Sandy shutdowns could slam New York office market
NEW YORK (Reuters) - The breakdown in services that lingers in lower Manhattan a week after super-storm Sandy may make tenants think twice before moving to or re-leasing office space in the area whose rebirth since September 11, has been painfully slow, some brokers said.
Thousands of people who work south of 34th Street in Manhattan have been told that they may not be able to return to their offices for at least a couple of weeks due to power outages and flood damage.
Others have been told to dress warm or bring blankets as they return to offices that have no heat or hot water in an area nicknamed "SoPo" or "south of power".
While the storm could hurt office space demands across the New York Metro region, the hard-hit region south of Canal Street on Manhattan could suffer most, brokers said. Lower demand could put pressure on rents.
"I think it's going to have to impact the repricing paradigm downtown." said Dan Horowitz, a broker with tenant representative firm Studley. "It just makes the downtown decision a bit more complicated."
Eleven years ago, the attack on the World Trade Center left the downtown office market reeling as it not only wiped out structures but part of lower-Manhattan's transportation system.
Office tenants in that area and all over Manhattan may now be put off by concerns they could be vulnerable to the next super-storm to hit the city.
"I think this was a blow to all of Manhattan," Horowitz said. "It may impact space decision in Manhattan verses other areas and the way companies allocate their staffing decision and the extent in which they concentrate people in New York."
Some brokers were less concerned.
"You're going to get some wicked, smart derivative trader to move to some other part of the U.S.?" asked Peter Riguardi, president of the New York regional for Jones Lang LaSalle Inc. "There's no question in the short term this is going to create a new challenge for downtown."
It is likely to lead to technical changes that will protect buildings from the damages of flooding, he said.
"When the World Trade Center opens, that's just going to be a positive tidal wave for lower Manhattan that in the end will grow the market," he said.
Construction of the World Trade Center resumed Monday.
The hardest hit office buildings are in low-lying areas in Manhattan, concentrated along the coast in the area called "zone a" where evacuation during the storm was mandatory.
That sent many employers scurrying for temporary office space.
"We've just been flooded with calls and online leads and brokers calling with all these people who want to set up an extra office," said James Kleeman, director at temporary office space provider Emerge212, a unit of SL Green Realty Corp
Law firm WilmerHale was one of the first to line up temporary offices, leasing space from Regus Office Solutions hours after Sandy hit late Monday evening. The law firm leased space for 36 people at 255 Park Ave at 47th Street in Midtown from Tuesday through Friday. On Monday, the firm was back in its downtown offices at 7 World Trade Center.
Some employees are still working from home or temporary space. Brookfield Properties Inc one of the largest landlords in lower Manhattan said 1 New York Plaza, whose tenants include law firm Fried, Frank, Harris, Shriver & Jacobson LLP and Morgan Stanley, could remain closed for several weeks.
American International Group Inc may have to wait at least two weeks for its building at 180 Maiden Lane to reopen. About 700 Fitch Ratings employees who worked at 1 State Street or 33 Whitehall are working in temporary midtown space, from home or from the rating agency's Westchester office. The company on Monday did not know when it could expect to return to its Manhattan offices, Dan Noonan Fitch spokesman said.
Even buildings that have electricity don't necessarily have heat or hot water. Google told employees working at its 3 million square-foot midtown south building on Eighth Avenue between 15 and 16th Streets to bring blankets because the building had no heat.
St. Martin's Press, told their employees to dress warmly because the building had no heat.
Many of New York buildings have steam heat and have told that power company Consolidated Edison won't be restoring steam heat until Wednesday. The company did not return calls seeking comment.
However, despite the pain, inconvenience and expense, and damage, Hurricane Sandy could become just a story of "where-were-you when...", Horowitz said.
"As time passes, these things diminish in urgency," Horowitz said. "Once you get through the exigency and solutions to get back up and running, to some degree the normal course of business takes over."
(This version of the story has been corrected to fix a typo in the fifth para)