The Aftermath of the 9/11 Attack in the New York City Office Market: A Review of Key Figures and Developments

Although almost eight years have passed since the terrorist attacks of September 11, 2001, researchers continue to investigate the consequences of this far-reaching event in a variety of scientific disciplines and subject areas. In economic research, a number of more recent publications have added to existing body of literature by elucidating the medium- and long-term impact of the attacks using new methods and/or data. This paper is more modest in scope in that it reviews the impact of the attacks on the Manhattan's office inventory, employment and rents. Overall, there is scant evidence that the attack have had a long-lasting impact on the Manhattan office market. Of the companies that decided not to return to Lower Manhattan after 9/11, the majority relocated to Midtown Manhattan. Taken together, the core markets of Midtown and Downtown Manhattan captured about 80 percent of the stream of displaced tenants after 9/11, while areas outside of these two core clusters captured only 20 percent, which bodes well for Manhattan's ability to remain a prime office location even in the face of a severe crisis. Moreover, the set of so-called "trophy" buildings proved to be less affected by the recession than the general market, a finding that runs counter to initial assumptions about the future of office high-rises. In addition to a drastic reduction in leased space, accommodation of displaced tenants within the existing office space portfolio of large companies contributed further to lower occupancy rates than had been expected after the destruction of 10 percent of the inventory. This phenomenon, also known as backfill, caused overall absorption to be negative in the quarters following 9/11, since the positive demand created by displaced tenants was more than offset by losses incurred in the accelerated recession.