"Buildings of high quality in optimal locations benefit more from booms, and suffer less from declines," the report states. "The 25 buildings that commanded the highest rents in 1998 out-performed the rest of Midtown in both up and down markets. The premium is currently 85%. These buildings boast either iconic architecture, new construction or highly efficient space, all of which will be available at WTC."
They'll also have the benefit of opening after Manhattan's vacancy rate starts to decline from its projected peak in the first quarter of 2011, according to the report. Based on estimates of office-based employment by Moody's Economy.com, CBRE forecasts the market's vacancy rate peaking at 14.3% with a 50% sublease ratio or 17.4% with a 70% sublease ratio. Either way, it will be on a downward trend by the time Tower 4 opens in 2013 and Tower 2 opens in 2015.
Although the report does not predict how long either tower will take to lease up, it does forecast asking rents ranging between $77.01 and $93.68 per square foot for Tower 4 and from $91.47 to $107.83 per square foot for Tower 2. In 2013, top-tier rents in Midtown will average $100.14 per square foot with a 70% sublease ratio or $123.16 per square foot with a 50% sublease ratio, the report states.
Along with an improving employment picture by the time the towers at 150 and 200 Greenwich St. are completed, the SPI buildings will be coming into what the CBRE report calls "a greatly improved environment and amenity base." These include reopened streets in the neighborhood, a completed PATH station and transit hub, direct access to new WTC retail--and a completed WTC Tower 1, which is being developed by the Port Authority of New York and New Jersey.
The Port Authority and SPI have been at odds in recent weeks over the extent of development at Ground Zero. SPI CEO Larry Silverstein has insisted that at least two of his company's three towers should be built now and has called on the authority to backstop construction financing. For its part, the authority has maintained that Downtown's office market over the next several years will be able to support no more than Towers 1 and 4, and that the developer should wait until market conditions improve before building Towers 2 and 3, unless SPI is able to obtain private financing.
The stalemate between the two sides--each of whom need cooperation from the other in order to build out their portions of the WTC development site--led Mayor Michael Bloomberg to call a summit earlier this month. The mayor invited SPI, the Port Authority, Assembly Speaker Sheldon Silver, New York Gov. David Paterson and New Jersey Gov. Jon Corzine to join him at Gracie Mansion.
Prior to Thursday's summit meeting, Bloomberg was quoted in published reports as saying, "There's no easy solutions here and I don't think you can expect us to come out of that with a grand solution. It will probably be just sharing information at the very beginning. This is something that [deputy mayor Robert] Lieber's been working on, as has everybody else. And the bottom line is that the market is no longer there for a lot of the development we want to see get done, nor is the financing."
In a statement issued late Thursday afternoon following the summit's conclusion, Silverstein says his company appreciates the participants' efforts "to get the World Trade Center project moving forward. We feel that progress was made this afternoon and that everyone left with a better understanding of the challenges and opportunities that lie ahead."
He adds, "We are ready to sit down with the Port Authority to hammer out a revised set of agreements. As stated in the meeting, we will be guided in all discussions by a set of core principles: all the stakeholders, public and private, must make good on our repeated vow that we will never waver on our commitment to rebuild the World Trade Center." GlobeSt.com will provide additional reporting as information becomes available.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
