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?
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 ...
The effects of the World Trade Center attacks upon ew York rents and vacancies are explained.