In December 2001, a headline in a local tabloid read: “People are fleeing lower Manhattan faster than the survivors on the Titanic.” How times have changed.

The future seems very bright for development in the third-largest business district in the country – and the city’s fastest-growing residential community.

Last week, a new design for the Freedom Tower was unveiled and Governor Pataki announced that U.S. Customs and Border Protection could be the anchor tenant.

Meanwhile, industry leaders expect Larry Silverstein’s 7 World Trade Center to be fully leased by spring 2007. Moody’s Investors Service last week announced plans to lease 600,000 square feet in the tower. With this lease and the announcement in January that Beijing Vantone had agreed in principal to lease 200,000 square feet, about 50% of the tower has been leased. More than 10 other companies are reported to be in final negotiations to lease space in the tower.

Commercial and residential tenancy is booming in Battery Park City. Last week, BearingPoint, formerly the consulting division of the accounting firm KPMG LLP, announced it will relocate its financial services group to 52,000 square feet at 3 World Trade Center in Battery Park City from 757 Third Ave. The firm will earn a $2.4 million federal job creation and retention grant. In addition, the company is seeking another $700,000 in incentives available in Lower Manhattan.

“Our move will strengthen our ties to the financial community and support the rebirth of Lower Manhattan,” the CEO of BearingPoint, Harry You, said.

A prominent New York City landlord who asked not to be identified said he opposed the idea of offering incentives to such companies such as BearingPoint. “Companies who move from Midtown to Lower Manhattan should not gain the credits and incentives,” he said. “Companies who relocate from outside of Manhattan should be the beneficiaries, no one else”.

The Battery Park City Authority last month announced it had designated Milstein Properties as the developer for two “green” residential towers on the last remaining undeveloped residential site in the area. The towers will include a total of 421 condominium apartments and 50,000 square feet will be devoted to a community center. The site is on North End Avenue between Warren and Murray streets.

In addition, four new condominiums are under construction in Battery Park City, as is the new world headquarters of Goldman Sachs.

A few months ago, P.J. Clarke’s opened at the World Financial Center. “We love our downtown location with the same benefits of Midtown,” one of the principal owners of the restaurant and chairman of global resources at CB Richard Ellis, Stephen Siegel, said. “We are in the heart of a business community, and our proximity to Battery Park City gives us the benefits of a residential neighborhood.”

North of the World Trade Center site, Edward J. Minskoff Organization is building a mixed-use development on Greenwich Street overlooking West Street and Battery Park City. The development will rise on a formerly vacant city-owned parcel. The developer paid $110 million for the lot, one of the highest prices every paid for a city-owned site.

The development will include 228 residential condominiums and 162 mixed-income market-rate rental units. There will be 400 underground parking spaces and 170,000 square feet of retail that will house a Whole Foods market, a Barnes & Noble bookstore, and a Bank of America branch.

“Finally, the realization that the downtown office market is thriving, and in the last year over 1 million square feet of office space has been signed by tenants relocating from Midtown,” the president of Rudin Management, William Rudin, who is chairman of the Association for a Better New York, said. “These tenants represent a change in the type of companies that are moving to the city. The tenant mix is changing from a financial segment to media and commercial.

“In 2000, the financial segment represented 62% of the commercial tenants, while today it is 40% and the balance of tenants from government, legal, media, nonprofits is taking over,” he said.

“The downtown office market is on fire,” Mr. Siegel, said. “I anticipated and began speaking about it three years ago, and the time has come. Large blocks of space are disappearing rapidly, and rents after a period of gradual increases are starting to move up more aggressively.

“Downtown continues to gain comfort as a 24-hour, 7 day a week community where people work, live, and play,” he said.

With the recent announcements that Tiffany and Hermes are joining BMW, Hickey Freeman, and Borders in Lower Manhattan, many other retailers are expected to flock to the area.

“We are all seeing the focus on high-profile and ‘luxury’ retail tenants leasing space in the Financial District,” the director of retail services at Cushman & Wakefield, Joanne Podell, said. “I don’t think that is the real story.The market is already viable and proven to be successful for many retailers – for example Ann Taylor, Nine West, Borders, and recently Sephora. It is more the idea of both these and future retailers being ahead of the curve with regard to lower rents and securing the best locations. “Retailers that choose to lease now will reap the benefit of the strong residential market that is being built. The phenomena, along with a strong office component, community services, and local attractions, will cause many retailers to consider downtown as a place to expand and position themselves now as well as in the future,” she said.

“Downtown continues to evolve as a rejuvenated community offering both office and residential projects, and increasing retail, entertainment, and other necessary amenities to support the successful transition of an officeonly environment to a balanced 24/7 community” the chairman of the national real estate practice Greenberg Traurig LP, Robert Ivanhoe, said.

Investment bankers and real estate lenders have been bullish on financing projects in Lower Manhattan.

Recently, the 21-story, 1 million square foot headquarters of the Metropolitan Transit Authority at 2 Broadway obtained complex subordinate financing through zero coupon bonds.

A national historic landmark, the 41-story, 1.8 million square foot Equitable Building at 120 Broadway, owned by a joint venture of Silverstein Properties and the California State Teachers Retirement System, obtained a $285 million loan from Morgan Stanley Mortgage Capital.

A number of Lower Manhattan office buildings are being marketed for sale. These properties include the 11-story, 336,000 square foot Class B office building at 99 Church St. owned by Moody’s Investors Service. Industry leaders expect this building to be converted into residential condominiums.

The 32-story, 295,000 square foot One Exchange Place at 55 Broadway, built in 1981, just fetched $82 million. Industry leaders expect the new owners to continue to operate the tower as a commercial office property.

The New York Sun has learned that a major Class A office building in the Financial District is expected to be marketed for sale this fall.The property is expected to fetch close to $400 million.

Massey Knakal Realty Services is marketing a development site at 80-84 Nassau St. on about 263,000 developable feet at an asking price of $72 million. The site, which can accommodate a 52-story residential tower, is south of the planned 75-story mixed-use tower for Forest City Ratner at 8 Spruce St., on the former parking lot of New York Downtown Hospital. That tower, to contain 666 rental and condominium apartments, will be the tallest building downtown other than the planned Freedom Tower. A new public school will be located in the base of the building.

A 10-story addition is planned for a seven-story building at 111 Fulton St. When completed, the building will house 289 residential condominiums.

A 30-story condominium tower with 100 units is planned at 133 Greenwich St., aka 25 Thames St.

One of downtown’s major developers, Joseph Moinian, is planning a 53-story building that would house a 220-room W hotel and 180 residential condominiums at 123 Washington St.

Hotelier Andre Balazs has teamed with owner SDS Investments to co-develop 15 William St., a 400,000 square foot residential condominium development.

By the end of the year, the 83-room Downtown Hotel on Greenwich Street and North Moore Street in TriBeCa, owned by Richard Born, Ira Drucker and Robert DeNiro, is expected to open.

The 45-room Loft hotel, developed by Sam Chang’s McSam Hotels and Hersha Group, is expected to open this summer at 130 Duane St.

These and many other signs indicate that Lower Manhattan is on the rise and will grow over the next the decade.

Mr. Stoler is a television broadcaster and senior vice president for a title insurance company. He can be reached at mstoler@newyorkrealestatetv.com.