The World Trade Center's Rocky Real Estate History
If the new One World Trade Center had trouble attracting tenants, no one would be terribly surprised. For starters, downtown is no midtown. Not to mention, leasing three million square feet of office space takes time. Then of course there is the psychological barrier of its tragic past. Real estate brokers struggle to rent apartments that have had bed bugs; the magnitude of the memory here is, let's say, considerably larger.
So it seems like an encouraging sign that 1 WTC, which is scheduled to open in 2014, passed the 50-percent occupancy mark earlier this summer. Much of that has gone to the publisher Conde Nast, which will leave Times Square to anchor the building, taking about a third of its office space for itself. The Durst Organization, a developer that has a stake in the building, recently told Bloomberg Businessweek that it expects to have it "fully rented by the date of 2017, 2018."
That would timeframe would be light speed by the standards of the original trade center. In 1964, with that project struggling to gain momentum, Governor Nelson Rockefeller announced that New York state agencies throughout the city would be moving to the site. The idea was immediately slammed by business leaders who saw it as clear evidence that the project had no legs. "The Governor is using taxpayers' dollars to bail out the Port Authority," one critic told the New York Times. "There is no need for the World Trade Center and there are no tenants."
Rockefeller's plan did get things moving. Construction got underway and, in July of 1969, the state announced it planned to uphold the lease over the protests of state representatives and the Manhattan borough president. In 1974 the state agencies moved into 56 floors of the south tower (and almost immediately contended that Port Authority was overcharging the rent). Still others were hesitant to make the move, particularly in a bad economy, and as of 1979 the trade center still wasn't completely tenanted. Alan Oser of the Times called it a "thirsty sponge over the downtown office market."
Brian C. Anderson, writing in the City Journal shortly after the 9/11 attacks, summarized the effects of Rockefeller's ill-conceived approach to the trade center:
When finished, the towers seemed to drain more life out of downtown than they added. When the trade center's initial 10 million square feet of office space first hit the market in the early 1970s, the result was such a glut of office space that lower Manhattan real-estate values sank at a time when the city was economically struggling and could least afford it.
Rather than attracting new firms to New York, as its planners thought it would, it drew tenants from other lower Manhattan offices, driving up vacancy rates throughout the area.
Of course things are different this time around. There were two towers, then, and more rentable space. Lower Manhattan is far more popular now; it may get ghostly at night, but Battery Park isn't anything like the desolate urban beachfront it was around the time of the center's construction. Perhaps most importantly, between the Fulton Center and the PATH station right at Ground Zero, the area is now a growing transportation hub.
The new iteration of the trade center does retain a modest government (or quasi-government) presence. The federal General Services Administration will take six floors of 1 WTC, and Port Authority and the City of New York together have about half of 4 World Trade Center. Still the big history lesson seems to have been learned: a proposal by the state back in 2006 to lease a million square feet of office space faced heavy criticism and never materialized.
Whether private tenants will pick up the slack remains to be seen. At $75 a square foot, rents at 1 WTC are affordable by Manhattan standards, and a tax break reportedly drops that figure about 10 percent. But Reuters recently reported that some midtown companies expressing interest in the site may simply be dangling it as a bargaining chip to lower their current rents. Welcome (back) to New York.
Top image: Shannon Stapleton/Reuters