Now, as Silverstein’s reward, the fate of one of the most valuable and closely scrutinized pieces of real estate in the world rests on his shoulders. Seven World Trade Center is more than just one piece of the $14 billion puzzle; it is, in a sense, the Ur-piece. Much of the project is made possible, or at least justifiable, only by Silverstein’s ability to get tenants for his five office towers. But because Silverstein still has just enough cash to build the first three office buildings— 7 World Trade, the Freedom Tower, and a subsequent building called Tower 2—any whiff of failure on the commercial front could slow down or derail the rest of the plan. If 7 World Trade doesn’t rent, the parts of the plan that Silverstein doesn’t control—the Gehry-designed theater, Calatrava’s $2 billion transit hub, and the 9/11 memorial, designed by Michael Arad—could all be stalled.
All eyes, then, turn to the fortunes of 7 World Trade Center. The tower has generated so much buzz in commercial-real-estate circles, rising so quickly at such a high-profile site, that leasing agents would simply be remiss in not asking for a tour. And the building has its virtues: The clear-glass-curtain wall with shimmering blue accents has impressive curb appeal; the floor plates are practical and customizable; the safety elements, like extra-wide stairwells and that concrete core, are, in fact, beyond what the city’s building code requires. Silverstein has also thrown in attention-getting bells and whistles: The entrance will feature a rhythmic flashing-light art display by Jamie Carpenter; the lobby will have an enormous $1 million LED art installation by Jenny Holzer.
Yet 7 World Trade Center has become the building everyone wants to date but no one wants to marry. For starters, Silverstein is asking $50 per square foot, easily the highest price in lower Manhattan. “The companies that have been through it think it’s great, but then they go to Water Street and can get about the same space for a lot cheaper,” says Robert Sammons, director of research for the real-estate firm Colliers ABR.
Morgan Stanley recently did a deal at 1 New York Plaza for $20 a square foot. The Securities and Exchange Commission signed at the World Financial Center, which asks about $35. Silverstein is known to have pitched Cravath, Swaine & Moore, and Fried, Frank, Harris, Shriver & Jacobson, and they’ve all taken up elsewhere nearby. Con Edison, Verizon, and the United Federation of Teachers also haven’t bitten. Silverstein could always drop his price, or offer givebacks or rebates or free renovations—or the state could offer tax breaks—but despite a slight downward trend in the amount of available space downtown, there are still plenty of more affordable alternatives. Consider 1 Chase Manhattan Plaza, the sleek white tower with the playful Jean Dubuffet sculpture out front, which has more than a half-million square feet of space available at about $35 a foot. Silverstein’s building may be prettier, but $15-a-foot prettier?
Silverstein has given his sales pitch for 7 World Trade Center dozens of times. As of now, he has secured a single tenant: Silverstein Properties.
Silverstein insists 7 World Trade Center and the Freedom Tower will compete not with downtown but with midtown, which historically charges up to double downtown’s rents. He argues that as midtown fills up, high-end firms will drift downtown in search of trophy space. Even if a stadium spurs West Side development, he believes, his first buildings will be ready years before the ones planned for the rail yards. The way he sees it, his only real competition is two midtown towers coming online at about the same time: the Bank of America Building, asking $100 per square foot, and the New York Times Building, asking at least $75. “Seven is the much cheaper alternative by far,” Silverstein says. “For tenants needing 400,000, 500,000, 600,000 feet, they have very few choices.”
The long-term trends would seem to support Silverstein’s case. In Manhattan, there are fewer and fewer places to build, and very little new office space was built in the city in the nineties; as the economy expands, most any new high-quality tower is apt to be successful. But none of this great new demand has happened yet, at least not downtown. “There is no migration from midtown to downtown,” says M. Myers Mermel, a real-estate investor and owner of TenantWise, which tracks office space downtown. Mermel has found that for every office tenant that has moved from midtown to downtown since 9/11, four have gone in the other direction. There are reasons to believe that won’t change any time soon. Downtown buildings have to compete with Midtown South and Jersey City, Mermel says, and even with the promised $2 billion transit hub, downtown will continue to be a two-train ride away from Morris County, Fairfield County, the North Shore of Long Island—almost everywhere the executive class of New York lives.
Then there’s the X-factor: It’s still creepy down there. Before construction, Silverstein offered one prospect an early quote of $40 per square foot and was told that the company didn’t want its employees staring into a “construction site”—a charitable term for what is still, in some sense, an open grave. Even now, looking down into ground zero from a high floor, prospective tenants must wonder if their employees will abandon them, or if the best and brightest won’t sign on in the first place, because they—or their spouses and children—just don’t want them to spend five days a week in the place that terrorists have tried twice to destroy. As bad as it is for 7 World Trade Center, the Freedom Tower may be worse. “We have heard from tenants that they think those reconstructed buildings will be targets,” Mermel says.
Silverstein’s blanket response, aside from reflexively ticking off the safety features of 7 World Trade Center and its future neighbors, is the patriotism argument: Rebuilding is what New Yorkers do best; to go on living and working downtown is to show that the terrorists have lost. He also holds fast to the notion that time—and $14 billion in capital improvements—will temper fears of terrorism. In a few years, he says, the swank new amenities of the new World Trade Center will create a forward-looking place with none of the bad memories of ground zero.