The sale of
new 32-story midtown office building to
this week convinced some that terrorists have completed a job demographics alone were supposed to do for years -- make New York's financial district obsolete.
The arguments against concentrating the bulk of the nation's financial firepower in a square mile of Lower Manhattan are obviously more convincing after 13 million square feet of office space was destroyed Sept. 11. But analysts and real estate experts say the same things that created that concentration -- access, infrastructure, and, in no small measure, romance -- will prevent a mass exodus from occurring.
"I don't think people are shunning downtown," said Eugene Pinover, head real estate lawyer at Willkie, Farr & Gallagher. "At this time what they're really doing is trying to find any place where they can be adequately housed. People bet against downtown 10 years ago, expecting it to be a residential community, only to find it's a tremendous draw for business."
That the area's common infrastructure is both a blessing and a curse was never more apparent than after the terrorist bombings last month. While the immense electronic capacity of lower Manhattan linked hundreds of companies to each other and the floors of the exchanges, the system's vulnerability to one big shock was made clear when those exchanges were closed down four days by the disaster.
Both considerations played into the Lehman-Morgan Stanley deal. "Lehman really needed to be in one contiguous space," said Reilly Tierney, brokerage analyst at Fox-Pitt Kelton, while Morgan Stanley realized that "consolidating their operations in a Times Square campus isn't the wisest course," he said. "Building an urban campus may not be useful from a disaster recovery standpoint."
For Lehman, which has been operating out of sites in Midtown and Jersey City and which analysts say suffered more than most in the attacks, the need to reestablish spaces where traders were physically close to one another was critical.
"The thing you realize after something like this is what's really important is to have continuity in trading," Tierney said, pointing out that the main reason traders work "in a football stadium-like setting" is that they benefit from the easy flow of information. Housing staff in the same building and "even in earshot of one another is a key way to maintain competitive advantage."
But Morgan Stanley's global headquarters, at 1585 Broadway, were already a stone's throw from the new 1-million square foot tower. "Business continuity planning" was the main reason for its decision to sell the space, according to Monday's press release, as all trading and backup facilities would have been concentrated in two buildings within one city block, under the same transportation and power infrastructures.
Bright Lights, Big City
Few observers believe the events of Sept. 11 will drive large numbers of businesses out of New York City. While many have taken temporary space in areas outside the city, New York will remain the hub for the "most talented people in business in this country, if not the world," said Pinover. "People have talked about downtown being dead and New York being dead at various points in the 30 years that I've been in business," he said. "But I'd never bet against New York."
hasn't returned to its headquarters, which are in the north tower of the World Financial Center. The firm has been conducting trading from the Jersey office of Herzog Geduld, a Nasdaq market maker it acquired a year ago. Operations are going very smoothly, a Merrill spokeswoman said, "we're just not in our headquarters." Merrill said it expects to return in November.
Bret Gallaway, Morgan Stanley's spokesman, said the firm will "continue to have a presence here," though it is also "considering all options for our short-term and long-term space." A Lehman spokesman said the company is "committed to downtown."
"It's a very patriotic thing," Tierney said. "These people are very involved in civic life in New York. Think about the victory terrorists achieve if New York became an economically unviable place to do business."
Pinover said the top financial talent will refuse to work anywhere else. "A lot of them are young people with great ambitions, and they're not willing to settle in locations where they aren't able to brush up against the brightest and the most ambitious and best of their colleagues across the world," he said. "The talent base is large and renewing, generation after generation. It's really true."