Trade center firms in `frenzy' to find new office space

650 are displaced

N.Y. vacancy rate lowest in nation

Some begin to look in N.J.

Terrorism Strikes America

September 15, 2001|By Meredith Cohn | Meredith Cohn,SUN STAFF

Just two days after the terrorist attack on the World Trade Center in Manhattan destroyed their 15th-floor offices, the 40 employees of John J. McMullen Associates Inc. reported to work - at the homes of two of their bosses.

Assured that all employees were unharmed and ready for work, executives began searching for permanent offices, but they have not found suitable space near their workers and their clients.

"It's been a bigger problem than the last time," said David F. McMullen, a vice president at the engineering and architectural firm, referring to the 1993 terrorist bombing that forced them from their offices temporarily. "We'll most likely end up in Jersey."

This time, there is nothing for them or about 650 other tenants of the World Trade Center and surrounding buildings to return to. They've found themselves competing for limited office space in a city that has the nation's lowest vacancy rate.

Although some businesses may choose not to open new offices, many have been scrambling to find anyplace with desks and Internet hookups to get running again.

Local brokers, many of whom do not have phones and Web access, have described the situation as a "frenzy" to get into new offices in New York.

And although on paper it looks as though there is enough square footage for all of the displaced companies, much of it is not downtown, not found in large blocks or just not as nice as the space was in and around the World Trade Center. Estimates put the loss of space at 17 million to 25 million square feet in nine buildings, although some damaged buildings may be repaired - and eventually, city officials say, they will encourage developers to rebuild many of the office towers.

The losses amount to at least 3.6 percent of the city's stock of office space, according to CoStar Group, a real estate information services company.

It's also about 2 million more square feet than all the offices in downtown Baltimore - or about 32 Legg Mason towers.

Some brokers say some of the largest tenants have found new offices in the city, New Jersey and other outlying areas, although none have made announcements.

American Express Co. will go to Parsippany, N.J., and another New Jersey location. Lehman Brothers Inc. has agreed to take space in Jersey City, N.J., said Patrick Robinson, managing principal at the Staubach Co., who did not represent either company. It's unclear whether the financial services giants, which each had more than 1 million square feet in the World Financial Center, will move permanently.

"There are compromises that have to be made," said Robinson, who insisted there is space in New York for companies that want it.

Some may have to take temporary space until more becomes available, he said.

State, city and real estate trade groups have set up an office to assist companies in finding a place to begin operations in the short or long term.

CoStar President and Chief Executive Officer Andrew Florance said CoStar is setting up a database for companies to find temporary and permanent space. Some companies that were unaffected by the attacks have offered free space in their offices or conference rooms, he said. He has heard of only a few cases of landlords asking for more rent than the going rate.

About 500 of the 650 or so displaced companies have small demands for space because they have fewer than 125 employees, Florance said. They will have the most options, but not all of the space is as nice as what they left, he said. "There is a reality, when looking at their options, there is no question they are going to be a little taken aback by what's there."

The misfortune of dot.com companies in the past year has left many spaces for rent in midtown, which had been the most popular section of the city for businesses in recent years, he said.

That will be good news to many companies that are insisting on staying in Manhattan, said Ray O'Keefe, executive vice president and regional managing director of Grubb & Ellis Co., a real estate services company.

O'Keefe said there is concern that large employers will leave, but he said he has seen a "spirit" in the World Trade Center companies. "Everyone is pulling together," he said. "There is patriotism and pride in New York. There is a willfulness ... not to be driven out. And most companies can be accommodated within Manhattan, but some won't, obviously."

Stephen Siegel, chairman and chief executive officer at Insignia/ESG, another real estate company, said he has also seen that spirit and expects even the companies that leave the city to return when it's financially and physically possible. He said he has heard of officials in cities such as Atlanta and Chicago aggressively courting New York companies.

"But there is no groundswell to leave," he said. "These companies care about their employees, and their employees are here."

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