The foolishness of locating much of the world's financial infrastructure on the tip of Lower Manhattan was obvious to many long before Sept. 11. What the attacks managed to do was extinguish many of the romantic notions that had kept firms devoted to Wall Street, replacing them with an uncharacteristic fear.

It's become commonplace to point out that, as far as property is concerned, Osama bin Laden's planes merely accelerated a demographic trend that had been in place in Lower Manhattan for several decades. Worried about the threat centralization posed to their systems and documents, and tired of the area's high rents, securities firms have been leaving downtown New York for years.

The pace had picked up in the summer before the attacks as a recession and bear market took hold. In one of many examples, J.P. Morgan Chase (JPM:NYSE) relocated 4,000 employees from Wall Street to New Jersey in June 2000. Sept. 11 simply threw the door wide open.

"It pushed everyone out of the boat," said M. Myers Mermel of Tenantwise.com, a commercial real estate firm. "Afterward, firms lacked a compelling reason to stay."

Not surprisingly, many companies whose offices were destroyed by the terrorist attacks left for good, including Cantor Fitzgerald, Sandler O'Neill, Fred Alger Management, Marsh & McLennan and Mizuho/Fuji Bank.

Trickling Out

Others followed. Morgan Stanley, the largest tenant of the World Trade Center, said last winter it would move 2,200 of its 12,000 New York staff to the old Texaco headquarters, a 720,000-square-foot space in Westchester. It scrapped plans to move into a tower in midtown and instead sold that property to Lehman Brothers, which gave up its offices in the World Financial Center.

And the New York Stock Exchange, which was laid low for four sickening days after the attacks, is building a second trading site away from Lower Manhattan.

At the moment, the area's viability as a financial center arguably rests with the continued commitment of three firms: Goldman Sachs (GS:NYSE), Merrill Lynch (MER:NYSE) and American Express (AXP:NYSE).

"We have been in lower Manhattan for 132 years," said Bruce Corwin, a spokesman for Goldman Sachs. "We are committed to it now as we have ever been." The investment bank will move its equities division to New Jersey by 2004, something it planned to do before the attacks, but most of what was on Wall Street before the attacks will remain there.

Merrill has returned to the two buildings in the World Financial Center that comprise its corporate headquarters, neither of which was heavily damaged.

"Returning downtown was never a question. The area has been our home since we were founded in 1914," said Selena Morris, a spokeswoman for Merrill Lynch. "It is the financial heart of New York."

Market Factors

A few things could slow the exodus of others. One of them is supply: as tenants flee, the area becomes less expensive. And, in fact, rent in premiere downtown office buildings is now about $44.50 a square foot, according to realtors Cushman & Wakefield, down from $47 just prior to the attacks. But they need to fall further. In Westchester County, rent for comparable space is $35 a square foot, nearly unchanged since the attack.

The government is also trying to staunch the flow with retention packages to businesses in lower Manhattan in return for long-term commitments to stay downtown. But so far, only 40 out of 140 eligible companies have agreed to the incentives.

"The level of benefits has not been sufficient to satisfy larger security and business-continuity concerns," said Kathryn Wylde, president of the New York City Partnership and Chamber of Commerce.

The other aspect, romance or symbolism, is harder to quantify. The words aren't as bereft of meaning on Wall Street as they are elsewhere because they have a role in both recruiting talent and attracting business.

"For a foreign company that wants to impress clients back home, an address on Wall Street is still important," said Christopher Jones, director of economic programs for the Regional Plan Association. "Having a link to what everyone has always identified as the financial district still has some weight."

A more likely scenario than the re-emergence of Wall Street as a financial mecca is its evolution into a more typical, varied city neighborhood. The trend makes sense because as high profile financial firms vacate, the area becomes a less desirable target for evildoers and could potentially seem safer.

"Financial services will be part of a broader mix of industries that rely on creative workforces," notes Jones. And nobody's ever tried to blow up Soho.