New York's new real estate boom

There is renewed interest in this office building under construction in Times Square.

By BBC News Online's North America business reporter David Schepp

The felling of the World Trade Center towers instantly erased 15 million square feet of office space - equal to about seven Empire State Buildings - from the New York commercial real estate market.

That sudden reduction is proving to be a boon for New York real estate brokers who are scrambling to find spaces, large and small, for businesses that have been displaced by the 11 September attacks.

For commercial real estate brokers it truly is the best of times and the worst of times.

While revelling in a sudden rush for their services, there is also the dismal reality of what caused it.

"There is obviously significant activity in reaction to a horrible, horrible event," says Stephen Siegel, chairman and chief executive at commercial real estate firm Insignia/ESG.

Unused space

Prior to the attacks, New York was looking at a softening real estate market as dot.com firm's began failing and other companies put unused space on the market for sub-leasing.

The attacks could lead to a sustained real-estate boom

That extra space has played a key role in helping some businesses relocate and keeping operations up and running after the attacks.

But it is far from enough. In response to the disaster, businesses have had to double up, backfill existing facilities and, in some instances, lease space outside the city.

Financial-services firm American Express, for example, has leased 700,000 square feet in suburban locations in New Jersey and Stamford, Connecticut.

Development rush

The rush for office space has also stimulated interest in unfinished developments going up around the city.

"I am sure buildings will be put in the ground quicker than it otherwise would have been," Mr Siegel told BBC News Online.

"And I am sure you will see development spur as a result of this as well."

Temporary office space is also at a premium in the city.

HQ Global Workplaces, a firm that leases temporary office space, had approximately 800 available offices prior to the attacks.

The firm is seeing those quickly snapped up.

"We have committed about a third of those already," says David Rupert, HQ Global's chief executive.

"We have proposals out on all the rest."

Mr Rupert adds that some of its own spaces were damaged by the attacks and some of those locations are using temporary telephone systems until repairs can be made.

Filling the demand for office space for HQ is not easy. Most of its available space tends to be smaller and not all together.

"Large blocks [of office space] were the ones that were taken very quickly by large firms," Mr Rupert told BBC News Online.

With more variety available for smaller firms, they have the ability to shop around and reassess space needs.

"Unfortunately, in many instances they do not have the same number of people," Mr Rupert says.

Suburban flight

Despite rumours of rampant suburban flight by companies that previously have had headquarters or offices in the World Trade Center area, the percentage of fleeing firms is actually small.

Investment bank Lehman Brothers, for example, whose headquarters were located adjacent to the World Trade Center, has signed a long-term lease to occupy space at Datek Online's headquarters in Jersey City, New Jersey - across the Hudson River from lower Manhattan.

But moves such as Lehman's are rarer than those still seeking to maintain a presence in Manhattan.

That is of some comfort to Insignia/ESG's Siegel, who is keen to keep businesses in the Big Apple.

"Our focus is on promoting and perpetuating New York's fiscal good health and its place as the financial capital of the world," Mr Siegel says.

"[We are doing] anything we can to convince people to stay here and then to expand here permanently when space presents itself."