Lincoln Building moving forward in a market changed by Sept. 11

Real Estate Weekly, Dec 12, 2001 by Kevin J. Driscoll

The effects of the events of Sept. 11 will remain with us for the rest of our lives. And, in a strange way, it almost seems that some of the effects of that horrific day were actually visible before then.

Let me explain. After Sept. 11, most of the commercial landlords in Manhattan decided (with the encouragement of the Real Estate Board of New York) that they would not do anything to take advantage of the fact that millions and millions of SF of office space had been suddenly removed from the market place. It was very definitely a time for owners to show that -- more than anything else -- they were, first and foremost, human beings and patriotic Americans.

As it turned out, that decision was even less difficult for us at The Lincoln Building than it was for many others, for one simple reason: As office rents were soaring in the mid- to late-1990s, our rents were rising much more modestly.

During last summer, we already understood that tenants -- already feeling the effects of the economy -- were more interested in keeping their costs down, than they were in such matters as having superb views or excess space that they might never need. This was especially true of many of our tenants from the financial services industry; demand for their services had dropped significantly, which we recognized and addressed quickly. (Similarly, we found that many tenants wanted pre-built space. We've completed nine such units this year alone. And so great was the demand that the three that were constructed in the first quarter were leased during construction.)

In terms of the Sept. 11 tragedy, one particular lease was especially notable, symbolically: The World Trade Centers Association, which manages the business of 306 world trade centers in 91 countries, took space on the 19th floor of The Lincoln Building; it had been a tenant on the 77th floor of One World Trade Center.

And while the suite was being prepared for occupancy, we set up temporary accommodations for the association's 28 employees on another floor free of charge. Obviously, these are extraordinary circumstances and we want to do everything we can to help displaced firms relocate. And, of course, the rent we charged was what we would have charged on Sept. 10.

It has not been difficult for us to join other Manhattan landlords in charging new tenants pre-Sept. 11 rents. I am blessed in working for an owner with remarkable financial strength and stability. It's been the same ownership for almost half a century, which makes it easier to attract tenants who might be otherwise concerned about the solidity of their landlord.

Another reason we have been attractive to tenants in today's uncertain world is that we are undergoing a $30 million capital improvement program, which includes new windows, refurbished corridors, elevator cabs and bathrooms. The improvement program also includes new amenities for tenants, such a new conference center and an updated law library, located adjacent to one another in the building's Madison Avenue Arcade, just off the main lobby. And it doesn't hurt that we have one of the most prestigious addresses in the Grand Central District, with direct underground access to Grand Central Terminal and several subway lines.

Obviously, it is impossible to predict what the Manhattan leasing market place will be like next year. All we can say is that we all hope that 2002 will not bring a repeat of the awful events of last September.