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National Disaster Forces Firms Out of Lower Manhattan
In the wake of the recent terrorist attacks, corporations,
developers and real estate brokers in the New York metropolitan
area have been working overtime to meet demand for office
and backup space. Some companies have been forced to move
from downtown, while others are initiating the move on their
own.
The types of office space in the highest demand right now
have been relatively new, low-level office buildings with
highly developed communication infrastructure and first-rate
power systems. Currently, the tri-state area has ample supply,
but this could dwindle over time. Historically, metropolitan
areas have been able to tackle the over-population issue by
building towards the sky. If companies do not want to go up,
the only other alternative is out. This is what seems to be
happening in downtown Manhattan.
On Oct. 8, Lehman Brothers (NYSE: LEH) made it official that
it would sever ties with Brookfield Properties (NYSE: BPO)
by moving out of the World Financial Center. Lehman agreed
to purchase a recently constructed 32-story Manhattan office
complex from Morgan Stanley (NYSE: MWD). This acquisition
will allow approximately 5,000 Lehman employees to relocate
from downtown to midtown.
Just the other day, Dow Jones & Co. (NYSE: DJ), the parent
of The Wall Street Journal, announced that they plan on permanently
relocating approximately 250 employees out of 1 World Financial
Center, and into their existing offices in South Brunswick,
New Jersey. This move will drastically reduce their floor
space in the WFC from seven to three. Despite the tragedy,
sources tell Stock Traders Press that Dow Jones planned the
move before hand in an attempt to cut expenses.
Recent channel checks and exchanges with members of the real
estate community indicate that many companies are actively
pursuing relocation options. Two major catalysts include issues
of geographic security and cost savings opportunities.
The commercial real estate cycle, from property surveys to
reviewing and signing the lease, typically falls somewhere
between 6-to-18 months, depending on the size of the firm.
The duration of this cycle combined with the already low Midtown
Manhattan vacancy rates, as shown in the accompanying chart,
indicate that real estate activity in the New York metropolitan
area should remain busy for the immediate future.—Staff
Analysts
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