Weighing options for rebuilding downtown.
But some firms are signing leases downtown--PKF, an accounting firm, recently signed a lease for 20,000 SF at 29 Broadway. Also, the Securities and Exchange Commission, which previously rented space at 7 world Trade Center, has leased 140,000 SF at the Woolworth Building.
So what is needed to retain tenants and lure new ones into the area?
The solution thus far has focused on incentive packages and tax abatements, all of which are engineered by the government. Some have suggested that the real estate industry should lower rents.
"Voluntary rent reductions are always a mistake. The market never lies. If there is a lot of vacant space down there, rents will fall," said Peter Pattison, a real estate consultant.
He questioned whether saving $2 a SF on office space would even be enough to compel some firms to rent space here anyway.
"Making funds available for capital expenditures is a better way for the government to help," said Pattison, who pointed out that that firms spend a great deal of money outfitting their new space.
Ten years ago, commercial landlords cut rents sharply, which allowed some tenants to remain in Manhattan. The reduction also lured new tenants who were previously barred from the high-rent market. Midtown office space dropped from $50 to $30 a SF quickly during that span.
Yet last year, midtown rents rose nearly 30 percent. This alone was enough to drive many tenants across the Hudson River, where rents were--and remain--substantially lower.
New York's senators have been piecing together an incentives package for lower Manhattan businesses, but they have yet to announce the specifics. Clearly, their help is crucial to the area, and an incentives package needs to be enacted as soon as possible.
Beyond the government's efforts, the dismal economic outlook could effectively lower commercial rents throughout the city.
"Rents will come down because of market conditions. Landlords won't lower them out of a sense of civic duty," said Rick Salomon, partner at Manhattan-based law firm Salans.
It happened ten years ago, so there's good reason to believe it will happen again."
"When push comes to shove, if you can save companies some money it definitely attracts tenants," said Brian Siegal, senior broker from the NAI Lawrence Group.
He compared the REAP Program in Long Island City to what is likely to happen downtown. REAP credits firms that move into areas like Long Island City by giving each employee a grant.
Prior to Sept. 11, such a program directed at lower Manhattan was unthinkable.
"We certainly hope that the incentives package passes soon, so more tenants don't flee," said Siegal.
Another source stressed that land lords--in this market--must be "aggressive."
"They have to be intelligent, and that means responding to the economy," said Bruce Weissberg, president of real estate brokerage DG Hart.
Sens. Charles Schumer and Hillary Clinton have said publicly that their plan would provide $2 to $5 billion in incentives.
"Everyone says that downtown is going to need a shot in the arm; otherwise, it's not going to recover," said Schumer in a recent New York Times article.
On a smaller scale, several small businesses downtown have received grants from the Manhattan borough president's office. A total of $30,000 was awarded to 28 businesses in lower Manhattan to help them recover from the Sept. 11 attacks.
"Many businesses, particularly small businesses, have suffered incalculable losses since the terrorist attack. That is why I believe it is imperative that we help them in this slow but steady recovery effort," skid Manhattan borough president C. Virginia Fields.
The Small Business Recovery Grant Fund was created in early October. The grants that each business received ranged from $800 to $1,500.
The New York Times reported last week that over half of the small business applications or federal disaster loans have bees rejected. But the article also pointed out that few business owners have applied for disaster relief.
One explanation for the weak show of interest in loans is that some business owners are concerned about business prospects in the area near Ground Zero. These owners may be considering a move away from this neighborhood.
The United States Small Business Administration is, according to the article, "all but begging for applicants. So far, the SBA has approved 844 applications worth $80 million in disaster assistance."
On a larger scale, until New York's senators submit their final package to Congress, the downtown waiting game will continue.