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Mobil Corp. and J. C. Penney Co. are fleeing New York, possibly precipitating a crisis in Manhattan real estate.
Together, the two companies will dump about three million square feet of prime office space on a market that had already begun to soften.
What's most troubling, however, is that those moves appear to be just the first of a new wave of corporate defections. Last week rumors were already swirling in real estate circles that ITT Corp. will leave its headquarters at 320 Park Ave. and that Colgate-Palmolive Co. will abandon its building at 300 Park Ave.
In addition, National Broadcasting Co. continues to consider a move to New Jersey, Trans World Airlines Inc. is looking to relocate to Westchester County, American Telephone & Telegraph Co. will certainly move more than a thousand employees across the Hudson, and major Wall Street brokerage firms are still exploring a shift of some operations out of Manhattan.
"The trend would become a bit more severe with four companies moving out. Then there could be six more companies going, and all of a sudden we would have to wake up to another 1970s move-out phenomenon," says R. Gary Barth, managing director of Jones Lang Wootton USA.
That, say developers and brokers, could kill the market for a slew of ambitious West Side office projects and slow down the city's construction industry, which has helped fuel New York's economic boom. Furthermore, a glut of space could scare off foreign investors, whose voracious appetite for prominent Manhattan buildings has bolstered property values.
"When you put three million square feet of good-quality space on the market when there's also a strong surge of new construction, you have the potential for trouble," says Glenn Whitmore, a vice president at Coldwell Banker Commercial Real Estate Services.
Even city...