The destruction of New York's World Trade Center may turn the trickle of financial firms moving away from the Wall Street financial district into a flood, rendering it the U.S. financial center in name only.

When two hijacked airplanes slammed into the town towers on Sept. 11, the subsequent collapse of the trade center and surrounding buildings killed perhaps thousands and displaced at least 40,000 people. The disaster may have put the nail in the coffin on an area that already had seen an exodus of premier investment banks.

"Wall Street is becoming more of an electronic business," said James Park, a trader for brokerage Brean Murray & Co. "It's nice to go down to the exchange, there's a certain nostalgia. But times change and this (event suggests) we need to re-evaluate what happens in terms of security and where things are."

Many financial firms now are relocating to New Jersey and other locations to prepare for the resumption of trading, and experts say some of these moves could become permanent. In addition, firms may avoid the Wall Street area because of its high real estate costs and out of fear for further attacks.

"Most companies will start to re-assess where other support functions, back-office-type functions really need to be located," said Mark Smith, managing partner of real estate advisory services at Ernst & Young. "If they had space in New York, they may look at this now as an opportunity to relocate some of that to a less expensive area."

PERMANENT RELOCATION?

The collapse may have destroyed as much as 20 million feet of office space in lower Manhattan. That's one-fifth the total area available for offices in the area and the equivalent of the total amount of business space available in Nashville, Tennessee, or Minneapolis-St. Paul, according to Ernst & Young.

Less than four percent of Manhattan's office space was vacant in the fourth quarter of 2000, according to Reis.com, which provides real estate data. That means there's far more demand than supply.

The World Trade Center was home to operations of more than 80 firms, including Morgan Stanley <MWD.N> and Switzerland's Credit Suisse Group Inc. <CSGZn.VX>, although both investment banks have their headquarters uptown. One of the largest U.S. bond traders, Cantor Fitzgerald, was headquartered in building one.

Companies forced to relocate because of the blast say they don't know when they'll be able to return to buildings in the area.

New headquarters may become permanent.

"Clearly some space that's gone will have to be replaced midtown," said Bruce Mosler, president of American operations of real estate firm Cushman & Wakefield, referring to central Manhattan. Cushman & Wakefield manages about 24 million square feet in the area, said Mosler.

Lehman Brothers had two floors in the World Trade Center and is headquartered in the adjacent World Financial Center, which was evacuated after the attack. Lehman will now transfer some operations to London, Tokyo and New Jersey offices, said spokesman Bill Ahearn.

"We haven't been able to get back in there," Ahearn said, referring to the World Financial Center. "They haven't even let our engineering people do an official visit over there."

Morgan Stanley <MWD.N>, the top U.S. investment bank and the World Trade Center's largest tenant with 3,700 employees, said operations previously located at the World Trade Center will be moved to other sites in Manhattan and facilities in New Jersey and Brooklyn.

The blast also slammed shut the doors of the 98-year-old New York Stock Exchange, which is the cornerstone of Wall Street. The building is just two blocks away from the mangled metal and smoking metal that was once the Trade Center complex. The exchange said on Thursday it would be closed through Monday, making it the longest down time since World War I.

The hugeness of the Trade Center disaster may succeed in damaging Wall Street as a prized business address - far more than the horse-drawn carriage bomb (packed with 500 pounds of broken-up windows-sash weights and explosives), which exploded in Sept. 1920, killing 30 and shattering many windows.

SECURITY WORRIES AND EXPENSES

There is also the chance businesses will avoid Wall Street because of security concerns.

"I think it is going to change the whole face of lower Manhattan," said James Meiskin, president of Plymouth Partners Ltd., a New York firm that represents tenants looking for office space. "I just don't think its going to be desirable. People are going to be afraid (to work down there)."

Tuesday's attack and fear of future attacks will probably push some firms out of Manhattan, said David Kriss, owner of commercial real estate firm David S. Kriss Realty Co. Inc.

"I think there will be other attacks," Kriss said.

Manhattan real estate is expensive. Commercial space costs about $55 a square foot downtown near Wall Street, while space in Brooklyn goes for just $40, said Peter Brooks, principal at Ernst & Young's real estate advisory services.

Already, an exodus of top firms from Wall Street had begun, as companies looked to consolidate their operations in more spacious buildings and cut costs.

Bear Stearns Cos. Inc. was already entrenched in midtown Manhattan and will move into a new 45-story building on Madison Avenue, rather than the Wall Street area.

Goldman Sachs Group Inc., which is headquartered at 85 Broad Street in lower Manhattan, recently scrapped a project near Wall Street.

To be sure, the area's pull as the symbolic and traditional center of finance will remain.

"Wall Street will rebuild, prosper, and return," said Cushman & Wakefield's Mosler. "These companies' resolve to be in Manhattan is extraordinary."

Still, some say they're not certain the office space will ever be reclaimed.

"I certainly don't think we're going to see another World Trade Center built on the site," said Meiskin of Plymouth Partners. "We're just going to see a memorial."