Wall Street crisis rattles dreams for new towers at World Trade Center site

With several financial giants collapsing - and others teetering - many experts wonder who will occupy the Freedom Tower and other World Trade Center skyscrapers developed by Larry Silverstein.

Wall Street's wipeout is taking its toll on Ground Zero - sparking fears that a forest of empty towers could rise on the 16-acre site.

With jobs and companies disappearing and the tax base under siege, the viability of mega-rebuilding plans at the World Trade Center is on the line, insiders say.

Factor in a glut of office space that's expected to flood downtown and Depression-era forebodings about the economy and a perfect storm is bearing down on lower Manhattan.

"A tidal wave is coming - and we're going to be the first ones hit," said City Councilman Alan Gerson, who represents the district.

The No. 1 challenge: filling 10.1 million square feet of commercial space in five skyscrapers, much of it designed specifically for financial giants that no longer exist or are struggling to survive.

Hanging in the balance are the iconic, 1,776-foot Freedom Tower to the north, a replacement for the toxic Deutsche Bank tower to the south and three enormous towers on Church St. built by developer Larry Silverstein, including one that will be taller than the Empire State Building.

The towers are set to rise almost simultaneously on the site during the next five years - despite a credit crunch, the liquidation of Lehman Brothers, the demise of an independent Merrill Lynch, the bailout of AIG and cloudy prospects for both Morgan Stanley and Goldman Sachs.

Some worry about the return of the "hollow high-risers" - a phrase first used to describe the original World Trade Center when it opened in 1973 with no private-sector tenants.

"The Freedom Tower very possibly will turn out to be a white elephant," said George Marlin, an investment banker and former executive director of the Port Authority.

"I think it's premature to predict empty towers, but clearly the staggering economy will affect the demand for office space in lower Manhattan," said Rep. Jerrold Nadler, the West Side Democrat whose district includes Ground Zero.

The Port Authority, which owns and is developing the site, is confident despite the market meltdown. "Even within the economic cycle we're in now, we think all the buildings will get built, and someone will come in and fill them," said PA Executive Director Chris Ward.

Silverstein notes he has faced doubters before. When he started building 7 World Trade Center in 2002, the downtown vacancy rate was 17%, but the building now draws top rents, he points out.

"The naysayers then and now don't seem to understand that we are building in anticipation of future demand, not based on today's market," Silverstein said.

Still, potential problems loom. The buildings were designed with massive, column-free trading spaces to accommodate the needs of Wall Street behemoths, experts say. Many of those companies are now on the ropes.

Silverstein's projected 79-story, 2.3-million-square-foot Tower 2, for instance, has four sprawling trading floors, and his 71-story, 2.1-million-square-foot Tower 3 has five.

Already, Merrill Lynch has pulled out of talks to move into Tower 3, while JPMorgan Chase scaled back its building plans at the former Deutsche Bank tower site.

Silverstein faces another challenge: His three towers come with a $6 billion price tag at a time when banks are tightening up on credit. His windfall from insurance payouts and tax-exempt Liberty Bonds totals $4 billion, so he'll still need $2 billion more from the banks.

"The big question is what the crisis means for projects that are not fully financed," said Richard Anderson, president of the New York Building Congress. "Will all three Silverstein buildings go ahead, and if so, on what kind of time frame?"