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Home arrow Real Estate News arrow General News arrow Experts on real estate answers queries on the recovery of Lower Manhattan

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Experts on real estate answers queries on the recovery of Lower Manhattan
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Saturday, 09 September 2006

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The commercial marketplace in Lower Manhattan has gone through some dramatic shifts during the past five years," said Robert D. Goodman, senior managing director for Studley Inc., an international commercial real-estate broker and advisor based in Manhattan.

Q: How would you describe the situation there just before 9/11?

A: Once the Internet craze bubble burst at the beginning part of 2001 — at the time when there was also a definite downturn in the economy — rental rates began to come down.

Q: How did 9/11 affect prices?

A: Because of the need for companies who were dispersed from the Trade Center and other buildings to find alternative locations, there was again a dramatic upturn in rental rates. A lot of these larger firms went and found some very expensive homes in Midtown or moved to New Jersey, Westchester and Connecticut. The smaller firms were taking space where ever they could in Lower Manhattan. Then, as companies continued to figure out what they were going to do for 2002, we started to see a trickling down of rents ... because there wasn't a lot of demand for tenants at that point to come downtown.

Q: When did the recovery finally occur?

A: It wasn't until the middle to end of 2004. The financial services community, which has always been the backbone of Lower Manhattan, came back to life. This industry was going through some significant increases in staffing. So come 2005, we're starting to see a slight increase in rental rates.

Q: What's the situation now?

A: In early 2006, we saw the most dramatic shift in pricing in Battery Park. The financial services community continues to grow, tenants who are in Midtown right now are being financially squeezed due to some dramatic shifts in rental pricing, there is little to no available space in high-end trophy buildings in Midtown. A lot of firms came to the realization that they could relocate to Lower Manhattan, move into buildings with stupendous views, buildings which have upgraded electrical and telecommunications infrastructures in place, and essentially pay 50 to 60 percent of what they would pay to be in a comparable building in Midtown. The other element is that there's been a tremendous change in the profile of Lower Manhattan. What had been essentially a business environment for its history is growing into a 24-7 business and residential community. Also, a number of the older, dilapidated buildings in Lower Manhattan ... have been converted for residential use, which reduced the inventory. Meanwhile, 7 World Trade Center was added to inventory this year, commanding rental rates in excess of $50 per square foot. There is also a government incentive plan that helps businesses come downtown.

Q: Why does the city want more businesses downtown?

A: It further diversifies the tenant mix downtown so that we are not as dependent on the financial services industry, as had been the case previously. It solidifies the business base and creates new retail opportunities.

Q: What do you see for the future?

A: What had been a somewhat isolated environment is going to become knitted together much more seamlessly with the rest of Lower Manhattan, which will help the marketplace from a commercial, retail and residential perspective. As a result of American Express, Merrill Lynch and (later) Goldman Sachs moving in, we're starting to see solidification of the financial community moving a little bit west and north. In the long run, we may see the Battery Park area becoming the focal point for the financial community, particularly with the new transportation hub, which is being constructed (for 2009-10). It will make the area easier to get to ... for commuters. Also, governmental agencies and other businesses will ultimately move into the new World Trade Center area. So I think the Battery Park area is in the early stages of a very dynamic transformation.

 

Edwina Baniqued

 
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