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Battery Park and beyond: an unaccustomed and saddening view from the Staten Island ferry |
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One of the first investment-banking firms to move back to lower Manhattan was Salomon Smith Barney. It had only moved over to New Jersey in part as a precaution, in part because its headquarters on Greenwich Street, a few blocks north of the disaster site, was initially within the exclusion zone. It was its old home, 7 World Trade Centre, that collapsed. There were housed back-office staff and asset-management employees.
Whether other firms will follow suit – or indeed can – is another matter. The downtown financial district of Manhattan west of Broadway is a horrific mess. There is over a million tons of rubble to be shifted, with just 100,000 tons moved during the first two weeks. Where once the twin towers of the World Financial Centre stood a quarter of a mile high there are now two heaps of rubble each over 60 feet high. In addition to the towers, numbered 1 and 2 World Trade Centre, buildings 3 (Marriott Hotel) and 7 collapsed, and buildings 4, 5 and 6 have all partly collapsed. To the south is the old Bankers Trust building, which has served as the headquarters for Deutsche Asset Management for the past two years. The 50-storey building now has a large section – some say up to 10 storeys high – of 2 World Trade Centre embedded in it, as well as part of an aircraft fuselage.
Across the west-side highway, itself rubble strewn, some of it pushed there by rescue workers, lies the World Financial Centre complex, much more imposing now that its taller cousins are gone. Merrill Lynch, Lehman Brothers, American Express, Nomura Securities, CIBC Oppenheimer, the Wall Street Journal and Dow Jones all have their headquarters here, as do a host of smaller companies including internet bond-trading firm BondBook.
As well as the visual horror, there’s the poor air quality from the dust, not to mention the stench, which has occasionally found its way uptown after overnight storms. It’s unlikely to change much for months, and replacing all the office space is going to take years, assuming it’s even attempted. The initial post-attack bravado to rebuild the towers larger and higher is already giving way to the realization that few firms will want to move back in, and even fewer insurers will offer affordable premiums. Talk of a memorial rather than skyscrapers is becoming more commonplace. These are, though, early days.
It’s a big cause for concern. Many companies are scrambling for space around Manhattan – the downturn of the past 12 months has made the search slightly easier, at least – and the offers of assistance from competitors have been astounding. But there is simply not enough capacity for everyone.
Firms are relying on their consultants and service providers to house them, at least temporarily. “We run our technology platform out of Exodus’s office in Weehawken, New Jersey, and they have allowed us to put a few tables and chairs in there,” says John Kim, CEO of BondBook, which has 100 employees and used to be in the South Tower of the World Financial Centre. “Management is, for now, using space provided by our consultants in mid-town, Accenture.”
He has enough space to have 25 key staff in place, which is just fine given the slow pace of trading in corporate bonds. But it is far from ideal having so few back at work, and split between two locations. And that is just for a small firm. For the likes of Lehman, Merrill and American Express, which have 9,000 or more staff to take care of, it’s a logistical nightmare that could threaten how business is conducted.
The makeshift trading floors, for example, are all well and good, but they are small, noisy and do not allow for optimal location of different groups. Lehman, for example, prefers to group its traders by sector, but has had to place them according to product. And its bankers are for now working out of a hotel in mid-town, nearly an hour away from the trading operations. Merrill, meanwhile, has had to house its equity-linked team in a completely different building to its equity and debt origination and trading groups.
Focusing on returning to the buildings around the disaster site provides little comfort: optimistic estimates state that Merrill might be able to return to its headquarters within three months – its north tower was largely shielded by the American Express/Lehman tower, and has already been cleaned up. The Amex building, though, which has some structural damage, might not be in use for at least a year.
Already American Express has signed long-term leases on buildings in Connecticut and New Jersey, which has heightened speculation that it might not return downtown. Others are keen to state their readiness to return. “Our sense is that we’re looking at a time frame of up to a year before we can get back in [to the south tower of WFC]” says BondBook’s Kim. “The general sentiment is that we want to remain in Manhattan, support the local economy. And if 2 WFC becomes available some time, great.”
Merrill Lynch’s CEO is typically bullish: “We expect to be able
to return to the North Tower within three months. Access is a problem, though. We might have to charter a fleet of ferries to get our people in.”
The New York Mercantile Exchange, which occupies the waterside building next to Merrill, and was therefore farthest away from the bombings, is already doing that. But it doesn’t make for a particularly pleasant working environment: staff will be hemmed in by the river and the site of the disaster for months, if not longer, unable to venture anywhere but between work and the ferry.
The fear is that this could all lead to firms, both big and small, deciding to relocate permanently not just to other parts of Manhattan, but to New Jersey and Connecticut. That would severely hit New York City’s revenue base. So we could see a hard-fought battle develop on the part of City Hall to keep many of these businesses within city limits. It’s been done before: the New York Stock Exchange has several times threatened to move to New Jersey, and received favourable treatment as a result – such as the $600 million in tax relief for locating the site of its new, yet-to-be-built trading floor downtown.
But for as long as the city lacks the office space so utterly destroyed by the suicide hijackers on September 11, it will not be a battle that is easy to win. In all, at least 12 million square feet of office space was destroyed in the attacks. There’s a further 13 million square feet that is either damaged or lies empty. That makes for more than 25 million square feet of prime real estate that has suddenly been rendered unusable. And that, according to some estimates, is equivalent to 10% of Manhattan’s top-quality office space.
