WTC spread by The Real Deal

Downtown Revival

Celebration and competition Downtown as One World Trade Center opens As the centerpiece of post-9/11 recovery debuts to fanfare, there’s still plenty of empty office space in Lower Manhattan

By Rich Bockmann ondé 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 Calatravadesigned 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 vicechairman 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.

ONE WORLD TRADE CENTER TENANTS Floors 100-102 Public observation desk

reportedly looking to reduce its footprint after Durst reduced rents at the tower. The company currently leases at Silverstein’s 7 World Trade Center.

Floor: 87 KiDS Creative The advertising agency reportedly paid the highest price for office space Downtown when it signed a 34,775 square foot lease in May for more than $90 per square foot. At the time, it was the first deal done in the building in more than three years. KiDS’ clients include companies such as Balenciaga, Alexander McQueen, Alexander Wang, Lancôme and RCA.

Floors: 50-55 U.S. General Services Administration The agency in charge of managing government assets and supporting federal employees is consolidating several offices to take 273,004 square feet for 20 years. Asking rent was reportedly $75 per square foot. The federal government, which had occupied significant space in the original World Trade Center, had long pledged to lease space when the new building was built. The GSA will share its six floors with the district headquarters of the U.S. Army Corps of Engineers and the U.S. Customs and Border Protection’s field office.

Floor: 85 Servcorp The business-services provider will open its 34,775 square foot space to clients in March 2015. The Australian company signed a 15-year lease in August for a full floor in an area of the building where asking rents range from $85 to $100 per foot. The company, which provides clients with executive suites, meeting rooms and virtual office space, has three other locations in the city, at RXR Realty’s 1330 Sixth Avenue, RFR Holding’s Seagram Building and 17 State Street. Floors : 64 (partial) -69 Vantone China Center New York China Center, which looks to give Chinese companies a toehold in New York by providing office and events space, was the first non-government tenant to take space in the building when it signed a 196,041 square foot lease in 2009. According to the Port Authority, rents on the 20-year, nine-month lease start at $80 and escalate over time. Earlier this year, China Center was

Floor: 46 (partial) BMB Group The Cayman Islands-based investment advisory firm, which caters to ultra-high net worth individuals and Forbes 500 companies, signed a deal in June to take 2,191 square feet at a reported asking rent of $75 a foot. The company, founded by financier and entrepreneur Rayo Withanage and Prince Abdul Ali Yil Kabier of Brunei, is relocating from Silverstein’s 7 World Trade Center. Floor: 45 (partial) Legends Hospitality The operator of 1WTC’s 120,000 square foot observatory, set to open next year, will relocate from its office at Third Avenue and East 50th Street. Legends, which was formed in 2008 by the New York Yankees and the Dallas Cowboys, has branched out to operate concessions for the likes of Manchester FC and New

York’s own Circle Line Cruises, as well as entering into sales and planning partnerships with a number of entertainment clients. The company signed a lease in June for 4,799 square feet of pre-built space with a reported asking rent of $75. Floor: 45 (partial) Cushman & Wakefield The global commercial brokerage, which is handling leasing at One World Trade along with the Durst Organization, is moving its Downtown office from 100 Wall Street. Cushman signed a 10-year lease in early September for 10,222 square feet on one of the prebuilt Condé Nast growth floors. The asking rent on the floor was reportedly $69 per square foot. Floors: 20-44 and a 10-year option on floors 45-49 Condé Nast By early next year, some 2,300 publishing employees will move into 1.2 million square feet of space. The company is making the move in phases, with corporate executives arriving first, in early November, to be joined by thousands more by February. Condé inked the deal in 2011, paying slightly more than $60 per square foot, according to reports. The company has an option on five growth floors. Much like its move to 4 Times Square more than a decade ago, the media behemoth’s decision to make a new home downtown was the first domino to fall in a line of office tenants heading to a rejuvenated neighborhood. Floors 1-20 Contain the lobby, mechanical equipment and other building services.

NEARBY BUILDINGS 7 World Trade Center (Silverstein Properties) 1.7 million square feet of office space 100 percent leased. Major tenants include Moody’s Investors Service, the WilmerHale law firm, and asset manager MSCI. 3 World Trade Center (Silverstein Properties) 2.5 million square feet of office space Vacant: 1.97 million square feet The building signed its only tenant to date, media-investment managing firm GroupM, to a 515,000 square-foot lease in December. The building is due for completion in 2018.

Brookfield Place (Brookfield Office Properties) 7.05 million square feet across four buildings Vacant: 390,650 square feet Signed Time Inc. to more than 700,000 square feet at 225 Liberty Street in May. Major tenants include Bank of America Merrill Lynch, Oppenheimer Funds, The Bank of New York Mellon and Cadwalader, Wickersham & Taft.

44 November 2014 www.TheRealDeal.com

PHOTOGRAPH OF WORLD TRADE CENTER FOR THE REAL DEAL BY MICHAEL MAHESH

4 World Trade Center (Silverstein Properties) 2.3 million square feet of office space Vacant: 901,838 square feet Major tenants include the Port Authority and the City of New York. The leasing team signed the marketing firm MediaMath to 106,000 square feet in July and investment-research company Morningstar to 30,000 square feet in September. One Liberty Plaza (Brookfield Office Properties) 2.25 million square feet of office space Vacant: 189,906 square feet Major tenants include the law firm Cleary Gottlieb Steen & Hamilton, since 1990.