Larry Silverstein Speech on Downtown ManhattanJan 29, 2008
Downtown Alliance / Cipriani Wall Street / Tuesday, January 29, 2008, 8:30am
Thank you Bob for those kind words. This area is experiencing a transformation that many doubted was possible a few years ago, and it is thanks in large measure to the sheer determination and relentless optimism demonstrated by the Alliance since 9/11 under the visionary leadership of Bob Douglass. Bob – thank you.
Thank you also to Downtown Alliance President Liz Berger for organizing this morning’s event. Liz has lived and worked Downtown her entire professional life, and there isn’t a better person to lead this great organization.
Everyone here belongs to an extraordinary part of New York City. Six years ago, after 9/11, a lot of people wrote us off. The naysayers said that the residents who fled the area would never return, that big companies would move to Midtown or to New Jersey or out of the region altogether. Downtown in their eyes was finished as a major financial center.
For many of us, the first couple of years after 9/11 were tough. The emotional and personal toll of that day cut wide and deep. Many of us lost loved ones, friends and colleagues. A lot of small businesses, shops and restaurants were forced to close down. A few employers did move, though not nearly in the numbers projected by the doom and gloomers.
For years, the World Trade Center rebuilding project itself seemed in disarray. And as we built 7 World Trade Center across the street from Ground Zero, we had no tenants except ourselves. It was during this time that Lower Manhattan fell behind Washington, D. C. to become the 4th largest business district in the country. In the face of difficulty and frustration, we needed to call upon all our optimism and belief in Downtown – which in my case – as in yours – runs very deep. But that was then.
Today, just a couple of years later, Downtown has completed a 180 degree turn. Thousands of people are flocking here to live and work. Downtown is also fast becoming the greenest community in the city with its sustainable buildings and new parks, waterfront and open spaces. New shops are opening every week – not just legendary brands like Hermes and Tiffany’s, but Whole Foods, Barnes & Noble, and Bed, Bath & Beyond. Wall & Broad Streets are quickly becoming Downtown’s version of 57th Street between 5th and Madison. If you ask retail brokers about other retailers looking Downtown, you hear names like Apple, Barneys, Bulgari, Cartier, DeBeers, Dolce & Gabbana, Salvatore Ferragamo and Versace. It’s a who’s who of high-end retail.
We also have many of the top restaurants in New York. And on that topic, I am very pleased to announce today that Capital Grille – a high-end restaurant whose only other New York location is in the Chrysler Building on 42nd Street – has just signed a lease for the ground-floor space in our 120 Broadway building. Capital Grille’s decision to locate here – within a few blocks of first-class eateries like Bobby Van’s Steakhouse and Fresco by Scotto – is more proof that Downtown has become a true mecca for foodies.
Across West Street from the World Trade Center, Goldman Sachs is building a $2.5 billion tower that will open in 2010 and house 9,000 employees. Directly to the south, JP Morgan Chase plans to build its new headquarters at World Trade Center Tower 5, moving 7,000 of their employees from Park Avenue. 7 World Trade Center has leased all but the top 10 floors of this 52-story building to an eclectic mix of companies, many of whom migrated from Midtown. Commercial vacancies in lower Manhattan stand at 6.2%, lower than they’ve been since early 2001.
And yet, as we are all aware, a host of economic indicators are now pointing to troubling times ahead especially for the financial sector. Are we headed for a recession? Will the strong job market slacken, and how might that affect real estate and Downtown in particular?
The naysayers of course will be back. And once again, all of us in this room will prove them wrong. Because what’s going on Downtown is more than a market cycle, it’s a permanent transformation in all sectors – commercial, residential, retail and tourism. The sheer breadth and diversity of the new Downtown economy makes it more durable and more lasting than at any point in its history.
This morning, I would like to step back a bit and examine how Downtown is evolving and reinventing itself – and why it’s destined to get much stronger in the coming years.
Let’s start by looking at this neighborhood as a place to live. The historic perception of Downtown was that it shut down after 5pm – that it was totally empty after dusk and on weekends. But well before 9/11, many New Yorkers had discovered the neighborhood’s charm as a place to live. And after 9/11, the residential market started booming.
From a population of about 14,000 in 1990, today more than 46,000 people live south of Chambers Street, a number that is projected to rise to 60,000 by the end of this year. This is thanks in large part to the 8,000 apartments built in Battery Park City, which has emerged as a model urban community where parks, schools, shops and apartment houses prosper steps away from major commercial office buildings.
Reflecting this intense demand for housing, condo sales and residential rents are at record levels and have, in recent years, even outpaced much of the rest of the Manhattan market.
This white-hot demand for Downtown living space has spurred another trend that began to take hold well before 9/11. Buildings that were formerly headquarters for financial institutions and other office users, but that had grown functionally or technologically obsolete, were given a second lease on life and converted into highly successful apartment buildings. Since 1995, over 13 million square feet has been converted from office space, resulting in 11,000 new apartments.
But what’s been happening is about more than just adding apartments and people. The new residential population is coming to Downtown for cutting edge, high-design and environmentally conscious living space. You have buildings now such as the Solaire, the first LEED-certified sustainable apartment building in the city. And whether it’s Philippe Starck at 15 Broad Street, Armani / Casa at 20 Pine Street, or Andre Balazs’ William Beaver House just around the corner, Downtown condo projects are setting a new standard for high style design and amenities. And Downtown has emerged as a prosperous community where the average household income is $242,000. All of this means more residents with more disposable income, which in turn will continue to attract and retain quality retail and services throughout the community.
Even us old-timers are getting into the mix. As most of you already know, Silverstein Properties recently purchased 99 Church Street – between Park Place and Barclay Street. For 56 years, 99 Church was the headquarters of Moody’s Investor Services. Of course, the half-a-century-old space no longer suited the technology and efficiency needs of a modern financial entity – so Moody’s moved its headquarters into 7 WTC in 2007.
This past October, we selected the legendary architect Robert A. M. Stern to work with us to design a spectacular residential and hotel tower for that site. Bob Stern is a wonderful addition to the roster of world-class architects-David Childs, Norman Foster, Fumihiko Maki, Richard Rogers and Santiago Calatrava-working with us to transform the landscape Downtown while at the same time honoring its rich architectural heritage.
Most recently, he has won universal praise for the stylish and contextual design of Fifteen Central Park West, which – by the way – broke all kinds of sales records.
Today, I am delighted to provide you with the first look at his design. The task was an architectural challenge as it has to work seamlessly with the Woolworth Building, while also co-existing with the ultra-modern towers that will rise down the block at the World Trade Center site. As I hope you will agree, Bob Stern and his team have really risen to the challenge.
The new building will combine a 175-room five-star hotel with 143 stunning condominium apartments in a slender 80-story tower. The hotel entrance on Barclay Street leads visitors into four floors of lobbies, lounges, restaurants, ballrooms, meeting facilities, green space, a spa and fitness center and public spaces.
A separate entrance and lobby at 30 Park Place will serve the residences. In the same spirit that led us to create a new park outside 7 World Trade Center, there will be a public plaza on the east side of the building linking Park Place and Barclay Street. The limestone and cast-stone shaft of the tower rises to a dramatic skyline profile of full-floor penthouses and setback terraces. When the building tops out in 2010, it will stand as the tallest residential building in New York, and add to Downtown’s growing stock of first-class luxury housing.
The building will be LEED-certified for environmental sustainability, like all of the office buildings we’re developing at the World Trade Center site.
This project also addresses what I call Downtown’s hospitality deficit. While there are some great hotels in our neighborhood, we currently have 400 fewer hotel rooms than we did prior to 9/11. In fact, only about 2,500 of the 65,000 hotel rooms in Manhattan are located Downtown – under 4 %. That’s way too few, and of course the market is now responding.
Right now, 14 new hotels at all levels and types of accommodation are under development Downtown. These projects will more than double the existing hotel stock, and Downtown’s hospitality capacity could boom to nearly 6,200 hotel rooms. That would equate to 150% growth in four years! This will help to make sure that Downtown keeps a larger portion of the tourist dollars that come to New York and will support all the new shops and restaurants opening down here.
On that note, I have one other exciting piece of news concerning 99 Church Street. It’s no secret that one of the major knocks on Downtown as an office center has been the shortage of the kind of first class amenities – including five star hotels – that are available in Midtown. Well, this morning I can assure you that no one will ever say that again, because two weeks ago we concluded an agreement for the hotel at 99 Church to be operated by the world’s premier 5-star hospitality company – Four Seasons Hotels and Resorts. That’s right, Downtown is going to have a Four Seasons Hotel!
Four Seasons’ decision to join in the transformation of Downtown is a huge sign of change – but it’s also a vote of confidence in Downtown’s historic role as a world-class business district.
Downtown remains the country’s 4th largest business district, and the home of every one of the major American exchanges, financial and clearing institutions that are the backbone of the global finance industry. We are home to illustrious names like Goldman Sachs, Merrill Lynch, Citigroup Investment Bank, American Express and AIG, among others.
But – as I’ve said all along over the past few years – to remain a world-class business district, Downtown needs new office space. That’s the only way we’re going to keep the first-class tenants Downtown. And that’s just what we’re starting to build – right now – at the World Trade Center site.
In September 2006, we unveiled designs for three inspiring new towers that Silverstein Properties will build along Greenwich Street. And thanks to an agreement with the city, state and the Port Authority, it guarantees that this much-needed space will be rebuilt within the next five years.
Over the past year and a half, 120 architects, designers, engineers and consultants have been working around the clock in what we call the World Trade Center Design Studio to design our three World Trade Center towers and the underground space that connects them.
Downtown is very much a mixed-use community and the plans you see here for the new World Trade Center reflect that. These buildings will contain over half a million square feet of prime retail, restaurants and bars being developed by Westfield America – the top-tier retail developer and operator I brought in to run the World Trade Center’s retail before 9/11. Each building will be connected to the PATH station, the subway network and the Frank Gehry-designed performing arts center that will be home to the Joyce Theater. And each of these buildings surrounds and respects the Memorial that is the centerpiece of this project – a public space larger than Bryant Park.
The Port Authority has been working hard for many months to prepare the site, and is nearing completion of its excavation of the area where these buildings will stand. We start construction as soon as that work is complete in the next few weeks.
The buildings will reach street level approximately one year after the start of construction and Towers 3 and 4 will top out in mid-2010, with Tower 2 following in 2011.
So, how much is all this going to cost? Between the private and public sectors, we are expending $20 billion dollars in a four-year timeframe on the Memorial, mass transit, retail and office buildings.
These numbers are meant to convey the magnitude this transformation will have on Downtown. The economic impact of this spending will be an extraordinary boon to Lower Manhattan. The construction period is sure to be difficult, but we should also bear in mind that it will be a plus for many of the small businesses who suffered most since 9/11 – after all, the 10,000 hard hats that will be working at our 16-acre site, and on the adjacent projects, will be ordering breakfast and lunch from every deli in the area.
But the real prize is the long run benefit to Downtown’s position as a business district. When these buildings open for business, there will be 75,000 people in new jobs working there every day. These workers will eat, drink, shop, and in many cases live Downtown, which all translates into a better, brighter, stronger and healthier future for the community we hold so dear.
Okay, I can hear you say: But what happens to Downtown now, if current negative trends in the financial markets continue? Silverstein – can you really fill those buildings? Are we still too dependent on one industry? Are we destined again for vacancy rates near 14%?
The answer, in a word, is “no.” In two words: “Hell no.”
Over the past few years, there has been dramatic, though largely unrecognized shift in Lower Manhattan’s tenant base. Of all the statistics I throw at you this morning, this one is perhaps most important in this time of uncertainty.
Of the 184 companies that moved Downtown between 2005 and 2007, 86% are in industries outside the financial industry – the so-called FIRE sector – 86%! Led by professional services, non-profits and creative services in particular, Downtown’s tenant mix is diversifying at an extraordinary rate. This bodes extremely well, not just for Downtown, but for the City’s economy as a whole.
The diversification of the broader Downtown tenant base is illustrated by our experience at 7 World Trade Center. While Moody’s presence serves to remind us that Downtown remains the financial capital, their neighbors in the building include a publishing company, an intellectual property law firm, a branding and advertising agency and the non-profit New York Academy of Sciences. Other than NCR, a Fortune 400 company who moved from Dayton, Ohio, six of the building’s tenants are migrants from Midtown.
The latest tenant at 7 World Trade Center is another creative firm. The Arnell Group – part of Omnicom – is a design and branding boutique specializing in product innovation. Their decision to move from 130 Prince Street – in SOHO of all places! – to the 37th floor of 7 World Trade Center demonstrates that Downtown is becoming the workplace of choice for New York’s creative class.
There are a lot of other reasons why Downtown is attracting new tenants. For one, space continues to lease for a dramatic discount over comparable Midtown spaces. But it goes much, much deeper than that. Companies and workers have awoken to the intrinsic strengths of the city’s second business district.
For starters, this neighborhood is the most transportation accessible urban district in the world. Each day half a million people travel through our one square-mile district using 13 subway lines, 30 bus lines, PATH trains and other mass transit services. Not to mention the 26% of Downtown residents who have the best commutes of all – they walk to work!
To make things even better, the city, state and Federal governments are pumping roughly $5 billion into upgrading and expanding Downtown’s infrastructure. The centerpiece effort of the public transit investment is an approximately $2.2 billion WTC PATH station, connected through a series of weather-protected concourses that will link all of the Downtown network into one seamless, ultra-modern system.
Remember how the renovation of Grand Central Terminal in the 1990s changed the travel experience and the image of that neighborhood? This is going to do a lot more.
And while we’re talking about our neighborhood’s incredible transit access, I’d like to counter the most common misperception about Downtown accessibility – that it is a longer commute for executives from Grand Central and Penn Station than other parts of Midtown. Here are some surprising statistics that dispel this myth:
According to expert analysis, the average transit travel times from Penn Station and Grand Central to Columbus Circle and to the G.M. building are longer or the same as trips to Wall Street and the World Trade Center from those same commuter hubs.
Another reason I’m so confident about the direction of the World Trade Center rebuilding is the commitment of key elected officials to rebuild Downtown as a world-class mixed use district, with business at its core. Speaker Silver had the wisdom to enact legislation to help bring companies back Downtown. He never stopped believing in this neighborhood – his neighborhood – as the best place in New York to locate a business, to live and to visit.
Governor Spitzer – early in his administration – took on the toughest issues. With his Insurance Commissioner Eric Dinallo, he broke the insurance logjam that had gone unresolved for over five years. There’s now no question there will be enough money to get the WTC project finished.
Mayor Bloomberg has been a consistent force for progress, conveying a sense of urgency to all the stakeholders. His successful leadership of the Memorial will result in a World Trade Center we can all be proud of, and that will also be a visited by more than 10 million tourists a year. We look forward to working with Deputy Mayor Robert Lieber who has spent most of his professional life Downtown.
Reflecting on the strengths of our community reminds us that Downtown has all of the elements of a dynamic, sustainable and unique urban neighborhood. There’s something unique here that makes people want to live Downtown. Companies want to locate here. Retailers want to do business here. Downtown is already a success.
And yet, five years from now, it will be something else altogether. A resurgent Lower Manhattan economy anchored by a 21st century global business hub at the World Trade Center will merge with a first-class walk-to-work residential, hotel and tourist community to create a new Downtown. This will be a real center, or Downtown, for New York, and a model for cities all over the world. Unprecedented, unimaginable, unbeatable.
This is the vision which the Downtown Alliance constituency – all of us who live, work, develop and invest in Downtown – has been working nonstop to achieve these past years. If we all keep pulling our oars a little longer, we’re going to get there. From the bottom of my heart, thank you all for everything you’re doing to realize this vision of a new Downtown