In January of last year, Lehman Brothers Holdings Inc agreed to boost its office space in the World Financial Center by 40 percent. City officials called it a vote of confidence in lower Manhattan's future.
That was before terrorists steered two jets into the 110-story towers of the World Trade Center, sending debris hurtling onto the World Financial Center complex across the street. Girders pierced the facade, damaging a new US$35 million trading floor.
Weeks later, holed up in makeshift offices at a Sheraton hotel, Lehman executives decided to leave downtown, the firm's home of 143 years, rather than face a daily reminder of the attacks. They put their offices up for sale and sublease and paid US$650 million for a 32-story building north in midtown's Times Square.
"There was the scare at the time of the chemicals in the air," said Thomas Russo, a vice chairman of the fourth-largest securities firm. "We didn't know the answers to a lot of things. We took what we thought was the quickest route to get us back together again."
Sept. 11 accelerated a decades-long exodus of securities businesses from the southern tip of Manhattan to midtown and elsewhere. Spurning federal, state and city incentives to stay, Cantor Fitzgerald LP, Salomon Smith Barney, Morgan Stanley and others followed Lehman. The New York Stock Exchange is planning a second trading floor outside lower Manhattan.
About 85 percent of the 62,467 jobs that left downtown in the past year were finance related, according to TenantWise.com, an online property brokerage. The office vacancy rate is 20 percent, the highest since the early 1990s and up from 9 percent before Sept 11.
"We worked from 1995 to 2001 to get downtown going," said Kathryn Wylde, president of the New York City Partnership & Chamber of Commerce. "We are starting again from scratch."
Citigroup Inc, whose Salomon unit was downtown's second-largest tenant behind Merrill Lynch & Co, was forced out of 1.2 million square feet in the collapse of 7 World Trade Center. The firm sent employees to midtown, Rutherford, New Jersey, and Stamford, Connecticut.
Among the chief reasons cited for leaving downtown is employees' difficulty in getting to work. The attack destroyed a subway terminal bringing 60,000 commuters a day from New Jersey. A new transportation hub may be three to five years away, said New York Governor George Pataki.
"I don't think anyone can discount the importance of the transportation disruption," said Mary Ann Tighe, head of the New York region for property broker CB Richard Ellis Services Inc.
Contrary to predictions that the attacks would drive businesses out of New York, 60 percent of the jobs landed in midtown, home to such landmarks as Rockefeller Center. Twenty-eight percent ended up across the Hudson River in New Jersey and 12 percent headed elsewhere, including Brooklyn, according to TenantWise.
Bond trader Cantor Fitzgerald, a Trade Center tenant that lost about 650 employees in attack, relocated to 135 East 57th Street, reuniting employees scattered in temporary offices.
The office vacancy rate in midtown is 8.6 percent, the second lowest in the US, trailing Washington at 5.7 percent, according to CB Richard. New York office building sales are on track to at least match their second best year on record, even though only one transaction occurred downtown.
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