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Downtown Firms Flock to Midtown

Hard-hit area loses thousands of jobs as major companies flee

By ERIC HERMAN
Daily News Business Writer

October 17, 2001

Since the Sept. 11 terrorist attack, many businesses forced from their offices have vowed to remain in Manhattan but not downtown.
Statistics show the majority of displaced firms are moving to midtown, cutting longstanding ties with lower Manhattan and taking thousands of jobs from downtown.

The area has lost an estimated 100,000 jobs, including the 50,000 positions at the World Trade Center, according to Carl Weisbrod, president of the Alliance for Downtown New York.

Some of those jobs will return, he said. But that depends on companies returning. Since the attack, 39 displaced firms have signed leases outside downtown, while only eight have done downtown deals, according to real estate company Cushman & Wakefield.

Real estate firm Julien J. Studley estimated that 9% of large firms displaced by the attack have elected to stay downtown and that 65% of the displaced companies have moved to midtown.

"The long-term outlook is very, very good. In the long term, downtown will get rebuilt," Weisbrod said, "In the short term, we face some serious problems."

The exodus comes after a period of high hopes for the area. Downtown had rebounded from its deep slump in the early '90s, when commercial tenants fled to midtown. But gradually, thanks to the city's booming economy, an incentive program and the transformation of many commercial buildings into residential, the area came back.

By last year, downtown commercial rents were hitting all-times highs. Real estate moguls tried to outbid one another for control of the Trade Center, and brokers marveled at the possibility of a 1.3 million-square-foot office tower attached to the New York Stock Exchange's new trading facility.

A Raft of Problems

But today, downtown's problems range from crushed subway tunnels and blocked transportation to employees' anguished memories of Sept. 11. The attack removed 25.8 million square feet of office space from downtown, nearly 24% of the supply, according to Cushman & Wakefield. Several companies reported moving to midtown because the space they needed was not available downtown.

"Lower Manhattan just became that much more of a difficult location to operate in," said Jerold Kayden, professor of urban planning at Harvard University and author of "Privately Owned Public Space: The New York City Experience."

The departing companies include the biggest names in financial services the backbone of the city's economy. American Express moved 5,000 employees from the World Financial Center to Parsippany and Short Hills, N.J., and to Stamford, Conn. Empire Blue Cross/Blue Shield, formerly in 1 World Trade Center, has moved 1,900 employees to Melville, L.I., and other locations for the time being. The company just signed a lease in midtown and is exploring a deal at MetroTech in Brooklyn.

Lehman Brothers, which had 5,000 employees and a long-term financial stake in the damaged World Financial Center, showed signs of leaving downtown for good when it leased much of 399 Park Ave. in midtown and bought 745 Seventh Ave., a million-square-foot office building near Times Square.

"Lehman's announcement to permanently move its headquarters to midtown is sort of the first shot across the bow for the downtown marketplace," said Matthew Barlow, executive managing director at Julien J. Studley.

Companies have not abandoned Manhattan, as many feared would happen in the days following the attack. Less than 20% of leases signed since Sept. 11 are for office space outside Manhattan, according to Cushman & Wakefield.

"The clear winner is midtown," said Myers Mermel, chief executive officer of real estate firm Tenantwise.

Union Square Move

Fred Alger Management, a mutual fund company that was on the 93rd floor of 1 World Trade Center, will soon move to a building near Union Square because the location is easily accessible from the PATH train, chief financial officer Greg Duch said.

"We don't know how long that downtown PATH [train] is going to be out," he said.

Real estate experts said government action is urgently needed to stanch the flow of jobs from downtown.

Ross Moskowitz, a lawyer with Stroock & Stroock & Lavan who once worked for the city Economic Development Corp., said tenants and developers need to see a "short-term and long-term solution" for lower Manhattan, and soon.

The plan, he said, should lay out the rebuilding of transportation lines and create a public authority that could override zoning restrictions and have the power to condemn property for construction.

"This is not something that can wait a year until the cleanup is finished," Moskowitz said. "Decisions are being made by major tenants."

Original Publication Date: 10/17/01
2001 Daily News, L.P.
 

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