Displaced Smaller Firms Having Trouble Finding NY Office Space
GRAND RAPIDS — Before terrorists reduced the office complex to rubble, the architect of the World Trade Center called it “a living symbol of man’s dedication to peace.”
Less than a week after the twin towers were violently toppled, many WTC tenants were looking for new space and, surprisingly, almost all wanted to stay in New York — already the tightest office market in the country with a vacancy rate of 7.4 percent.
According to Ray O’Keefe in the Midtown New York office of Grubb & Ellis, one of the world’s largest commercial real estate firms, 13.4 million square feet of office space was destroyed on Sept 11.
O’Keefe estimated that another 17 million square feet was damaged from the attacks. He added that of the damaged space about 5 million square feet suffered structural damage and will unlikely ever be usable again. Overall, the attacks reduced office space in Manhattan by nearly 4 percent.
To put those numbers in an identifiable context, downtown Grand Rapids has about 5.2 million square feet of office space, while the Greater Grand Rapids market has 13.2 million square feet. So the terrorist action completely wiped out the equivalent of all of the office space in the entire local market once, and all of the downtown office space two-and-a-half times.
At least 64 companies, agencies and organizations were headquartered in the WTC. At least another 112 had operations there. The large firms were having better luck in finding space in the area than the smaller and medium-sized companies were, and there are two reasons for that.
First, the larger companies use the largest amount of space and because of that are better connected to and represented by commercial real estate agents. Second, there isn’t enough space available in a single building to allow a large firm to move into one. So a big firm that needs 200,000 square feet may lease 20,000 square feet in 10 buildings and that squeezes the smaller companies out of the market.
“The big companies who have either real estate departments or good relationships with real estate firms like Grubb & Ellis are responding immediately and they’re going out to other places in New York, New Jersey, Connecticut, and places like that,” said Kent Hildebrand, CFO of Paramount Properties/Grubb & Ellis, a local commercial real estate firm.
For example, American Express leased space for its interim corporate headquarters in Jersey City and rented office locations in Parsippany and Short Hills, N.J., and in Stamford, Conn. The company said it leased the space for the “short and medium term” without revealing how long that will be. AmEx had nearly a million square feet at 3 World Financial Center, where some 3,000 of its employees worked.
“The real problem is smaller and medium-sized businesses that either don’t have the relationship with a professional adviser like Grubb & Ellis or don’t have their own internal real estate staff. They are really having problems finding space,” said Hildebrand.
“The big firms have a foothold in the market already because they’re working with advisers and they have the contacts. And it’s probably a little easier for them to write a check, I would guess,” he added. “So the demand is getting sucked up very quickly by these large companies, and I’m wondering if the small companies even get their telephone calls returned.”
One of the more surprising aspects of the incident is that most displaced companies want to stay, and, at least for now, few are looking to move.
“They want a New York presence. Whether they want half the presence they had before and will move half some place else, there may be some of that going on. But I don’t think there are too many firms that are planning to leave New York,” said Hildebrand.
“I don’t think you’ll see a big flood of people moving from New York. New York is still going to be the Big Apple, as near as I can tell.”
The towers are gone. But, apparently, the businesses are staying. And, possibly, the hope that WTC chief architect Minoru Yamasaki had for his creation also will remain.
“The World Trade Center is a living symbol of man’s dedication to world peace,” said Yamasaki. “Beyond the compelling need to make this a monument to world peace, the World Trade Center should, because of its importance, become a representation of man’s belief in humanity, his need for individual dignity, his beliefs in the cooperation of man, and through cooperation, his ability to find greatness.”