Rents/Vacancies in New York After 9/11
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The 9-11 terrorist attack on the World Trade Center complex completely destroyed or damaged 21 buildings with 31.2 million square feet of Manhattan office space - accounting for nearly 10% of the city's entire inventory. Just prior to the attack, the Manhattan office vacancy rate throughout the entire island was 8% and the average asking price for rent was $52.50 per square foot.
A - Based on what you have read so far, as an economist what would you conclude about rents and vacancies in Manhattan after 9/11? Why?
B - Immediately after 9-11 the vacancy rate throughout the entire island increased to 9.3% and the rental price fell to $50.75 --- not just in the neighborhood of the World Trade Center. As an economicst, why was this surprising? What is the explanation?
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Solution Summary
The effects of the World Trade Center attacks upon ew York rents and vacancies are explained.
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A) Based upon standard economic theory, one would have expected that rates for real estate would have soared. Prior to the attack, vacancy rates were at 8%. If the attacks destroyed 10% of the city's entire inventory, then current demand should have been greater than current supply. The rate of $52.50 should have increased dramatically as clients scrambled to find a vacant space. The simple law ...
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