Port Authority Weighs Subleasing World Trade Center SpaceDavid M. Levitt
The Port Authority of New York and New Jersey is considering subleasing as much as a quarter of its new headquarters at 4 World Trade Center, the lower Manhattan tower it owns and is scheduled to open next month.
The agency, which oversees the region’s interstate ports and transportation infrastructure, last month issued a request for proposals from commercial-property brokers to advise it on finding tenants for as much as 150,000 square feet (14,000 square meters) of its 601,000 square feet of offices in the skyscraper. The space is on the 18th to 21st stories, according to the document.
“The authority has determined that it no longer requires the entire leased area,” the agency said in the document. “The authority intends to sublease this area in a manner that maximizes the potential financial return.”
The 72-story tower, developed by Larry Silverstein, will become the first office building to open on the 16-acre (6.5-hectare) World Trade Center site since the 2001 terrorist attacks destroyed the original twin towers. With about 1 million of its 2.3 million square feet unleased, it’s one of several top-quality office towers with large vacancies in lower Manhattan, including the bigger 1 World Trade Center, scheduled for completion next year.
The marketing of the space is consistent with instructions from the governors of New York and New Jersey, who each appoint an equal number of trustees to the agency’s board, to use its real estate in the most cost-effective way possible, Authority Director Patrick Foye said in a telephone interview.
At 4 World Trade Center, “we’re preserving our optionality to sublet a portion of that space,” he said. “We have not made any decision, and we’re taking the same approach to that expense as we are to every other cost item across the agency.”
The Port Authority owns the building and the 16 acres of grounds. Silverstein is responsible under a net-lease agreement with the authority for the 4 World Trade Center site and two other nearby skyscrapers, which are unbuilt. The lease, which runs through 2100, makes him responsible for the economic success of those projects.
Silverstein’s firm, Silverstein Properties Inc., declined to comment on the potential sublease, Dara McQuillan, a spokesman, said in an e-mail.
As part of the deal that enabled Silverstein to start the project, the Port Authority and the city of New York agreed to lease about half of the Fumihiko Maki-designed glass tower, the shortest of the four planned for the site.
The agency’s rent, which starts at $65 a square foot, would cover payments to holders of $1.2 billion of tax-exempt Liberty Bonds that paid for most of the tower’s construction, according to the offering statement for the securities. The agreement originally was struck in 2006 and amended in 2010.
The city, which plans to move its Human Resources Administration to 4 World Trade Center, leases 582,000 square feet at the tower starting at $56.50 a square foot, and those payments are similarly pledged to cover the building’s debt service, according to the document. Julie Wood, a spokeswoman for New York Mayor Michael Bloomberg, said the city has no plans to sublease any of its space.
The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.
Lower Manhattan has an office availability rate of 15.1 percent, the highest of the borough’s three major markets, according to data from brokerage Newmark Grubb Knight Frank. Rents in the third quarter averaged $42.33 a square foot, lower than Midtown and midtown south.
The Port Authority might be able to get as much as the low $80s a square foot for its offices because of the premium newly constructed Manhattan space commands, according to Greg Kraut, a principal at the New York office of commercial-property brokerage Avison Young.
“If the Port Authority prices it correctly, and the price is less expensive than other direct pieces of space with a better package, tenants are going to go there,” he said. “If they try to hold out for every dollar, then it may sit on the market for a little bit.”