The Freedom Tower

The financial windstorm shaking Wall Street may have slowed New York’s drive to rebuild the World Trade Center and revitalize Manhattan’s downtown neighborhoods, the Financial Times of India reports.

The near collapse of the financial industry in recent days and especially today — New York’s engine of growth driving jobs, office rents and apartment sales prices and rents — will likely take a bite out of the city’s economy, experts say. “Lower Manhattan, whose crown project, the rebuilding of the World Trade Center site and its 10 million square feet of commercial real estate, is seen as the most vulnerable.

“The entire chain of failures will also hamper our ability to rebuild my hometown of Lower Manhattan, to recover the jobs we lost after September 11, and to regain our status as the nation’s third-largest central business district,” State Assembly Speaker Sheldon Silver, a Democrat who represents Lower Manhattan, said recently.

The 2.6 million square-foot Freedom Tower originally was expected to be completed by 2009, with three other buildings opening through 2013. But construction and bureaucratic delays have pushed that schedule off the page. The Port Authority of New York & New Jersey, the agency that owns the site, is scheduled to issue new timetables and cost estimates on Tuesday. Ironically, the Port Authority’s inability to stick to a schedule may work to Manhattan’s advantage, planning and real estate experts say.

“It’s a godsend,” said David Arena, president of the New York business for real estate services company Grubb & Ellis Co. Manhattan’s current 357 million square-foot office market is expected to take a hit from the layoffs created by the downfall of Bear Stearns and Lehman Brothers, the troubled insurer American International Group (AIG), Bank of America Corp’s buyout of Merrill Lynch — who leases 4.2 million square feet downtown — and the overall shrinkage of the financial industry.

Office market rents are expected to fall about 7 percent annually over the next three years, according to Grubb and Ellis. The average asking rent at the end of August stood at $68.39 per square foot, and $50.72 for downtown. Office vacancy rates, which now stand at 5.7 percent for Manhattan and 6.9 percent for downtown, could go as high as 9.5 percent before the end of the 2009, Arena said.

But most think the World Trade Center project should go ahead because Manhattan has a shortage of new office buildings and will eventually need them. “I think that the financial world is never going to be the same, but that doesn’t mean it will disappear,” Owen Gutfreund, director of the Barnard and Columbia Urban Studies Programs of Columbia University, and former vice president of investment bank Lazard Freres & Co.”