- The Washington Times - Monday, September 2, 2002

Pressure from employees and investors has led to major security upgrades at most large companies after the September 11 attacks, but the vast majority of firms plan to stay in high-rises or popular downtown areas seen as potential terrorist targets, according to a recent survey.
Nearly 91 percent of executives indicated safety and security now were top priorities, according to the survey conducted by Jones Lang LaSalle, a top real estate services firm based in Chicago.
Jones Lang LaSalle polled real estate executives of 50 of its top clients, all Fortune 1000 companies. The results were released Thursday. Jones Lang LaSalle manages about 725 million square feet worldwide, including more than 400,000 square feet at 1300 I St. NW in the District.
Just two firms surveyed said they were leaving high-rises, and two said they had moved, or were planning to move, out of downtown areas. In the District, the picture is not so clear. While some employers are moving away from downtown, few are moving away from potential target areas.
The vacancy rate over the past year has more than doubled to 8.7 percent in the central business district. But around the U.S. Capitol and Pentagon, vacancy rates are lower than those of the region as a whole. No major tenants in the District indicated they had moved because of terrorism fears.
Most large companies surveyed nationwide say they have made or will make changes to evacuation plans, garage security and overall building management. Most took these steps to calm employee fears. About 70 percent of executives said that the "perceived relative safety" of their buildings can affect how well a company can attract and keep workers.
"Our clients have told us that enhanced security is extremely important because it helps accomplish a number of crucial goals," said Bruce Ficke, head of Jones Lang LaSalle's account management group. "It's a security measure in and of itself, it serves as a deterrent and it helps reassure employees."
Furthermore, 85 percent of executives surveyed say they believe shareholders now are paying more attention to how fast their companies can resume operations after a disaster.
Despite added attention to security, most companies say they will not move out of high-rises or downtown areas, which are perceived as more vulnerable to terrorist attacks.
Some changes are planned, though. Of the 50 company executives interviewed, 14 said their companies have considered dispersing operations over larger areas, and 12 said they would consolidate offices into fewer locations.
In New York, some firms affected by the loss of the World Trade Center still are discussing where to put displaced employees.
Goldman Sachs and Morgan Stanley plan to move some employees out of lower Manhattan, citing a desire to decentralize operations. Goldman Sachs says it plans to move its equity trading department to Jersey City, N.J., by 2004. Morgan Stanley, meanwhile, is moving several hundred employees to a newly acquired office on Long Island.
But other spots once viewed as terrorist targets have not seen a mass exodus of tenants. The Sears Tower, the largest U.S. office building, lost just two small tenants after September 11, one of which has returned. The vacancy rate of the tower is 5 percent.
In this region, some consolidation is in the works; the U.S. Census Bureau plans to move all of its offices into one large, two-building complex at the Suitland Federal Center.
But an exodus from areas seen as terrorist targets is not so apparent.
In the area around Union Station, just blocks from the U.S. Capitol, the vacancy rate is 7.6 percent, or a 10th of a percent lower than the average in the District. The vacancy rate decreased from 8.6 percent over the year.
The vacancy rates in Pentagon City and Crystal City, the business districts closest to the Pentagon, are among the lowest in the region, at less than 5 percent. MCI is expected to vacate more than 200,000 square feet at Pentagon City by next year, but analysts say the move is related to downsizing stemming from the bankruptcy of WorldCom Inc., MCI's parent company.
More than half of the companies surveyed by Jones Lang LaSalle said they have seen occupancy costs increase since September 11. But the bulk of those surveyed indicated the increases were small; just two said their costs rose more than 5 percent. But, analysts said, many companies will face higher costs next year, after security expenditures are passed on to tenants and insurance rates increase.


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