Home Search For Space My Tenantwise About TenantWise Contact



Market Analysis

New York: No One Is Betting Against It.
But, Then Again, Few Companies Are Betting For It
Effects: Higher Availability Rates, Decentralization and Dispersion

October 22, 2001

TenantWise.com has emerged as the leading provider of information concerning the dislocation of World Trade Center (“WTC”) tenants and the tenants of surrounding, damaged properties. As the first provider of a status report on all tenants affected by the WTC tragedy, TenantWise.com has supplied data to The New York Times, The Wall Street Journal, The Daily News, Newsday, The Post, (See www.tenantwise.com/press.asp for further details) and others as they reported on the tragedy, its effects on the New York economy, and the future of the real estate market in Manhattan and Downtown.

Now, one month after the attack, we are able to assess the effect of the disaster more clearly and make projections about the future of Manhattan’s office market. We have learned that, while the majority of corporations and their employees are committed to doing business in Manhattan, the tenants who represent the largest blocks of square footage in the affected area have chosen to backfill their existing office space in other locations, move to New Jersey, or relocate to Midtown. Although backfilling in Midtown and moving to New Jersey have become the solution for many of the largest tenants, the change in Manhattan availability rates may not be as pronounced as one might expect after such a great amount of office space was destroyed and damaged.

Situation Overview

The properties of the WTC that were destroyed account for 13.4 MM sq. ft. of office space. The surrounding properties that were damaged account for 18.5 MM sq. ft. of office space. (For further details, see Special Report: Damaged Areas at www.tenantwise.com.) In total, over 31.9 MM sq. ft. has been destroyed or damaged, a loss of 60% of Downtown’s Class A office space.

TenantWise.com research indicates that there were 187 non-governmental tenants over 10,000 sq. ft. in size in the WTC buildings and the 15 damaged buildings surrounding the WTC. It is anticipated that it will require 5 years to rebuild the destroyed properties and from 2 months to 1 year to repair the damaged properties. (This time frame may also lengthen if the ash contains unacceptable levels of asbestos. In that case, interiors will have to be abated, demolished and then reconstructed.)

We have learned that 47 of 73 tenants with over 10,000 sq. ft. from the destroyed buildings will backfill Midtown space or relocate to Midtown. Their square footage requirements account for 68% of the square footage that the larger tenants from destroyed buildings represented as a whole. The second most popular destination for destroyed building tenants is New Jersey with 8% of the total square footage relocating there. While 57 tenants of 114 larger tenants from damaged buildings report that they intend to reoccupy their offices downtown, (50% in number) they actually only represent 24% of the square footage that the larger tenants from damaged buildings represented. Another 25% of the square footage from damaged properties will relocate to New Jersey, and 26% will go to Midtown. As the largest tenants disperse, it is clear that the majority are leaving Lower Manhattan for Midtown and New Jersey.

From tenants in both destroyed and damaged buildings, a total of 8.3 MM sq. ft. is being backfilled or newly leased in Midtown, and 3.7 MM sq. ft is being backfilled or newly leased in New Jersey, for a total of 12 MM sq. ft. Together, the tenants from destroyed and damaged buildings indicate that a total of only 3.8 MM sq. ft., only 12%, of the 31.9 MM sq. ft. that was destroyed or damaged – have announced commitments to remain in or relocate to Lower Manhattan.

Before the attack on the World Trade Center, availability rates were 9.05% in Midtown, 7.60% in Downtown, and an overall 8.67% in Manhattan. We conclude that, if the corporations who have not indicated their plans for relocation follow the same patterns of relocation as the other companies that have announced plans, and if governmental tenants stay Downtown, availability would decrease by only 2.6%, 0.13% and 1.95% respectively, for Midtown, Downtown, and Manhattan as a whole.

Destroyed Property Overview

TenantWise.com determined that 73 tenants of over 10,000 sq. ft. in size occupied the World Trade Center complex as of September 11th. TenantWise.com has contacted these larger tenants and 60 of those surveyed have made plans for relocation and 53 of the 60 have made plans to relocate outside of Lower Manhattan. These 53 tenants account for 86% of the square footage of the 73 larger tenants surveyed. These destinations are only indications of deals in progress and some may be reversed, however only 13 companies from the destroyed buildings remain undecided and represent 10% of the square footage.

Surprisingly, while the largest portion of square footage from destroyed property tenants is relocating to Midtown, 42% of this space relocated to Midtown represents backfilling of already committed space and, as such, does not represent new leasing activity. The impact that this will have on Midtown availability rates, coupled with an additional 8% of square footage moving to New Jersey, is significant. One would expect that the transfer of occupancy in 5 MM sq. ft. from larger tenants to Midtown would consume much of the vacant space that Midtown had to offer, however, the significant backfilling movement causes Midtown space availability to decline only 2.9MM from the new leasing activity of tenants from destroyed properties.

For complete information on all 73 tenants from destroyed properties, please view Special Report: Tenant Relocation Summary at www.tenantwise.com.

Damaged Property Overview

To examine relocation from the perspective of companies that have the option to return to their offices, either in the near or not-so-near future, one discovers the lack of enthusiasm by corporate leaders to continue their business operations in Lower Manhattan. There are obstacles to re-establishing a business Downtown. 17 tenants, representing 53% of the total square footage of the damaged properties, have already committed to relocate in Midtown and New Jersey. 57 of the total of 114 companies located in the damaged properties have stated their intentions to resume operations in Lower Manhattan. They represent only 24% of the total square footage of the damaged properties. 37 companies representing 17% of the square footage of the total damaged properties have not indicated whether they will return once repairs are complete.

For complete information on all 187 tenants from destroyed and damaged properties, please view Special Report: Tenant Relocation Summary at www.tenantwise.com.


While it is clear that companies are supportive of the City and State of New York in its time of crisis, it is also clear that many are not betting on the future of Lower Manhattan. The decline of Lower Manhattan was predicted before in the early 1990’s, when availability rates there exceeded 23%. However, a rebounding economy and growth of the technology sector rescued the real estate market at that time. Given the recession now underway, the challenges faced by the Lower Manhattan market make a quick recovery unlikely.

Given that tenants representing 82% of the square footage occupied by larger tenants of the destroyed and damaged properties have reported a destination, it is possible to project the effect that the dislocation of all tenants into permanent locations will have over the next twelve-month period. We know that the larger tenants account for 19.6 MM sq. ft. of the 31.9 MM sq. ft. that compose the destroyed and damaged properties. Given that approximately 5,000 people were lost, that means, sadly, a commensurate loss of 1.25 MM sq. ft that will not immediately need to be replaced. 10.9 MM square feet remains comprised of non-governmental tenants under 10,000sf in size, and governmental tenants of all sizes. Making the assumption that all 1.8 MM sq. ft. of governmental tenants remains Downtown, this leaves only 9.2 MM sq. ft. of non-governmental tenants whose destinations are unknown. If we assume that the square footage of the unaccounted for and undecided tenants follow the existing pattern, availability rates may be as follows:

  Availability 9/11 Availability10/10 Availability If Government Tenants Remain Downtown And Unaccounted/ Undecided Follow Patterns
Midtown 9.05% 7.37% 6.45%
Downtown 7.60% 7.51% 7.47%
Manhattan Total 8.67% 7.41% 6.72%

We have found that from the 31.9MM sq. ft. of damaged and destroyed properties, only 8.4 MM sq. ft. will have an impact on Midtown availability rates and only 152 K sq ft. will affect Downtown availability rates.

Availability rates calculated above also do not reflect potential job layoffs, nor do they reflect the low-density layouts of many tenants. The ability some of the larger tenants had to absorb employees into existing space gives one a sense of the unused space currently being held on the books by companies in Manhattan.

TenantWise.com estimates that large financial service firms have moved approximately 4.4 MM sq. ft. of operations away from New York to New Jersey, Connecticut, and elsewhere. Large financial service firms are responsible for the majority of this movement that represents a departure of 17,600 jobs. Add this to an estimated 5,000 people who lost their lives and 22,600 jobs have been lost in over one month’s time.

Of the 187 tenants surveyed, new commitments to Lower Manhattan will account for only 1.9 MM sq. ft., assuming that governmental tenants of all sizes remain Downtown. Tenants representing only 9% of the 31.9 MM sq. ft. that was occupied have indicated plans to resettle their existing leased offices in damaged properties Downtown. The WTC Liberty Stimulus Package is clearly needed to make relocation and resettlement back to Lower Manhattan a reality. If companies do not purposefully move back to reclaim damaged space, then Downtown landlords will face an even tougher challenge in re-leasing their buildings in an ever more negative environment. The greatest period of risk is the next five years while rebuilding is taking place. If leases roll on a ten-year cycle, tenants representing a full 47 MM sq. ft., or 188,000 jobs, will also have the option of relocating before Downtown can be rebuilt.

As to the assertion that tenants are not relocating to Lower Manhattan due to the lack of available space, we have found 23 blocks of space, each over 100,000 sq. ft. available in the area.

We have heard from business leaders that it is not wise to bet against Lower Manhattan. We think it is time for business leaders to bet for it.

For further information contact::
M. Myers Mermel
Chief Executive Officer
(212) 943-7777
Caroline McLain
Chief Financial Officer
(212) 943-1902

© Copyright 2001, TenantWise.com Incorporated. All Rights Reserved.

Goods & Services     Privacy     Press     Terms of Use