Incentives key to downtown business success, says CBRE.

If downtown is going to succeed as a major business center, city and state officials will need to extend their incentive packages for commercial tenants and make sure that plans for better transportation to lower Manhattan are actually realized.

According to Mary Ann Tighe, president and CEO for CB Richard Ellis' New York tri-state region, the residential conversions that have taken place downtown in the past few years have left the market with only premium quality office space and at prices 40% below those of midtown, it makes economic sense for businesses to relocate to the area. But the economics are only part of the story--employers have to feel confident that their workers will be able and willing to commute to lower Manhattan. Speaking at CB Richard Ellis' downtown market forecast breakfast on November 11, Tighe praised the Lower Manhattan Development Corporation for creating a more diverse commercial tenant base.

"Downtown has grown its population of users to include law firms, educational institutions and non-profits," she noted--but called for more aggressive incentive packages.

"The economic incentives have been instrumental in attracting a diverse range of tenants to the area," she said. "Unfortunately, the incentives will expire at the end of the year. We think it's too early and urge city and state governments to extend them."

"Another big gap in these incentives are the non-profits," she added. "Many of them are ineligible, [even if they move their operations here]."

William Rudin, president of Rudin Management, one of downtown's biggest commercial landlords, agreed with her.

"Over four million s/f of leases have been signed here in the past few years and I predict this trend will continue," he noted. "But in order for downtown to continue to attract tenants, the government has to replace the incentives."

Rudin also mentioned the importance of improving transportation to allow more people to commute to lower Manhattan.

"Now we have an opportunity to redefine the landscape," he said. "The city would like to apply $2 billion [in federal aid money] toward a rail link with Long Island and JFK, allowing our workforce the access to [the area]."

According to Charles Gargano, chairman of the Empire State Development Corporation, the Mayor and the Governor are working on making those plans a reality.

"Governor Pataki has already committed dollars to studies [on the project] and is trying to move things forward," he said. "He and the Mayor are working with the federal government to convert the federal aid money for transportation. We are really focused on bringing in the Long Island Rail Road and I believe we will get it."

Tighe and Rudin also spoke about the importance of making the general public realize that downtown's profile is changing for the better.

"I think that if the economics was the single issue, downtown would be fully populated," Tighe said. "We [in the industry] know how much downtown has changed, but we need to make the progress visible."

According to Rudin, "Today, the fundamentals of downtown are totally different [than in the late 1980's.] You have great owners who are committed to their projects. You have companies moving downtown, you have the cultural institutions. Lower Manhattan is now an acceptable address, so the dynamics are different."