When lower Manhattan’s new World Trade Center was conceived a decade ago, nobody had in mind a Silicon Valley in the sky.
Financial companies, which dominated the original twin towers, are scarce among tenants who have committed to space at the complex’s glass-and-steel skyscrapers. Instead, the majority of deals done since magazine publisher Conde Nast agreed to anchor 1 World Trade Center in 2011 have come from technology, media and advertising.
“People were expecting financial companies to be a substantial portion of the leased space” in the new towers, said Christopher Jones, vice president of research at New York’s Regional Plan Association. “I don’t think many people would have thought that it would be virtually nothing.”
The November opening of 1 World Trade Center, the 1,776-foot skyscraper built at the site of the 9/11 terrorist attacks, marked a milestone in a lower Manhattan renaissance that’s been fuelled by a changing mix of inhabitants beyond the area’s finance-industry roots. That shift is presenting a challenge: The creative companies dominating New York’s office market tend to be comparatively small, leaving landlords to fill their monumental buildings floor-by-floor.
Almost 2 million square feet are unrented at 1 and 4 World Trade Center, the first buildings to open at Ground Zero. Agreements were signed for about 340,000 square feet in 2014, with no single lease larger than the 106,000 square feet that digital-advertising company MediaMath took in July at tower 4, according to CoStar Group, a Washington-based research firm that tracks office leasing.
At that pace, the towers wouldn’t reach 95 per cent occupancy until 2019, almost two decades after the 9/11 attacks levelled the first twin towers.
Few people in the real estate industry doubt that the towers will be filled. The newness of the buildings and the market-leading rents they’re seeking have contributed to the slow pace of leasing, said Mary Ann Tighe, chief executive officer of CBRE Group’s New York/tri-state region.
“It takes a while to fill these buildings,” said Ms Tighe, who is co-head of the leasing team at Larry Silverstein’s 4 World Trade Center and 3 World Trade Center, which is still under construction. “I actually feel we’ve begun to develop momentum, and momentum is always the secret to leasing.”
So far, about 3.3 million square feet have been rented at 1 and 4 World Trade Center, including Conde Nast’s 1.2 million square feet, according to CoStar. The banking and insurance industries, which occupied almost 80 per cent of the old World Trade Center’s leased space, make up 1.3 per cent of current tenants, according to CoStar.
Media, advertising, computer-technology and communications companies have taken almost 33 per cent of the space rented so far, compared with only about 3 per cent at the old World Trade Center, the research firm’s data show. About 40 per cent is from government tenants that agreed to lease space in the middle of the last decade to help jumpstart construction of the towers. The remainder came from business services, real estate and other fields.
For High 5 Games, a developer of casino and social media games, 1 World Trade Center was “complementary to Silicon Valley on the West Coast,” said Patrick Benson, vice president of marketing. The firm, currently based at 770 Broadway in the East Village, took 87,663 square feet on floors 58 and 59.
“It provided everything that we needed,” including state-of-the-art technology, a “blank slate” of column-free offices, and room for expansion, Mr Benson said.
Banks including Citigroup, JPMorgan Chase & Co. and UBS Group have considered and rejected going to the trade center site.
The few financial tenants at the new skyscrapers have come from outside the industry’s mainstream. The biggest is investment-research company Morningstar, which took a 30,000-square-foot floor at 4 World Trade Center in September. IEX Group, the stock-selling startup that was the subject of Michael Lewis’s book Flash Boys, agreed to lease 13,000 square feet in that building in November.
At 1 World Trade Center, BMB Group, C12 Capital Management and Incandescent Technologies each took spaces smaller than 3,500 square feet.
That 3 million-square-foot tower, the tallest in the Western Hemisphere, is 62 per cent rented, up from 58 per cent in early November, when the first Conde Nast employees started working there, said Eric Engelhardt, director of leasing for co-developer Durst Organization’s trade center operation. It cost $3.95 billion to construct, making it the world’s most expensive skyscraper, according to property-information website Emporis.com.
The building - still known to many by its former name, the Freedom Tower - has faced criticism in recent months, including a negative architecture review in the New York Times by Michael Kimmelman, who wrote that the skyscraper “looks as if it could be anywhere, which New York isn’t”. Comedian Chris Rock, in a Saturday Night Live opening monologue, called it the “never-going-in-there-tower, ‘cause I’m never going in there.”
That fear of terrorism, or mere discomfort at being surrounded by the memorial in the footprints of the twin towers honouring those killed on 9/11, was something potential tenants had to confront.
“That’s absolutely one of the conversations that you have to talk to your employees about,” said Dipanshu Sharma, CEO of xAd, a mobile-advertising technology company. The company in November took the entire 44,000-square-foot 60th floor at 1 World Trade Center.
“Ultimately, we decided it was the safest space on the planet now, because of the past history,” Sharma said. “You could take it as a space that could be under attack in the future, because it has been a target, or you could think of it as a matter of national pride that you’re part of the resurgence.”
One World Trade Center was at the top of the list when Servcorp shopped for a fourth New York location, said chief operating officer Marcus Moufarrige. The Sydney-based firm provides temporary high-end offices to global companies, targeting the most famous and opulent properties in the markets it serves, such as London’s Cheesegrater.
“We’ve been working on this deal for three years,” said Mr Moufarrige, whose company rented about 35,000 square feet at 1 World Trade, the entire 85th floor. “It’s going to be the most iconic building in the world. There was no hesitation in us wanting to be there.”
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