Cadwalader, Wickersham & Taft LLP, a big financial-services law firm, is moving into new digs at One World Financial Center this week, right across the street from the World Trade Center site, The Wall Street Journal reported. Goldman Sachs Group Inc. is building a $2 billion headquarters near the Trade Center site. And 7 World Trade Center will be the first of the destroyed buildings to reopen, late this year or in 2006.
A few blocks away, Morgan Stanley is leasing 450,000 square feet, returning downtown for the first time since 9/11, when its offices in the Trade Center were destroyed. And Newsweek magazine is looking at the possibility of leaving midtown Manhattan for a 175,000-square-foot space at locations including nearby 55 Water St.
Cheap rent is the main attraction. After the Sept. 11 terrorist attacks some companies fled downtown and others that remained moved some of their operations elsewhere to make sure any future attack couldn't shut them down. A nascent movement to turn the district into a residential area sputtered. Combined with the slump on Wall Street, downtown Manhattan's fortunes seemed bleak.
Now, a number of companies are returning downtown or expanding there, lured by rents that in some cases are half what they are in midtown. Another attraction is a growing sense that normalcy has returned to the area.
Work continues on 7 World Trade Center (right), the first building to be reconstructed at the site of the terrorist attacks in lower Manhattan.
New York's economy is also a big factor in the new activity: It's humming for the first time since the terrorist attacks. The city started 2004 with an 8.9 percent unemployment rate and finished it at 5.4 percent — the lowest since July 2001.
As the midtown office market heats up there are fewer big blocks of space available there for companies to relocate or expand. Historically, the midtown market, which at 234 million square feet is more than twice as big as downtown's, improves first and downtown follows.
The fact that downtown is so dependent on volatile financial-services companies means its fortunes can rise and fall quickly. With some Wall Street companies reporting record profits last year, an upswing seems to have begun.
In addition to the Morgan Stanley deal and the Goldman Sachs headquarters already under construction, Merrill Lynch recently took about 200,000 square feet off the market that it had been trying to sublet. American Express Co., based at Three World Financial Center, leased an additional 150,000 square feet in the high-rise, and the Securities and Exchange Commission has a 220,000 square-foot lease pending in the same building. TD Waterhouse leased about 140,000 square feet last month a few blocks away.
The rebuilt 7 World Trade Center will add 1.8 million square feet of top-end space downtown. Larry Silverstein, the World Trade Center leaseholder and developer of the building, has not had much success leasing the space. But sources familiar with the situation say several large companies, including Verizon Communications Inc. and the law firm Cravath, Swaine & Moore LLP, are looking at up to 500,000-square-foot blocks in the building, where asking rents are $50 to $55 a square foot.
Silverstein recently won a crucial victory in court that gives him an extra billion dollars to rebuild the 10 million square feet of buildings lost in the Trade Center attacks and yesterday he was granted an extra $75 million in Liberty Bonds, bringing his subsidized financing on the building to $475 million. His company will begin pouring the concrete foundations next month for the landmark Freedom Tower office building, slated to be the tallest in the Western Hemisphere.
Still, despite all the activity, the vacancy rate downtown is 13.6 percent, compared with midtown's 10.1 percent, says Cushman & Wakefield, and rents are still falling. Cadwalader is paying about $33.50 a square foot for its new space — about half what some companies were paying on leases signed before the Trade Center attacks.
