TenantWise
Home Search For Space My Tenantwise About Contact



Login

Register
Search for Manhattan Office Space





Privacy

Brookfield Seeks to Keep Tenants Downtown

By KAREN HOWLETT

Tuesday, September 10, 2002

Richard Clark, chief executive officer of Toronto real estate company Brookfield Properties Corp., has been on a mission for the past year: to persuade major tenants not to flee the area surrounding ground zero.

He has had mixed results. Since terrorists reduced the World Trade Center's twin towers to rubble, many Wall Street refugees have not returned. And landlords have had little luck attracting new tenants.

In all, six buildings were destroyed in New York City's financial district last Sept. 11, accounting for about 13 million square feet of space. Another 23 surrounding properties, including four owned by Brookfield, were damaged, accounting for 21.1 million square feet.

Just under 138,000 men and women worked in these buildings. Nearly 48 per cent of them have not returned and about one out of every five floors of downtown office space is empty, according to TenantWise.com, a real estate company.

Brookfield, downtown Manhattan's biggest private landlord, has a big stake in the area's future viability. Mr. Clark, a third-generation real estate man, remains optimistic about the long-term prospects. "We're committed to downtown. We're anxious to continue to invest downtown. We think the future is very bright," he said in a recent interview.

Yesterday, he made good on that promise by announcing that Brookfield will purchase Lehman Brothers Holdings Inc.'s 51-per-cent interest in a tower in the World Financial Center complex for $158-million (U.S.).

The 52-storey building is the world headquarters of co-owner American Express Co. and one of four towers in the complex. Brookfield now owns 9.1 million square feet of office space downtown, including 100 per cent of two towers and a half interest in a third tower in the World Financial Center complex and One Liberty Plaza.

Lehman sold its interest in the tower as part of its decision to move its headquarters from the World Financial Center to midtown Manhattan. It was also the largest tenant in Brookfield's One World Financial Center.

Lehman's departure will not hurt Brookfield's bottom line -- the firm's 20-year lease requires it to pay rent regardless of whether it occupies the space. But it was a blow to Brookfield's efforts to persuade other displaced tenants to return, Mr. Clark conceded. Many of them joined an exodus to midtown or the suburbs, including Morgan Stanley, the largest securities firm in Manhattan.

At the same time, other major tenants have returned. Law firm Cleary Gottlieb Steen & Hamilton was the first major tenant back in Liberty Plaza last December. Merrill Lynch & Co. Inc. returned to the World Financial Center five weeks later, and American Express is back in its building in the complex, albeit with fewer employees.

But many former tenants are still leery of returning. Their reluctance is compounded by the economic slowdown. In July, the vacancy rate in lower Manhattan for class A office space -- a real estate term for properties built after 1970 and outfitted with the latest technology -- soared to 14.7 per cent, according to commercial real estate brokerage Colliers ABR Inc.

That's more than double the 5.8-per-cent rate last July, and the highest in five years.

In Brookfield's downtown Manhattan buildings, the vacancy rate doubled to 2.1 per cent at the end of June from less than 1 per cent a year ago. Most of the increase came from the loss of Gruntal & Co., a defunct brokerage firm that had more than 400 employees in Liberty Plaza.

2002 Bell Globemedia Interactive Inc. All Rights Reserved.
 

Goods & Services     Privacy     Press     Terms of Use