For the past 26 years, Robert Goodman has worked in Lower Manhattan, where he launched his career in financial services at Merrill Lynch. Goodman prides himself on his encyclopedic knowledge of the market, and maintains a mental database of tenants and their locations, past and present.
He has seen multiple cycles and watched the market rebuild over the past eight years. He also watched it collapse before his very eyes. On Sept. 11, 2001, he left his office on the 86th floor of One World Trade Center at 8:47 a.m. One minute later, he was at the base of the building, getting ready to jump onto the subway, when the first plane crashed.
Recently, Goodman left his position of senior managing director for tenant rep firm Studley and joined FirstService Williams, where he now serves as senior managing director of brokerage in the firm's Manhattan office. NREI recently talked with Goodman about the Lower Manhattan office market, the current challenges of oversupply and the future of the home of Wall Street.
NREI: How has the market changed since the 9/11 attacks eight years ago?
Goodman: The real estate market before 9/11 occurred was weakening as a result of the dot-com implosion. As we turn the clock ahead eight years later, it's been a little bit of déjà vu in that we now have a weakening market that we're once again addressing. The good news is that over the span of these eight years there's been a change in the tenant mix, which makes up the business sector for Lower Manhattan.
NREI: How has the tenant mix changed?
Goodman: Up until 9/11, it was essentially old-line investment banking firms, all of the major Wall Street companies. We have a higher proportion now of technology firms, information technology firms, public relations firms, non-profits, architectural and engineering firms, so the marketplace is no longer dependent on one particular business for its growth. It helps mitigate some of the risk that has been going on in the business.
NREI: What happens if the 11 million sq. ft. of office space lost when the World Trade Center was destroyed is replaced before the economy rebounds?
Goodman: It would be a significant risk to the marketplace because there are not enough existing tenants or new companies that are going to be created that could possibly fill up a majority of that space. It will work to Lower Manhattan's benefit that the development of those properties takes longer than anticipated because at that point businesses will have stabilized.
NREI: What concessions are office landlords granting these days?
Goodman: The level of tenant improvement dollars continues to escalate. The number of months of free rent continues to increase. Probably the biggest difference that's taken place is that tenants are significantly cash-flow sensitive. Landlords now are aggressively promoting the fact that they will construct new premises at little to no cost to the tenant.
NREI: When will there be a balance of supply and demand in your market?
Goodman: The population, at about 23,000 at the time of 9/11, is now in excess of 55,000. The growth of residential has taken inventory away from the Lower Manhattan office market. That's going to help stimulate the balance sooner rather than later, probably within the next three years.