City sends positive message.

The city sends a positive message to tenants through The Downtown Revitalization Plan by showing them its willingness to put its own pocketbook behind the market's redevelopment. However, time will tell how the Plan will affect the margin of increased renting over deals already in play, as well as the rate of absorption of vacant space in the Downtown market.

"Although brokers report that the plan has stimulated tenant interest, the incentives alone will probably not be enough to create major change. They may, however, stop some of the bleeding and hopefully inspire a few companies to relocate to the area," contends Laurence Briody of Joseph Hilton Associates, Inc. (JHA). "Although consensus seems to be that the incentives offer an important vote of confidence to tenants, there will have to be significant infrastructure improvements, including enhanced transportation, retail amenities and educational facilities to give clout to the revitalization plan above and beyond a short-term, band-aid."

"Even with the numerous deals signed last year that took advantage of the Downtown Revitalization Plan, the Downtown market continues to struggle with major vacancies in Class 'A' buildings, many of which do not qualify for the Plan," said Kathleen Collins, senior director of JHA. "The major change which will most likely spur growth will come about as a result of the rehabilitation of existing office buildings for residential use. Hopefully, this will create a renaissance for Lower Manhattan. In the past, growth was generated when Midtown rents began to climb and created a price differential that drew prospective users south."

For the developer willing to take the first step, however, the proposed residential conversion tax abatement program provides a solid basis for investment. "For certain older properties with small floor plates, higher ceilings, views and ambiance, the prospect of residential conversion is promising," reports Joseph Hilton, chairman of JHA. "There is a definite market for interesting living space at reasonable rental rates."

Perhaps a residential enclave will develop around the incipient technology culture that buildings such as 55 Broad, the New York Information Technology Center, are promoting. The jury is still out, however, on whether or not the new tenants of Silicon Alley will stimulate the Downtown economy to the point where it is considered a healthy market. Unlike the Wall Street traders and bankers of the go-go Eighties, the new high-technology professionals are not generally considered to be expansive users of services and amenities such as restaurants - leaving the ripple effect of these users on the New York City economy questionable.

The struggling Downtown market, however, is not without its success stories. As noted by Mariyon Robertson, president of JHA, "The World Trade Center closed many significant deals last year, attesting to both the desirability of the complex as well as its willingness to do deals with tenants. Located just 15 minutes from Midtown, the Downtown market can be an excellent opportunity for an average tenant to be given first-class treatment. Unless reasons of location absolutely prohibit such a move, I always encourage my clients to consider Downtown as a viable alternative for their operations."