Long Haul but prospects up as downtown N.Y. recovers
By early September, lower Manhattan was flying high. The nonprofit Alliance for Downtown New York had spearheaded a dramatic six-year transformation of the area that had finally come to pass: The formerly buttoned-down, black-and-white financial district was blossoming into a technicolor community, with upstarts in high-tech and creative services adding spice to the commercial landscape; up-scale retail and entertainment catering to a fast-growing residential population and larger-by-the-weekend crows; and thriving cultural institutions fashioning the city's newest, hottest Museum Mile. But by the afternoon of September 11, the new downtown was at less than zero - and whether it can be raised from the ruins is anybody's guess. A total 28.7 million square feet of commercial space was either destroyed or damaged in the terrorist attack, resulting in a property loss exceeding$34 billion. Yet, despite the permanent loss of 13.45 million square feet at the World Trade Center - 4% of Manhattan's total commercial inventory -far more lower Manhattan office space is sitting empty today than it was before September 11. Neighborhood vacany rates have soared by four points to 11.3%, according to Insignia/ESG, with 3.35 million square feet of space coming on the market in October alone.
The combination of the softening economy and the blunt-force impact of the trrorist attack has led to large-scale divestiture of space, and ultimately negative net absorption: "More space has been added to the market than removed," notes Bruce Surry, executive managing director at Insignia?ESG. While there have been some high-profile moves to New Jersey, Westchester and Connecticut, "flight is not a big issue yet," observes Surry. Most displaced companies still feel they need the synergy and consistency of talent that only a Manhattan location can provide, he adds. But if the exodus from downtown continues, "Manhattan will lose."
Debating Location
It remains to be seen by whether more seriously displaced creative tenants will pick up the torch and return. Feelings are mixed, even within firms. At Two Twelve Associates, a brand-consulting and graphic design firm whose employees escaped from severely damaged 90 West St. with nothing but their lives, principal Judi Francis wants to return. "I'm a booster; I want to be there for the community," says Francis. She recognizes the steep climb to making lower Manhattan a thriving place again, but adds that "image builders have to reclaim down-town. Going back sends a message that we are strong."
But her two partners aren't so sure, Francis concedes. "They're concerned. Will the infrastructure be in place to support us? Will it be a happy prosperous, safe place to be?"
Staying the course
It's a whole different story in Tribeca, just north of ground zero, where the entertainment industry-heavy residential population remains committed to their beloved neighborhood despite its proximity to the devastation.
"We've seen absolutely no increase in the number of Tribeca properties coming on the market," reports Tricia Cole from the Corcoran Group's Soho office. "The reasons people want to live here are still here."
Tribeca apartment prices have declined by roughly 10% since August, reports Cole and Ellen Leon, Corcoran's executive vice president of marketing. But with prices down an average of 15% citywide, the neighborhood is faring better than most.
Corcoran is seeing a lot of traffic and lots of interest from prospective buyers. Still, it's too early to tell how the market is going to shake out. "We're taking the temperature every day," says Leon.