As much as the twin towers of the first WTO became an international symbol

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of New York ascendant, the 232 acres inside the buildings undercut private landlords with cheap, subsidised space, took a decade to attract significant nongovernment tenants and were not financially successful until the 1990s.

The tentative agreement struck last month by ground zero’s owner, the Port Authority of New York and New Jersey, with the developer Larry A Silverstein has some urban planners and real estate executives wondering whether New York is destined to repeat the past. The agreement negotiated by Christopher O Ward, the authority’s executive director, seeks to avoid oversaturating the market by providing for the construction of towers in phases.

Still, the development of Silverstein’s three towers will require huge subsidies, tax breaks and government tenancies at a time when analysts are predicting that the downtown commercial vacancy rate could climb to a very unhealthy 18 per cent by 2013. That is the year the first Silverstein tower and One World Trade Center, which the Port Authority is building, are scheduled to open. It could be “déjà vu all over again,” said Robert L Freedman, executive chairman of FirstService Williams Commercial Real Estate.

At the same time, some planners, brokers and downtown advocates say that with Lower Manhattan evolving into a lively residential and commercial community, the district will need buildings with a mix of retail, apartments, hotels and offices, rather than the huge office towers planned for the trade centre. Those towers, they say, are better suited for financial firms than for the kinds of companies now moving downtown.

“The growth in the city’s economy has come from small and mid-sized firms,” said Robert Yaro, president of the Regional Plan Association, an independent planning group. “And the companies that have moved downtown in recent years tend to be smaller: business services, design, legal and engineering firms. Federal agencies, state government and a single private tenant, Vantone, a Chinese real estate company, are expected to lease almost half of One World Trade Center, the $3 billion, 1,776-foot-tall building formerly known as the Freedom Tower.

If Silverstein can raise $300 million and lease 400,000 sq ft to corporate tenants, then the city, the state and the authority will provide up to $600 million in financial support for his second tower, which will be 2.5 million sq ft. His third tower will wait until there is enough demand to justify construction. Mayor Michael R Bloomberg embraced the tentative agreement last month, saying it would accelerate the redevelopment of the downtown area. He noted that in the past five years, “More than 200 firms in a wide range of industries have relocated to Lower Manhattan, taking 4.4 million sq ft of space.” But the mayor’s numbers also indicate that the average lease was 22,000 sq ft, a size more representative of small businesses than a 500,000-sq-ft block of space that might be rented by a corporation institution.

On paper, the commercial market downtown looks better than nearly every other central business district in the country. But real estate brokers report that rents are still falling, because of the expectation that large blocks of vacant space will be coming on the market. Depository Trust and Clearing Corporation will vacate about 600,000 sq ft in 2012 at 55 Water Street, and Goldman Sachs is already leaving 85 Broad Street and One New York Plaza, moving to a new headquarters across West Street from the trade centre. AIG, the insurance giant, and Merrill Lynch are shrinking.

Even Silverstein’s tower at 7 World Trade Centre, which opened in 2006, is still 20 per cent vacant. Combined with the new towers, the brokerage Jones Lang LaSalle estimates that the vacancy rate for first-class space could hit 18 per cent by 2018.

“Somebody’s going to get crushed in the interim,” said Barry M Gosin, chief executive of another brokerage, Newmark Knight Frank. “The downtown market would be better served by having mixed-use buildings with a hotel, retail and a modicum of commercial space to support a 24/7 neighbourhood. That would be far more attractive for new residents and workers.”

The Port Authority dedicated the original trade centre, a 10-million-sq-ft office complex, on April 4, 1973. Private landlords complained bitterly that the trade centre, with its cheap space and low taxes, was undercutting their ability to attract tenants. Still, the complex was plagued by a high vacancy rate, and its biggest tenant was government: The authority, the United States Customs Service and more than 40 state agencies accounted for over 3.3 million sq ft. The trade centre did not overcome its stigma as a government complex until 1985, when the authority signed a lease with its first major financial tenant, Dean Witter Financial Services, for 24 floors, at $31 per sq foot, which was three times the rent paid by state agencies.

But occupancy fluctuated wildly at the trade centre until the late 1990s, when corporations fleeing high Midtown rents moved to the trade centre. After the attack on the trade centre, in December 2002, Bloomberg outlined his vision for downtown and warned against rushing to replace the 10 million sq ft of office space. “If we are honest with ourselves, we will recognise that the impact on our city was not all positive,” he said of the trade centre. “The twin towers’ voracious appetite for tenants weakened the entire downtown market.”

However, Bloomberg argued in favor of completing construction at the trade centre as quickly as possible. The mayor backed Silverstein’s effort to get the Port Authority to finance his towers after the developer was unable to get tenants or financing for the projects. Reluctant to finance speculative office space again, the authority agreed to limit its subsidies and impose a number of conditions on construction. “How can you build a building when there’s no demand?” said Donald Schnabel, a downtown broker who retired in January after 47 years in the business. “I’m not convinced that downtown can absorb all the space.”.

— International Herald Tribune