Americans will never see the world in the same light as they did before
the attacks of September 11, 2001. For a long time there will be two time periods for
Americans, before September 11th and after September 11th. That day changed our lives
forever through many aspects of life including travel, occupation, security, where we live
and work, financial stability and many others. Even though there are many aspects of the
attacks, I am going to focus on the real estate aspect of the attacks.
The attacks of September 11th caused diverse consequences in demand
in the New York City real estate market as well as the national real estate markets. For
my research, I used several different real estate sources. Grubb & Ellis is a business
advisory firm with global experience in real estate. Bloomberg News is an information
services, news, and media company serving customers around the world. The
Institutional Real Estate Newsline is a weekly e-mail newsletter that provides up-to-date
information on institutional investment in real estate, gleaned from a large variety of
sources, including news wires and press releases. Cushman & Wakefield is a global real
estate services firm. CoStar is a provider of electronic commercial real estate information.
Lend Lease Real Estate Investments is one of the largest real estate investment managers
in the world. According to Grubb & Ellis, about 15.5 million square feet of office space
evaporated, 10 million of it belonging to the World Trade Center, and about 12 million
more square feet was damaged that day. These numbers do not mean much to the average
person unless they are put into perspective. The World Trade Center totaled about 10
million square feet. This is about 10 percent of the entire lower Manhattan office market,
which is about twice the size of the entire Tampa, Fl. Office market and is larger than
those of Miami and San Diego, according to Bloomberg News. As of the second quarter
of 2001, New York City had the lowest office vacancy rate in the United States at 5.1
percent. According to the Institutional Real Estate Newsline, the sudden loss of an
enormous amount of square footage supplied in lower Manhattan tightened up the market
again. Cushman and Wakefield's Bruce Mosler stated that there is about 14 million
square feet of office space available throughout the city and about 9 million of that was
available on a sublease basis. CoStar also believed that there was enough space in
Manhattan to accommodate about 80 percent of the 650 displaced tenants, assuming that
no more structures are deemed uninhabitable. The problem with this prediction was that
many of the displaced tenants either relocated in alternative places or downsized their
leased office space. Many of the tenants were looking to downsize their leased office
space prior to the attack to reduce costs and fight the economic slowdown. Many of the
firms that were in the World Trade Center were totally wiped out by the attack, therefore
demand was slightly reduced. Also, due to security and practicality reasons, many of the
tenants did not return to lower Manhattan or even Midtown. There was an obvious trend
of movement to settlement in New Jersey, which is closer to many of the employees'
homes. Although it is constantly changing, roughly the same numbers of tenants were
relocated to New Jersey. Several were returning to lower Manhattan although this was
difficult due to a small amount of available space. Also, tenants wanted to avoid areas
that could be emotionally sensitive to their employees. One can conclude that because of
the attacks the real estate market of lower Manhattan tightened up but not as much as if
all the displaced tenants relocated there. Displaced tenants moved to surrounding areas in
New York, New Jersey and even Connecticut to try to find available office space, and
some also downsized their square footage to cut costs. Some of the larger WTC lessees
had trouble finding office space large enough so that they can keep most of their
operations in a single area. Morgan Stanley for example occupied about 1.19 million
square feet in the WTC and Deutsche Bank, Bank of America, and Marsh & McLennan
had more than 300,000 square feet each. These tenants had trouble finding comparable
space. Therefore, these firms were forced to split up their operations. For example,
Morgan Stanley signed two leases for space, one in Midtown and one in lower
Manhattan. Not all industries in lower Manhattan were economically damaged due to the
attacks. For example, the hotel industry in that area, which had been hit hard from the
economic slowdown, picked up business from displaced tenants of the WTC. They were
not spending the night in the comfy beds, but instead they used the rooms to make shift
offices. For example, a Manhattan Sheraton tossed the beds and brought in desks for
Lehman Brothers to move in temporarily, benefiting both industries. Office space was so
hard to find following the attack that a company even set up floating offices on a barge in
the harbor.
In spite of the negative affects on real estate after the attacks, single family
properties in New York City still showed an increase in value by the end of 2001.By the
end if 2001, the average sale price for a single family in NYC was $278,418, an increase
of 45% compared to 1995 levels. Predictably, Manhattan real estate was more severely
affected by the attacks of 9/11 than any other borough. By the middle of 2002, prices for
Manhattan condominiums were still significantly below pre - 9/11 levels. Condo sales
volume also decreased significantly in Manhattan compared to three of the previous four
quarters. The highest decline was between the last quarter of 2000 and the last quarter of
2001, indicating a 34.8% decrease in number of sales. These were just a few of the
numerous consequences of the attacks on the NYC real estate market.
The attacks also affected the national real estate market. There were only a
few incidents that we could possibly compare this to, but they hardly come close to the
magnitude of this attack like for example, the 1993 bombing of the World Trade Center.
This was a serious attack where six people were killed, but the objective of the attack, to
topple both buildings, was not accomplished. Many people who worked in buildings like
the WTC feared for their safety, but most Americans forgot about it relatively quickly
and went back to their "untouchable" mindset. The national real estate market did not
notice a movement from skyscrapers after this attack since the risk was still considered
low. But the attack of 1993 does not compare to that of the 11th.According to LendLease Real Estate Investments, "The paranoia has dissipated over whether to occupy
high-rise buildings. If you work on the top floor of the Sears Tower, for example, you
may have concerns about your safety, but other than those few buildings there really
should not be too much paranoia. Nationally, all types of skyscrapers, famous or not,
have stepped up security to a new level, just like the airline industry has. It is a pretty safe
assumption that there will not be a flight from all high-rises but maybe a small movement
out of a few.
Also there was a slowdown in lending and an increase in loan defaults. As Lend-Lease
Real Estate Investments puts it, "Since lenders continued to be financially healthy and
had not experienced significant real estate-related credit events, the lending activities
returned to normal in fairly short order. Basically, the attacks did not affect future lending
or the ability to pay loans. Banks that lend to the hotel sector felt an increase in defaults
and loan delinquencies since hotels were hit hard by the attacks and the economic
slowdown. As a result of the rapid, economic slowdown the real estate industry
eliminated the uncertainty about what effects an economic slowdown had on the real
estate market. Now that we can tell that we were in an economic slowdown, the asking
prices came closer to the bid prices. In conclusion, there was not large disruption in
lending activities nor in loan defaults except possibly in the hotel sector. Many of the
markets around the nation slowed down and prices and values decreased because of the
rapid economic slowdown caused by the attacks. Since companies looked to cut costs
they either downsized their square footage or they sublet their extra space to other
companies. This additional square footage on the markets drove down prices due to the
excess supply. In New York City a trend of increasing demand appeared because of the
sudden loss of space. "Ironically, the New York City… metropolitan office market
tightened as a result of the destruction of office space," comments L-LREI. In some
cities, demand for space increased according to the industrial background of that city.
Now that we are fighting bio-terrorism and a war, defense, technology and medical
industries have improved. Therefore cities and areas built on these industries like
Southern California, New Jersey, San Diego, San Francisco, and metropolitan Boston
noticed an increase in demand and prices of office space. According to L-LREI, the
apartment markets across the nation should continue to flourish relative to other markets.
Retail markets continued to decline because of the economic slowdown and the attacks,
and the hotel markets were most likely hit the hardest since the attacks. People did not
travel as much as they did before the attacks resulting in empty hotel rooms and
numerous closures. These are some of the trends that we have seen in real estate markets.
One thing we can conclude for sure; everything in the United States was affected by the
September 11th attacks. Americans will never forget the day that changed their lives in so
many ways. The real estate markets in New York City and around the nation will never
be the same. There will be winners and there will be losers, but most markets around the
nation will not change. Some markets tightened and others opened up depending on the
economic foundation on which that city is based. New York City specifically experienced
various effects. The lower Manhattan market tightened due to the sudden loss of supply.
Midtown tightened a little but not much since many tenants were locating elsewhere,
downsizing their space, and some firms simply did not exist anymore. Some companies
had to split up their operations since very large office space allotments were hard to find.
The attacks on 9/11 and the collapse of two of the world’s tallest structures, the
World Trade Center towers, showed both the strength and vulnerability of skyscrapers.
Not only did the World Trade Center signify unity, but it also signified an
accomplishment, a bridge stone of what man was capable of doing. The ideas of
Yamasaki have been used and improved. Buildings today are considerably more hightech than they were thirty years ago. But nothing will ever take over the powerful image
of the World Trade Center, an image of technology, accomplishment and cooperation.
It has been five years since fear was imposed on us and age of terror began.
If 9/11 had not happened more than 3000 neighbors would still be blessedly alive,
downtown skyline would look as it had since 1972, we wouldn’t have to deal with
anxiety, fear, trauma, depression, occasional bag searches on the subway and regular
searches on the airports. Despite all those facts, the New York City didn’t become an
American Belfast in the eyes of potential tourists. It became even more seductive and
glamorous. Even though many predicted that after 9/11 real estate market will collapse, it
didn’t. Instead it soared. If 9/11 hadn’t happened, we would definitely be less fearful, but
fear has its uses too. “A certain amount of anxiety is good for you - it keeps you on your
toes.”(B.K.) Americans will never look at their country and the world the same as they
did before the attacks. We must forgive, but to forget would be a mistake. We should
learn from our history and do all we can to prevent events like the ones of September the
11th from happening to us, our children and their children.