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Newsday

Officials Hopeful Ground Zero Lures Will Draw Renters

By PRADNYA JOSHI
STAFF WRITER

July 3, 2005

Attention real-estate shoppers: There's a great new sale for office space going on at Ground Zero, thanks to new city and state incentives.

And experts say those new financial lures that state Assembly Speaker Sheldon Silver shepherded through could be just the jump-start his downtown Manhattan district needs to help lift Ground Zero out of the political morass that has caused one delay after another.

All in all, the new state incentives, developer Larry Silverstein's agreement to match them, and other energy and efficiency savings could equal as much as a $20 per-square-foot discount on the new 7 World Trade Center and other Ground Zero buildings once they are completed. To date, Silverstein has not signed any tenants to 7 WTC, which is scheduled for completion early next year.

With Silverstein asking at least $50 a square foot in rent for 7 World Trade Center, the new breaks add up to real money for companies thinking about relocating to downtown.

"It's really changed the economics of coming to lower Manhattan versus midtown," said Richard Kennedy, senior director at the Cushman & Wakefield's Wall Street office.

Silverstein's exclusive brokerage firm said the incentives as well as the near-completion date are getting clients interested.

"This is one of the most efficient, safest and newest buildings in the country if not the world -- and it's one of the best economic values," said Steve Siegel, chairman of CB Richard Ellis' global brokerage services. He added his brokers have talked to law firms, investment banks and even cosmetics firms.

Silverstein said at a news conference last week announcing the new Freedom Tower design that his phone "has been ringing off the hook" since the incentives were offered, which will be paid for by the city and state. Silverstein said it's too soon to sign up tenants for Freedom Tower because that building is not expected to open until 2010, but he expects that he can secure them for the $750-million 7 World Trade Center quickly with the incentives.

Still, real-estate brokers acknowledge that it's been an uphill battle to get businesses to come back to Ground Zero.

Companies may be leery about setting up shop overlooking the construction pit at Ground Zero; the transportation connections to downtown, particularly for suburban commuters, still aren't as extensive as in midtown; and the downtown real-estate market still has a glut of office space available.

Ground Zero is competing with nearly 12 million square feet of vacant office space elsewhere in downtown, of which 5 million square feet is large blocks of space that a large company may want, said M. Myers Mermel, founder of TenantWise Inc., a firm that advises businesses on real-estate transactions.

In addition, Mermel said another 4.3 million square feet of space downtown is not officially on the market but sits empty and could be available for rent.

Despite those drawbacks, Silverstein Properties says 7 World Trade Center has many assets: "green" building codes that will cut the electric costs for tenants; natural light and special design materials to make office workers happy and productive; and sweeping views of the harbor and the city that many of the crowded midtown office towers can't offer.

Furthermore, with an address at 250 Greenwich St., Silverstein is also marketing the building's proximity to trendy TriBeCa with its shops and restaurants.

Brokers say one reason tenants have been keeping away has been Silverstein's asking price. According to Colliers ABR, downtown rents averaged $33.92 a square foot last month for the top-quality office space, which meant Silverstein was asking more than $17 above market prices.

That extra rent is "not outrageous for a new product but sits in the context of a lot of new vacancy" downtown, said one real-estate broker who asked not to be named.

Siegel of CB Richard Ellis acknowledged that the downtown glut hasn't helped but the firm also has only recently ramped up its marketing of the building.

Copyright 2005, Newsday, Inc
 

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