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Opinion: Further Post-ARC Questions and Observations

Can lower Manhattan displace midtown as the paramount destination for New Jersey commuters?

James W. Hughes

As we discussed in our previous column, the cancellation of the Access to the Region's Core (ARC) project gives us a chance to rethink the requirements of New York - New Jersey transportation linkages. One of the critical assumptions that must be re-evaluated is also one of the most basic: Where do commuters need to go?

For the past two decades that destination more often than not has been midtown Manhattan.

But New York City has several large office nodes besides midtown, including the financial district, the area around Grand Central terminal, Rockefeller Center, Times Square, the proposed West Side Yards, and others. Is there any reason to think that one or more of these might become the next midtown?

Answering that question means understanding what we call "less is the new reality," shorthand for the diminished expectations for regional job growth stemming from America’s lost employment decade and the Great Recession. "Less is the new reality" will be particularly pronounced in the knowledge-dependent, information-based jobs that are housed in advance office structures.

Joseph J. Seneca

Consequently, for the balance of this decade, the dominant office-market dynamic in the region may well take the form of musical chairs -- companies repositioning themselves as their leases expire and as their space requirements and costs emphasize efficiency. While this repositioning has always been an important market factor, it is likely to be more so in the future. And the geographic outcomes of this process within the region, uncertain as they are, will be important for planning new regional transportation investments.

Certainly, over the past two decades, midtown has dominated at the expense of lower Manhattan. Financial activities were migrating north, with transportation linkages to midtown gaining increased importance. And after 9-11, with the lengthy delays of getting the office towers at Ground Zero underway, there was little confidence of a strong lower Manhattan rebound.

That assumption is now being challenged. The recent decision by Conde Nast, the trendy media and publishing giant, may prove instructive as to shifting transportation needs even in the absence of net new job growth.

The high-profile company currently occupies approximately 800,000 square feet of office space at 4 Times Square, as well as smaller blocks of space at other midtown locations. Last summer, however, the high-profile company announced it was moving to 1 World Trade Center, currently under construction by the Port Authority of New York and New Jersey in lower Manhattan.

Conde Nast will consolidate all of its Manhattan operations in about 1.2 million of the 2.6 million square-foot building which, when it tops out at 1,776 feet, will be the tallest office tower in America.

While no new jobs are involved in this consolidation, it represents an enormous vote of confidence in the economic prospects of the entire World Trade Center site and lower Manhattan. According to Robert Caro, President of the Regional Plan Association, this move may represent a game-changing transformation of lower Manhattan into a hub for the creative industries, not just for financial services.

World Trade Center

Certainly, the newest office infrastructure in Manhattan will be in the orbit of the World Trade Center site. The just-opened headquarters of Goldman Sachs (2.1 million square feet) is directly across West Street from 1 World Trade Center. Silverstein Properties’ 7 World Trade Center (1.7 million square feet), completed in 2006, and more than 80 percent occupied, is New York’s first certified “green building” with a gold Leadership in Environmental and Energy Design (LEED) certification. It is located just north of Ground Zero.

Currently under construction by Silverstein Properties is 4 World Trade Center (1.8 million square feet), which is already two-thirds leased. In addition, Silverstein Properties has under construction 2 World Trade Center (2.3 million square feet) and 3 World Trade Center (2.1 million square feet). These towers will be completed when market conditions permit.

In total, this is probably the most significant increase of advanced, sophisticated office space of any market in America.

Of course, a rejuvenated lower Manhattan is not an economic destiny writ in stone. But massive transportation investments in the area enhance the possibility. The Fulton Street Transit Center, in its seventh year of construction and due to open in 2014, will link existing subway lines to the $3.2 billion World Trade Center Transportation Hub. The World Trade Center, PATH and 13 subway lines will all be linked by underground pedestrian concourses. This complex will provide an extraordinary level of transportation linkage and should greatly increase the development potential of lower Manhattan. Consequently, enhancing New Jersey’s transportation linkages to lower Manhattan may become a greater investment priority than other trans-Hudson alternatives.

The Gold Coast

Complementing lower Manhattan’s economy over the past three decades has been New Jersey’s burgeoning Hudson River Gold Coast, which now stands as a national financial center. What made this possible was the PATH system, which provided the key rail linkage between New Jersey and Manhattan’s World Trade Center and Financial District. PATH was established in 1962 by the Port Authority. It connects Manhattan to neighboring New Jersey urban communities and suburban commuter railroads. Extending PATH offers intriguing potential economic benefits.

In another related (and unexpected) development, Google has just purchased the landmark Port Authority Commerce Building located at 111 Eighth Avenue (between 15th and 16th Streets) for $1.9 billion. Its 2.94 million square feet make it the third-largest building in New York. Google already occupies 550,000 square feet and will expand its occupancy when space becomes available.

Significantly, PATH’s 14th Street station (at Seventh Avenue) on its uptown Manhattan extension line to 33rd Street is just one block away. The building also has a major regional fiber-optic line running through it and includes among its tenants the communications companies Verizon and Level 3. Could this become the major communications and information technology zone in Manhattan? If so, PATH again stands as a key investment opportunity to provide linkage to New Jersey.

These are just a few of the potential geographic hot spots in the Manhattan sector. Understanding the potential economic growth zones throughout New Jersey and New York, even if much of the growth is based on repositioning, is a key to evaluating transportation investments and determining which linkages should have priority for the investment of scarce public resources.

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