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Economic effect of 9-11 terrorist attack

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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 economist, why was this surprising? What is the explanation?

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A. The 9-11 terrorist attack resulted in a dramatic reduction in office space. Such a reduction in supply should cause prices to increase, and vacancies to decline. This is because renters would compete for the remaining space, driving up prices, and would be willing to take whatever ...

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