Incentives Deal of the Month
from Site Selection's exclusive New Plant database
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New York's $500M Incentive Package Aims to Retain Lower Manhattan FirmsBy JACK LYNE Site Selection Executive Editor
of Interactive Publishing
NEW YORK Seeking to stem major employer relocations from lower Manhattan, the state of New York and New York City are offering selected firms portions of US$500 in incentives. The $500 million comes from federal aid, allocated after Sept. 11's terrorist attacks to preserve the strength of New York City's fabled financial district.
The state and city in mid-March began sending out letters offering individual companies multimillion-dollar incentive packages, according to Daniel Doctoroff, the city's deputy mayor for economic development and rebuilding.
Officials have not yet divulged either specific companies chosen to receive aid or the amounts they're being offered.
City and state officials, however, provided some of the program's particulars at a March 20 luncheon meeting of real estate executives, service providers and economic development officials.
Criteria for the grants, Doctoroff explained, include companies' total employees in lower Manhattan, as well as the likelihood that they might relocate from the area. The incentives are targeting corporations that employ more than 200 workers, he said.
'About 150' Firms to
"This is really a significant pool that can be used to make it cheaper to live and work down there," Doctoroff told the luncheon, a New York chapter meeting of CoreNet Global and IDRC.
"For too long, New York City has treated its tax-paying, job-creating corporations as hostile invaders," he continued. "The Bloomberg administration is committed to completely reversing that. We've changed the way in which we think about government, the way it deals with big companies, the way it deals with residents, and, to some extent, the way it deals with small businesses."
Empire State Development Corp. CFO Kevin Corbett explained that "a major part of our strategy" is focused on retaining "the major employers, particularly in the financial industry, with their foot traffic and economic benefit of their employees."
30,000 Employees Relocated
Sept. 11's attacks dislocated or disrupted some 10,000 lower Manhattan businesses employing more than 377,000 workers, state officials have estimated.
Sept. 11 also spurred the relocation of as many as 30,000 lower Manhattan employees to Connecticut and New Jersey. The new incentive program is tackling the big question: Will those relocations turn out to be temporary or permanent?
Government officials speaking at the CoreNet Global/IDRC luncheon were taking their message to a major part of their target audience. The crowd included the real estate heads for some of the most prominent companies located in lower Manhattan.
But despite its rebuilding focus, the $500-million incentive package is already drawing criticism.
Some critics, for example, have said that the funds would be better spent on infrastructure and other public investments to make lower Manhattan a more appealing location.
Other critics have pointed to downtown's space glut. Downtown's 14.1 percent vacancy rate is twice as high as a year ago, according to a recent Newmark & Co. report.
But perhaps the program's biggest hurdle is determining which companies would actually relocate without financial assistance.
Doctoroff conceded that some incentives would likely go to firms "that never had any intent to leave . . . Everyone lies about it." He added, however, "It probably is appropriate for people who recommit to downtown to get some money."
Goldman Sachs, Morgan Stanley Relocating
Morgan Stanley, for example, has announced an agreement to buy the former Texaco headquarters in Westchester County, N.Y., where the company said it will locate no more than several hundred of its 14,000 New York City employees. Then there's Goldman Sachs, which has announced that it will relocate its equity trading department to Jersey City, N.J., in 2004. A desire to decentralize operations was a major rationale for the two moves, Goldman Sachs and Morgan Stanley officials said.
American Express and Bank of America, on the other hand, are both moving employees relocated to New Jersey back to lower Manhattan.
Many more decisions remain to be made. Of the 185 tenants occupying more than 10,000 sq. ft. that were displaced by the Sept. 11 attacks, only 40 percent have announced that they will return downtown, according to a survey by Tenantwise.com.
One of the major companies weighing its relocation options is Aon, whose 1,100-employee World Trade Center operation was displaced. The insurance giant is reportedly considering locations in lower Manhattan and New Jersey.
Sublets: Who Gets the Grant?Aon's search, however, underscores the kind of incentive decision that promises to be a very sticky wicket. The lower Manhattan site that Aon is looking at is occupied by Salomon Smith Barney, reports The New York Times. Salomon is looking to sublease the 335,000 sq. ft. (30,150 sq. m.) at 125 Broad St., where it has a nine-year lease. But Salomon's subleasing efforts face a market awash with low-priced vacant space. With incentives, though, Salomon could recoup its outlay for fitting out its space.
So which company is entitled to incentives in such cases? The company that returns to lower Manhattan in subleased space? Or the company that subleases the space in order to relocate outside the area?
Doing the latter, critics charge, would be rewarding companies for leaving.
Decision-makers for the lower Manhattan incentives may face a lot of those kinds of decisions. Over the next five years, leases will expire for downtown businesses with a composite total of 144,000 employees.
©2002 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.