The Battle for Ground Zero, Part XXI

American Express Signs Lease At 7WTC
With 7WTC nearly completed, Larry Silverstein got his first big-name tenant to fill the 52 story tower. American Express has decided to lease about 20,000 sq. ft. of space in the building for a term of 15 years.

Assembly Speaker Silver wants to take credit for this because he put forth the legislation that created incentives for prospective tenants downtown:

The Legislature approved a package of incentives last month intended to revitalize the downtown commercial district and to lure tenants to the trade center site.

The package provides tax exemptions and rent subsidies potentially worth millions of dollars to companies that move to the site of the 2001 terrorist attack. It also eliminates the commercial rent tax for tenants there and provides a five-year rent tax exemption for companies in buildings elsewhere in lower Manhattan.

Here's a couple of pieces of information that were left out of the story. Businesses purposefully sought to wait until the last minute before committing to the WTC site, precisely because they knew that politicans would provide incentives to come to the site. The businesses aren't stupid - they don't want to pay any more than they have to - and the politicans are stupid because instead of repealing the CRT, they simply push the burden onto those businesses operating outside the area where the incentives are not operable.

However, more important is that the story makes a big deal about 20,000 sq. ft.

The average floor plan for 7WTC is about 40,000 sq. ft. In other words, if this report is accurate, we're talking about about half a floor! considering all the bad news and slow pace of rebuilding, we've got to take our positive news where we can get it.

Politicans, like Speaker Silver, claim that the failure of 7 WTC to find tenants is a sign of weakness in the Lower Manhattan market. They could not be further wrong. The failure to obtain tenants flows directly from the mess that the Governor and other politicans have made of the WTC site. There is no construction ongoing in the pit, and the earliest construction will start at years' end, and that's an optimistic timeframe. People aren't willing to look downtown for office space because there is no sign that the market is rebounding because the government has failed downtown by not tackling the issues fast enough. It isn't a function of tax breaks.

It is a function of willpower. If businesses don't see steel rising from Ground Zero, they have to wonder whether it is worth waiting for something to happen or commit elsewhere (and not necessarily in NYC).

UPDATE:
Crain's New York Business has more details, including that some fault Silverstein for setting prices too high for the rental space ($50-$55 per sq. ft., versus ~$30 sq. ft. elsewhere in Lower Manhattan). The new incentives appear to put the new building on an 'even playing field.'

UPDATE II 7/25/2005:
The New York Times has a story on the recovery and preservation of the original Hudson terminal at the WTC site.

UPDATE III 7/25/2005:
After doing a little digging after receiving an email about Silverstein's pricing of 7WTC, here's what I found. One of the unstated reasons for pricing 7WTC the way they did was because of the higher costs associated with its construction. More steel rebar, more reinforced concrete, and higher safety standards simply cost more than other buildings to build, and that cost has to be passed on to the tenants. Now, whether these particular costs add up to an additional $15-20 per square foot cost is a matter of some speculation, but not out of the realm of possibility.