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Potential Seen for N.Y. Real Estate

By KAREN MATTHEWS, Associated Press Writer

Fri Oct 18, 2002

NEW YORK (AP) - With more than 12 million square feet of commercial space now vacant, can Lower Manhattan absorb the 10 million or more square feet of new office space being planned to replace the World Trade Center?

The real estate industry is divided on the answer.

Skeptics say Sept. 11 raised big questions about the future of commercial real estate in Manhattan. Others, like property executive M. Myers Mermel, say the next boom will create huge demand for office space.

"It's based on historical absorption patterns," said Mermel, who runs Tenantwise.com, an online commercial real estate firm. "At some point the broad market indices have got to come back, which will take the real estate market with them."

The current situation is not promising.

The official vacancy rate in Lower Manhattan is 13.4 percent, or 12.4 million square feet, according to real estate firm Cushman & Wakefield.

Yet the Lower Manhattan Development Corp., the city-state agency charged with redeveloping the trade center site, is planning for 10 million to 13.5 million square feet of new office space at and around ground zero. About 13 million square feet of office space was destroyed in the attacks.

Some experts say terrorism and financial industry trends may have put a lasting chill on demand for Manhattan office space, especially downtown.

"After Sept. 11 there's some real questions about the long-term trends for high-class office space in New York City," said Jonathan Bowles, research director for the Center for an Urban Future, a think tank.

"You've got the decentralization of the financial industry and you've also got a situation where if they do have a presence, a lot of the big financial firms much prefer to be in midtown."

One reason more square footage might be needed: Relatively little existing space is considered "class A" with high ceilings, climate control and modern computer and fiber optic lines.

"Clearly there's going to be a strong demand and a strong need to replace that class A stock," said Kenneth Krasnow, the head of Cushman & Wakefield's New York office.

There is also a movement afoot to fill financial industry vacancies by turning downtown into a biotechnology corridor. A group called the New York City Partnership proposed this month to convert 300,000 square feet into offices suitable for research and development.

Copyright 2002 Associated Press. All rights reserved.
 

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