Home Search For Space My Tenantwise About TenantWise Contact



Market Analysis

World Trade Center Tenants Leave Lower Manhattan; Larger Tenants from Damaged Properties Follow. Many Tenants Remain Undecided.
New York, NY. October 1, 2001.

A majority of the tenants from the destroyed properties of the World Trade Center (“WTC”) have made long-term plans to relocate outside of Lower Manhattan. An initial inspection of tenants from the damaged properties surrounding the WTC indicates that a large number are planning on returning to their former offices once they are repaired. However, a closer inspection reveals that the largest of these tenants (accounting for 44% of the square footage of the damaged properties) have also made provisions to leave Lower Manhattan. (For more details, view the Special Report: Tenant Relocation Summary at http://www.tenantwise.com/reports/wtc_relocate.asp.)

TenantWise.com’s research indicates that there were 188 non-governmental tenants over 10,000sq. ft. in size in the WTC buildings and the 14 damaged buildings surrounding the WTC. The properties of the WTC that were destroyed account for 13.4MM sq. ft. of office space. The surrounding properties that were damaged account for 17.3MM sq. ft. of office space. It is anticipated that it will require 5 years to rebuild the destroyed properties and from 6 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.)
TenantWise.com surveyed 75 of the largest tenants from the destroyed buildings of the WTC. 47 of those surveyed have shared their plans for relocation and 40 of the 47 have made plans to relocate outside of Lower Manhattan. These 40 tenants account for 82% of the square footage of the 75 larger tenants surveyed. Furthermore, 11 of the largest tenants of the damaged properties surrounding the WTC (which represent 44% of the total square footage of the damaged properties) are also relocating outside of Lower Manhattan. Those destinations are only indications of deals in progress and some may be reversed. 28 companies from the destroyed buildings remain undecided.

From the perspective of companies returning to their offices, 31 of the total of 113 companies located in the damaged properties have stated their intentions to resume operations in Lower Manhattan. This represents only 17% of the total square footage of the damaged properties. However, 71 companies representing 39% of the square footage of the total damaged properties have not indicated whether they will return once repairs are complete. These companies may be focused on the grieving and healing process, they may be still getting settled in temporary space, or they may be withholding commitments before the restoration delivery schedule has been finalized by landlords. Some may even be withholding commitments with the hope of striking cheaper, long-term deals once the flurry of activity resulting from displacement quells.

While it is clear that companies are supportive of the State of New York in its time of crisis, it is also clear that many are not making plans now to return to Lower Manhattan. The decline of Lower Manhattan was predicted before in the early 1990’s, 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 at this time may make a quick recovery difficult. The following observations can be made based on what has transpired to date after the tragic events of September 11th:

10,000 Jobs Have Already Left. As a result of backfilling existing space, TenantWise.com estimates that large financial service firms (Merrill, Amex and Lehman) have moved approximately 2.6 MM sq. ft. of operations to New Jersey and Connecticut. This totals 10,500 jobs. These are high-paying, white-collar jobs that will pull other services like accounting, legal, and business services with them. Add this to people who lost their lives and New York State has lost 16,500 jobs in just three horrible weeks. Merrill has announced it will return jobs and vacate some of its New Jersey space in the future, so the numbers lost from Merrill may recede to some extent.

4,500 Jobs At Risk Within the Next Few Days For Lower Manhattan. Currently Empire Health Choice is considering moving 300,000 to 400,000 sq ft. to Brooklyn or 450 W 33rd St. Bank of America is choosing between two sites in Midtown for 150,000 sq ft. Oppenheimer is negotiating at 498 Seventh Ave (37th St) for 200,000 sq ft. None have begun to consider Lower Manhattan as an alternative to these long term locations. In contrast, TenantWise.com has learned that Lehman is considering taking 464,000 sq ft at 180 Water St. and that Gruntal and AON have begun to look Downtown. Perhaps one or more of these tenants will return to anchor Lower Manhattan.

The Status Of The Financial Capital Is At Risk. If the above jobs at risk this week leave with those already lost, over 21,000 jobs will have left Lower Manhattan. This does not include recent announcements of layoffs. The loss of these jobs will have a multiplier effect and produce overall job losses from companies that remain. As it now stands, only 88 MM sq ft. of usable office space remains Downtown. If leases roll on a ten-year cycle, a full 44 MM sq. ft. or 176,000 jobs will be at risk before reconstruction can be completed in five years, as these companies will have leases expiring within that time. The existing loss - if not combated with relocation of displaced companies to Downtown - will clearly jeopardize the remaining job population over the next five years.

Despite the indications and negotiations for locations outside Lower Manhattan, it is still possible for companies to return as sufficient Class A and B space exists to house them.

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