[NYguy]

http://www.crainsnewyork.com/article...TATE/305129977

World Trade Center site sits empty as rivals lease up
With no big deal inked since Condé Nast, all three buildings there have huge vacancies.

By Daniel Geiger
May 12, 2013

As of today, more than 3 million square feet of vacant office space is expected to open in 2014 at 1 WTC and the neighboring tower under construction, 4 WTC. And more than 2 million square feet are on the drawing board at 3 WTC, whose construction is stalled at seven stories for lack of commercial tenants.

Meanwhile, many real estate experts had thought law firm Jones Day might anchor the yet-to-be-built 3 WTC, but it is instead close to inking a 400,000-square-foot deal at Brookfield Place, the four-building office complex just across West Street from the trade center site.

"It's definitely disappointing," said Christopher Ward, former executive director of the Port Authority of New York and New Jersey, which owns the WTC site. "Jones Day should have been the deal that 3 World Trade Center landed."

The heated race for tenants hasn't led to Silverstein Properties and the Port Authority undercutting each other on price at the WTC site. In fact, the site's relatively high rents are a key reason it has lagged behind other properties in attracting takers. Jones Day, for instance, is said to be negotiating a lease in the $50s per square foot at Brookfield Place. And Time Warner would get an even cheaper rent at Hudson Yards, where that site's developer, the Related Cos., has pledged to give early tenants their space at cost in order to get construction going there.

"It's not surprising Time Warner is going to the yards; they could probably get a rent in the low $40s per square foot," Mr. Ward said. "Buildings at the World Trade Center need to get in the mid-$60s per square foot, at least."

Pressure is mounting, however, to find a taker for 3 WTC, an 80-story, 2.8 million-square-foot skyscraper that Silverstein Properties wants to build between 4 WTC and the transit hub. Currently, 3 WTC stands at seven stories, accommodating retail space and mechanical systems, but can't proceed higher without a large commitment from an office tenant.

If Silverstein can't find any takers within a year, when the site will have nearly transitioned from a construction zone into a neighborhood, it will have to build a permanent roof to protect the structure. That's a relatively tight timeline in the world of jumbo-size leases. Restarting the tower after that would be more costly.

Silverstein, though, has been through this before. After initially struggling to lease 7 WTC, the company filled the building at above-market rental rates just a few years after it was finished in 2006, and completely leased it by 2011, despite earlier suggestions from Mayor Michael Bloomberg to slash rents.

"There is a really good feeling downtown right now about leasing," said Peter Riguardi, New York area president of brokerage Jones Lang LaSalle. "We're nearing the end of 10-plus years of construction there, and with the site almost done, I think tenants are now clearly going to see this is a place they want to be."