Julien Studley release report on WTC disaster impact

Real Estate Weekly, Oct 24, 2001

National commercial real estate services firm Julien J. Studley, Inc. has released a report that details the impact of the Sept. 11 attacks on the Manhattan real estate market, analyzes trends that have occurred during the last month, and opens a dialogue on various issues tenants will be facing in the future.

While most tenants and building owners are still trying to determine the full impact of the devastation, the report highlights key statistics and details some emerging trends:

* A total of 13.4 million SF of space in six buildings in and surrounding the World Trade Center complex were destroyed. In total, 652 tenants occupying 28.6 million SF of space were temporarily or permanently displaced by the destruction.

* Manhattan's overall availability rate has actually increased since the attack, Tenants that had considered subleasing excess space have moved forward with plans, and owners have recaptured space to place directly on the market, adding a total of more than 7 million SF of inventory.

* Several large, displaced tenants already planning major consolidations and space reductions before Sept. 11 may reduce net demand by 2 to 3 million SF. It is also possible that 2 to 4 million SF of leases may permanently move outside of Manhattan. It is uncertain whether companies that have leased space outside of Manhattan, based on immediate space needs, will return to the city. However, some estimates show that net demand in Manhattan could be reduced by about 5.7 million SF as a result of these actions.

* The majority of large displaced tenants signed leases in locations outside of Downtown Manhattan. For transactions larger than 50,000 SF, 65 percent have been signed in Midtown, 17 percent in New Jersey, 5 percent in Westchester and Connecticut and 9 percent in Brooklyn and Queens. While a clear majority of displaced tenants relocated outside of Downtown, approximately 75 percent of all transactions have remained in Manhattan.

* Leasing activity had already slowed significantly prior to Sept. 11, and when World Trade Center relocation activity subsides, the market might soften further, particularly if the nation and city enter a sharp recession.

In addition to the above findings, the report also highlights how tenants are re-thinking commutation, disaster recovery, and non-financial aspects of leases, from building security to damage and destruction clauses, after witnessing the disruption to business caused by the tragedy. The report also touches upon how corporate strategies, including work habits and contingency planning, will also change as a result of the attack.