ONE YEAR : Aftermath of the Attacks
Finance Firms' Moves Diversify Downtown
Washington Post Staff Writer
Wednesday, September 11, 2002
A year later and the World Financial Center is a frontier town. Defiant
signs proclaim the pioneer spirit: "Johnney's Seafood is Back. C'mon in."
You see it in the faces. Lunch break feels like the first day back at school
after a long summer. Friendships rekindle with broad smiles.
Across West Street, what had been a smoldering wreck of unfathomable
destruction is now an orderly construction site -- the hulking cranes of
winter are gone, tangles of smoking steel replaced by a clean hole in the
In January, you could wander into the Financial Center complex and barely
find a soul. Now the Starbucks is packed, and if you want to sit outside at
SouthWest NY and watch boats bob in the marina, you will have to wait for a
"Every time a new restaurant or store opens, or one of our old hangouts
comes back, it turns into a spontaneous celebration," said Steve Carl,
senior vice president for technology operations at American Express Co.,
which has moved about 3,000 of a planned 4,000 employees back to the
Financial Center. Along with Merrill Lynch & Co. and returning Wall Street
Journal staffers, the American Express employees breathed life back into the
"Every time the elevator door opens I run into someone who tells me they are
overwhelmed by a sense of being back home," Carl said. But not everyone has
And once the current era of good feelings recedes, Carl and others will
confront the new reality: Wall Street, and the neighborhoods surrounding it,
is no longer the unquestioned center of global finance. And depending on how
the rebuilding process goes, it may never be again.
Whether this is a bad thing is open to debate. In many instances, Wall
Street's big guns (Morgan Stanley and Lehman Brothers Inc., among others)
have simply packed up and moved to glittering Midtown towers. Others,
including Bank of New York Co., are moving some employees to Brooklyn and
other boroughs, continuing a migration that began well before terrorists
toppled the World Trade Center.
Many city advocates praise these moves, saying as long as jobs and tax
receipts stay in the city, all is well. And despite early fears of a
post-Sept. 11 exodus to New Jersey, numbers so far indicate that 70 percent
of the office space destroyed on Sept. 11 that has migrated elsewhere has
gone to Midtown, while just 9 percent has crossed the Hudson.
Still, the list of blue-chip Wall Street firms no longer on (or near) Wall
Street is long and getting longer: Lehman Brothers, Credit Suisse First
Boston Corp., Morgan Stanley, Bank of America Corp. and CIBC, to name just a
few. According to some estimates, downtown has lost 100,000 of the 400,000
jobs it had before Sept. 11, most of which were in the financial services
and insurance industries.
Those who advocate for trying to keep as many big financial firms downtown
as possible contend that if the firms continue to disperse, another city,
perhaps Singapore or Brussels, could emerge as the world's biggest financial
marketplace, which would damage both New York and the nation.
Meanwhile, even some of the big firms still downtown have quietly moved some
employees elsewhere or are planning to soon. Goldman Sachs Group Inc., a
pillar of Wall Street since 1869, still has around 10,000 employees at 85
Broad St. but plans to move a significant number (the firm wouldn't say how
many) to a Jersey City tower in 2004. New York Stock Exchange Inc., the axis
around which the financial district revolves, plans a second trading floor
outside Lower Manhattan.
According to M. Myers Mermel, founder and CEO of TenantWise Inc.,
which monitors New York commercial real estate, only 25 percent of companies
with 200 or more employees downtown have made long-term commitments to stay.
On the bright side, Merrill Lynch, among the first back into the World
Financial Center, is committed to the complex at least through 2012. The
firm has moved 6,700 employees back in, nearly as many as were there before
the attacks. Firm officials say the slightly lower total reflects
bear-market layoffs rather than a decision to move employees to alternative
locations. American Express is also committed to downtown for at least 10
Nonetheless, with Lower Manhattan vacancy rates at around 15 percent and an
increasing number of big firms controlled by foreign conglomerates with
presumably little allegiance to New York or even the United States (Credit
Suisse First Boston, Deutsche Bank AG and UBS Warburg, for example), some
worry that Gotham could suffer the same fate as London, once assumed to be
global capital's permanent home.
For Wall Street to avoid that fate, urban planners, academics and real
estate brokers say the city, state and federal governments must focus on
three things: transportation, transportation and transportation.
The PATH train station that brought hundreds of thousands from New Jersey
must quickly be rebuilt. The new transit hub envisioned for downtown must
include a connection to Grand Central Terminal to link Lower Manhattan with
the Metro-North Railroad, which serves affluent suburbs in Westchester
County, N.Y., and Connecticut. The biggest dream of all: a new subway line
on Second Avenue to take pressure off the jam-packed Lexington Avenue line
and provide express service downtown from the Upper East Side.
More broadly, planners point to a need to rethink street patterns by opening
up blocks once cut off by the Trade Center while providing moving sidewalks
to connect one side of busy West Street to the rest of the financial
Experts say all this will require a federal commitment far larger than the
$20 billion already promised, at least $3.8 billion of which is earmarked
for transportation projects. Without a bigger commitment, they say, keeping
Wall Street on Wall Street could prove impossible.
"Without doing all this, it's very likely that they will restore the 16
acres of the Trade Center and in 10 years you will have a nice, shiny apple
in the middle of a big dead tree," Mermel said.
So far, much of the financial assistance for Lower Manhattan has centered on
offering tax incentives and direct payments to encourage businesses not to
leave or to come back. Such programs, initially criticized as too
restrictive, have recently been widened and have helped numerous small
retail and professional services firms stay afloat downtown.
According to a report by the city's comptroller, 8,768 firms with fewer than
500 employees have received grants totaling $240 million, while a far
smaller number of big firms have received much less. Urban planners say the
disparity reflects how little the incentives mean to big Wall Street banks
and brokerages that have balance sheets big enough to afford more expensive
Midtown digs or to build outside the city.
Lehman Brothers, for example, reportedly paid $700 million, or $700 per
square foot, for its new neon-soaked tower on Seventh Avenue near Times
Square. Meanwhile, Brookfield Properties Corp., the largest downtown
landlord, is said to be paying just $127 per square foot for Lehman's space
in the World Financial Center.
"Our fundamental belief has always been that the short-term incentives are
not going to address fundamental issues," said Thomas Wright, executive vice
president of the Regional Plan Association, which studies urban design.
"Subsidizing real estate construction is not going to help Lower Manhattan.
Building more civic institutions and open spaces and improving
In addition to funding transportation, Congress needs to pass legislation
making terrorism insurance more affordable for city companies, said Kathryn
Wylde, president of the New York City Partnership, which advocates for New
"No amount of subsidy is going to get firms, particularly major employers,
to stay downtown if they can't get insurance," she said. "And an incredible
number are unable to get it. And if they do, the cost is so astronomical
that it more than offsets any benefits they get from the relatively small
Even if Congress passes a terror-insurance bill and government at all levels
unites to dramatically improve transportation, experts tend to agree that a
very different downtown is likely to emerge in the next five to 10 years,
one that will include increased residential and retail development, more
small firms, and more tourism.
As an early indicator, experts point to the bitter invective New Yorkers
heaped on initial plans for redevelopment of the Trade Center site, plans
that would have restored all 13 million square feet of destroyed office
space. Who would fill all that space, many asked, citing high vacancy rates
and the trend toward Midtown development.
Instead, sentiment now seems to favor rebuilding on a smaller scale to
include a significant memorial, new housing (at high, moderate and lower
prices) and open spaces.
Already, most residents displaced by the attacks have returned. And housing
experts say incentives -- including awards up to $12,000 -- to get more
people to move downtown could lead to a new housing boom.
"In the end you are going to see a lot of new housing built downtown," said
Michael Schill, a professor and housing expert at the Robert F. Wagner
Graduate School of Public Service at New York University.
"One of the keys to success will be to see downtown become a 24-hour
community like much of the rest of the city, where people live in close
proximity to where they work and the residential population helps support
amenities," Schill said. "If someone could tolerate a period of disruption,
buying housing downtown could be a very good investment right now."
Mary Anne Tighe, a leading New York real estate agent at CB Richard Ellis,
said big commercial development will continue to flow toward Midtown through
late 2003, when new space in the area may finally run short. In the
meantime, Tighe expects improved infrastructure to attract residents and
small businesses downtown. Coupled with lower rents, this should once again
attract the big firms once Midtown space runs dry.
"At long last we will finally see a much more dynamic and extensive
residential population downtown, and that will support the business
environment," Tighe said. "There is no residential real estate developer of
any significance right now not thinkingabout what to do downtown."
Wylde of the New York City Partnership said tourism will also be a bigger
part of Lower Manhattan's future, as visitors who now come to Ground Zero
but leave without spending much money will have more options for dining and
"After several years of construction, we think Lower Manhattan will remain
the world's financial capital," she said. "But it's going to have less of a
concentration of big employers. We think the movement of smaller
entrepreneurs downtown, which started in the 1990s, will continue and become
a very important part of the ideal 24-7 community."
© 2002 The Washington Post Company