auction. We have a moral responsibility to rebuild the trade center in some form--as a tribute to those who lost their lives there. And that effort should be led by Larry Silverstein."
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