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Firms hunt for office space
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September 14, 2001: 1:51 p.m. ET
With 20% of lower Manhattan office space in ruins, real estate is scarce
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NEW YORK (CNNfn) - Even as rescuers continue digging through the rubble of New York's shattered World Trade Center, companies big and small are scrambling to find new office space beyond the heart of the world's financial center.
Office space in New York already was hard to come by before Tuesday's attack that destroyed the 110-story twin-towers and damaged several surrounding buildings at the World Trade Center.
"When you lose more than 16 million square feet of real estate in half a day...there's obviously a very intense search going on in this city and throughout this region," said Walter Smith, executive vice president of operations at Hartz Mountain Industries Inc., New Jersey's biggest real estate investment trust.
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Firms are scrambling for new office space after terrorists slammed two jets into the World Trade Center Tuesday, killing thousands (CNN/File) | |
The looming question for businesses once the grieving is done is whether to remain in downtown Manhattan or to relocate out of the city, spreading facilities out among several properties instead of concentrated in one vulnerable area.
"I think clearly the necessity of getting back to business is certainly foremost on everybody's mind. They're looking for desk space to accomplish that," said Mitchell Hirsch, CEO of Mack-Cali Realty Corp., one of the country's biggest real estate investment trusts. "I see a paradigm shift to some degree with companies making some long-term commitments due to uncertainty in the marketplace. They'll have less concentration in one or two locations. I'm definitely sensing that."
Hirsch and other real estate executives said Friday they have fielded overwhelming numbers of inquiries from former World Trade Center tenants scrambling for office space simply to keep their businesses operable.
One corporate real estate executive who asked not to be identified said his telephone began lighting up with calls within five minutes of Tower 2's collapse Tuesday.
Many companies are leasing space in New Jersey, where several already lease existing space from major realty firms.
"I don't think anybody truly understands what the conditions of all these other buildings are downtown yet. If that's true, then you have companies that have to make hard strategic decisions," one source said.
However, others believe downtown Manhattan will remain the vibrant hub of the financial district once the recovery is complete, something experts have said is likely to take years.
Hartz Mountain's Smith is among those who believe companies will remain in lower Manhattan, but believes they will branch out more to the surrounding metropolitan region.
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When you lose more than 16 million square feet of real estate in half a day...there's obviously a very intense search going on in this city and throughout this region.
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Walter Smith
Hartz Mountain Industries |
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"I believe that New York City is still vibrant. I think New York will still be the financial center. Today's communications technology allows firms to cast a wider umbrella under which firms would be able to locate people in and conduct business with what is bound to remain in Manhattan," Smith said.
About 27.5 million square feet of commercial office space, or 20 percent of the space available in lower Manhattan, has been destroyed or damaged, a real estate services firm said Friday. That could leave large corporations such as Merrill Lynch and Morgan Stanley little choice but to search outside the city for sufficient space to house their massive operations.
Several businesses in "Silicon Alley," the Internet technology development center just north of the Financial District, are offering prime office space to displaced firms for free until they can get back on their feet.
Stephen Swerdlow, president of the eastern division of C.B. Richard Ellis, one of the biggest U.S. real estate firms, told CNNfn Friday that, ironically, significant amounts of office space have opened up in New York as a result of the slowing economy. But six months ago, there was nothing to be had.
Still, the available space is in small pockets, suitable for small to mid-size firms, and not the trading floors, newsrooms and other large open spaces needed by major companies, according to a report in Friday's New York Times.
New York-based Grubb & Ellis said Friday that about 15.5 million square feet of the real estate was in the seven buildings destroyed in the blast, including 4.8 million square feet in each of the two towers of the trade center. Another 12 million square feet was in 16 buildings surrounding the trade center, including the three most prominent buildings that comprise the World Financial Center.
The firm estimated that 25.5 million square feet of office space is available for lease or purchase in Manhattan, although very little of it is the type of open space predominant in the World Trade Center and surrounding buildings. Another 22 million square feet was estimated to be available in the suburban counties surrounding New York City.
Larry Silverstein, the developer whose group bought the World Trade Center's 99-year lease in 1999 from the Port Authority of New York and New Jersey, said he is committed to help rebuilding the center, according to a published report Friday.
But Silverstein, whose group paid $3.2 billion for the lease, told the Wall Street Journal that he is not necessarily committed to building exact replicas of the towers. 
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