This year, Condé decided to take an additional 133,000 square feet at the building, now occupying floors 20 through 44—more than a third of the property. And though it's not yet official, Midtown law firm Chadbourne & Parke is said to be the next big tenant to make the move to the WTC.

For the remaining 40% of the building, Stacom says the Condé deal "ignited interest" in the communications and technology firms that are situated both in Midtown and Midtown South and which are now focused on Downtown. She tells Forum that several active negotiations are in the works. "While many firms may have considered Downtown as an inkling, now it is an absolute," she says. "Downtown is viewed differently and it's been a complete renaissance. It's attracting the younger communications and technology media firms because of Conde Nast."

Despite the tenant diversification at 1 World Trade and the successful lease-up of 7 World Trade, obstacles remain for Downtown. Namely, Wall Street profits, jobs and bonuses are likely to drop, according to a 2011 report from New York State Comptroller Thomas P. DiNapoli, who estimated the city could lose nearly 10,000 jobs in the securities sector by the end of 2012. This would bring total job losses in the industry to 32,000, making it the highest since January 2008. This phenomenon could create a ripple effect throughout the city's economy and impact office moves, sources say.

"Historically, the financial services sector has always had a big impact, but right now large financial services firms are downsizing," says Peter B. Hennessy, president of the New York Tri-State Region at Cassidy Turley. "You've got the Volcker Rule, which prohibits large financial institutions from doing proprietary trading. You're seeing people exit the proprietary trading business, and getting into the fast-growing smaller and mid-sized financial service firms. But the multiple of employees is not there."

According to Q4 data from Cassidy Turley, Lower Manhattan has 8.2 million square feet of direct vacant office space and 1.4 million of vacant sublet space across 252 buildings. At the WTC specifically, 50% of the 72-story 4 World Trade remains unoccupied, while the 3.1-million-foot 2 World Trade and 80-story 3 World Trade have not yet secured office tenants.

Last year, investment bank UBS AG mulled a move to 3 World Trade after the company cut 3,500 jobs and reduced its operating expenses by $2 billion, $150 million of which was tied to real estate savings. The firm signed a five-year agreement to stay at its longtime Stamford, CT headquarters following a review of its real estate requirements in the tri-state area.

Hennessy says this is part of a general trend in the financial services industry. "For example, if they are at a million square feet in New York City, they might have a 5% to 12% fluctuation in their space needs," he says. Smaller or more nimble companies that can use their space more efficiently can reduce their space needs by 5% to 6%, so they don't lease as much excess footage. All of this, he says, is leading to one of the real fundamental problems for Lower Manhattan: filling up space.

The implementation of the Dodd-Frank Act is high among industry concerns as well. "There's still some uncertainty in Washington about what the material impact will be and how it will play out," says Hennessy. All of these factors (the Volcker Rule, prop trading and Dodd-Frank) coupled with the downsizing of BofA/Merrill, the relocations of Nomura and Deloitte to Midtown, the 700,000 square feet currently vacant at 4 World Trade Center, not to mention the space that will still be vacant at 1 WTC, he says, all result in "a brewing storm."

However, Larry Silverstein, president and CEO of Silverstein Properties Inc., is confident that his company's three WTC towers will lease up as planned, despite media reports that 3 World Trade will be capped at seven stories. "We are talking with a whole range of tenants with respect to Tower 3," Silverstein tells Forum. "Just as we leased up 7 World Trade, the same set of dynamics may affect the lease-up of towers 2, 3 and 4."

Silverstein says while UBS was expected to be a major occupant of 3 World Trade, the company suffered a 75% drop in earnings followed by a rogue trader's loss of $2.4 billion before the deal was about to go forward. "That combination just killed that lease for them," he says, noting that despite the bad news, several interested parties have emerged. "The tenants we're dealing with are technology and communication firms—creative companies. There are some very large firms out there with leases maturing in 2014, 2015, 2016, 2017, and those are the tenants we're talking to."

When asked about the future leasing concerns at the site, Silverstein says "all you have to do is look out the window" at the activity occurring Downtown. "It's spectacular, although every once in a while there's a bump in the road and something gets unglued or a wheel comes off the wagon somewhere."

Silverstein explains that the leasing environment at the 16-acre redevelopment site has followed a similar pattern. Five years after 9/11, the commercial real estate community was skeptical about the WTC's return to the marketplace. Uncertainty and political controversy surrounded the entire site, calling into question the leasability of not one new skyscraper, but six.

The first tower to rise after 9/11 was 7 World Trade Center, a 52-story, 1.7-millionsquare-foot office building by Silverstein Properties. Since it was built on land Silverstein owned free and clear, the property was built largely without the disagreements that plagued the other WTC buildings. Still, the emotional factor tied to the attacks remained high, leaving firms wary of moving back to the place where the worst terrorist attack on America had occurred.

"The wounds of 9/11 were more raw," recalls Janno Lieber, the director of redevelopment for the WTC at SPI. "And it was not clear that Downtown had rebounded, and indeed would rebound, as a world-class business district. There was a sense that people might not want to go back to an office building with the World Trade Center address because of the negative overlay."

All of these factors helped to create a challenging leasing environment for 7 World Trade, but Lieber explains that the core appeal of the building's new construction and green features helped attract a diverse roster of tenants. One of the first to take space was the New York Academy of Sciences, which had been located on Manhattan's Upper East Side since 1949. Lieber says the deal was the beginning of Downtown's diversification—well before Condé made its commitment.

"They sold their townhouse on Fifth Avenue, moved down here, created a conference center and made this place a center of intellectual activity," he says. Shortly after, 7 World Trade got its first major anchor tenant. In September 2006, Moody's Corp. signed a 20-year, 600,000-square-foot lease to occupy 15 floors at the tower, making it the largest deal of the year—and a gamechanger for the leasing efforts at the site.

Then, in December 2008, WestLB, a German investment bank, signed a 15-year lease for approximately 129,000 square feet on the top three floors of the tower, moving from 1211 Ave. of the Americas. As a result, the building's lease up began to accelerate, Lieber says.

"For the traditional financial services companies, the fundamentals of this building— green, high tech, new space, highly productive for their workforce—trumped all of the negatives associations, which were more opinion-driven," he says. "It came to represent the diversification of the local business community. Moody's is the anchor, but for the rest of the building, you've drawn in all these creative firms, which are not historically the kinds of companies who wanted to be Downtown," citing tenants such as music licensing manager BMI and Mansueto Ventures, publisher of Fast Company and Inc. magazines. The building has now reached 100% occupancy after telecommunications firm MSCI Inc. signed on for 80,000 feet.

Going forward, Mary Ann Tighe, CBRE's CEO of the New York Tri-State Region, who represented Conde on its relocation to 1 World Trade (see story, page 26), says the industry can look at the state of Downtown's real estate in a positive or negative way. "It is a timing fluke that 2013 is when so much space will become available at the World Financial Center and at 55 Water St., and when the first of the World Trade Center buildings, 4 World Trade, will become available for occupancy, "she says. "At that time, the likelihood of the financial services industry taking up that space is probably remote because of the cutbacks that we envision. Even if there aren't cutbacks, everybody feels the absence of growth is a problem."

The upside, she says, is that it will cause Downtown's tenant base to diversify by virtue of the fact that growth is happening in other areas. "Media, technology, education, service firms—all are experiencing growth in Manhattan right now and, as a result, there are very few significant blocks of space available in Midtown."

Lieber agrees, noting that New Yorkers—and the world at large—are beginning to see what's really happening Downtown. "There's a sense of optimism that these buildings are going to be successful," he says. "None of us has a crystal ball, but we do have the experience. As we saw with 7 World Trade Center, you can open a building empty, but great companies will eventually fill it."