One World Trade Center brings celebration and competition Downtown

As the signature tower opens to fanfare, there’s still plenty of empty office space in Lower Manhattan
By Rich Bockmann | November 01, 2014 07:00AM

Condé Nast’s arrival at One World Trade Center this month gives the Durst Organization and the Port Authority reason to celebrate.

In much the same way that the publishing giant’s move to Times Square in 1999 signaled a new era there, Condé’s move-in as the anchor tenant for the most high-profile office building in the country symbolically puts Downtown’s darkest days behind it.

And “anchor tenant” is exactly the role Condé is playing. Since the Port Authority of New York and New Jersey announced three years ago it landed the brand behind Vogue and Vanity Fair, more than 30 companies signed leases for 100,000 square feet or more in Downtown office buildings.

Add to that the retail complex incorporated into the Santiago Calatrava-designed transit hub, the Fulton Center Mall, the South Street Seaport redevelopment, an influx of retail along Fulton Street and a profusion of new residential developments, and Lower Manhattan has over the 13 years since the 9/11 terrorist attacks become one of the city’s most buzzworthy neighborhoods.

“Alltogether it’s changing, and again you get that vibrancy and energy and that wanna-be-Downtown syndrome,” said Tara Stacom executive vice-chairman of brokerage at Cushman & Wakefield, which is not only directing leasing at One World Trade, but also is one of the building’s tenants. “It’s once again going to put the full spotlight Downtown.”

At the end of the second quarter, Downtown leasing was up 34 percent year over year, the best surge the market has seen in 13 years, according to the Alliance for Downtown New York.

It’s taken some time to get to this point. One World Trade was mired in delays due to legal woes between the PA and the original developer, Larry Silverstein. After shovels were in the ground, the PA took over development duties and in 2010, brought Durst on as a partner.

Leasing was slow, however, and Durst had to reduce rents on the building’s middle floors earlier this year. But with a flurry of deals this year, roughly 60 percent of the building’s 3 million square feet is leased.

Last month, Cushman & Wakefield released an in-house study that showed One World Trade had a larger percentage of space leased up at opening than six out of the last seven speculative office towers opened since 2006, including Silverstein’s 4 and 7 World Trade, and Boston Properties’ 250 West 55th Street. Stacom attributed it to the property’s cache.

“It’s a recognized building and a recognized address that provides something more than just the real estate fundamentals,” she said.

But the tallest tower in the Western hemisphere may prove to be a double-edged sword. While it provided a spark that helped ignite Downtown, it’s also a 3-million-square-foot competitor to a host of other new and refurbished office buildings in the neighborhood.

In fact, five other buildings within a few blocks have more than 1.4 million square feet of vacant space combined. Silverstein’s 4 World Trade is the emptiest, with more than 900,000 square feet.

“Office space is about jobs. That’s what it’s all about,” said Marisa Manley, president of Commercial Tenant Real Estate Representation.

Citing state labor statistics, Manley said the sectors seeing the largest growth — healthcare, education and hospitality — aren’t the types that lease large blocks of Class A office space. The 15,600 professional-service jobs the city added last year, she said, would only support about 2.3 million square feet of office space across the city.

And, she noted, One World Trade is still 40 percent vacant. In a 3-million-square-foot office tower, that’s another skyscraper’s worth of empty space.

Last month, The Real Deal took a look at what’s leased and what’s not in the area surrounding One World Trade.