In World Financial Submarket, Silverstein, Brookfield Rule the Roost
Jotham Sederstrom Oct. 23, 2012, 7 a.m.
The 1 World Trade Center tower, which seems to spring into view from every vantage point these days, symbolizes different things to different people. To commercial landlords and brokers, it represents both a flagship for the Downtown area and a potential surge in competition. For those with a direct stake, it means the recovery from the terrorist attack is finally reaching the finish line.
“The sense of momentum and progress, which was not universal for years, is now palpable,” said Janno Lieber, who oversees design and construction at the site for Silverstein Properties, the landlord of the two towers that were destroyed 11 years ago.
Passersby can now see three of the four planned office buildings rising from the site, and about 5 million people have visited the 9/11 Memorial since it opened at the complex on the anniversary of the attacks last year, he said.
Silverstein owns 7 World Trade Center, which was the first building to open on the site of the attacks, as well as three of the four towers in progress. Silverstein’s 4 World Trade Center, which topped out at about 1,000 feet, will be open in a year, and the other two are expected to be complete by 2017, Mr. Lieber said.
“As the World Trade Center marches toward completion, concerns are rising about the potential for a glut of space to flood the market at a time when demand remains somewhat evasive,” Cresa, a tenant advisory firm, said in a third-quarter report.
The building at 4 World Trade Center will add about 2.3 million rentable square feet of office space to the market, about a third of it slated to become the new headquarters of the Port Authority of New York and New Jersey. 1 World Trade Center, which is majority-owned by the Port Authority and scheduled to open in 2014, has leased about 1.6 million of its 3 million square feet of space, mostly below the 65th floor Sky Lobby, said Durst Organization spokesman Jordan Barowitz. Durst has a $100 million equity stake in the building and acts as manager and leasing agent.
Mr. Lieber said 7 World Trade Center may prove to be a model in terms of tenancy in the neighborhood, “which, unlike your grandfathers’ Wall Street, is very much more diverse.” Moody’s Investors Service, the law firm WilmerHale, publisher Mansueto Ventures and a division of Omnicom Group, the international advertising and marketing giant, all have space there.
The prospect of competition looms largest for Brookfield Properties, owner of the World Financial Center, which sits in the shadow of the new tower; the four buildings, now undergoing a name change, account for more than half of the current space in the World Financial submarket.
Brookfield is in the midst of a $250 million makeover of the retail space at the complex, adding restaurants to appeal to guests of the Conrad Hotel across the street, and improving pedestrian access. The company is counting on arts and events programs like the Lowdown Hudson Blues Festival to build World Financial Center’s reputation as a destination for the increasing downtown residential population as well as tourists and today’s “hip” tenants.
“We control 8 million square feet right on the water,” said Jerry Larkin, the director of leasing at Brookfield Properties. “No other landlord has that.”
While it competes with the neighboring buildings, World Financial Center will also benefit from the overhaul of the transportation hub at the site, which will improve access for a growing number of workers who commute from New Jersey and Brooklyn.
“We look at it as a rising tide,” he said. “If they’re successful, we’ll be successful.’’
He also said World Financial Center will be offering space at a different “price point.”
Downtown brokers estimate World Financial Center rents may be $10 to $15 cheaper than at the World Trade Center. New, state-of-the-art Class A space in the Downtown area may command rents in the $80s per square foot, said Marc Shapses, executive managing director at Studley.
Class A space in the World Financial submarket averaged $54.19 in the third quarter, according to Cushman & Wakefield.