9/11 and the Market for Manhattan office Space
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The attack on September 11, 2001 had influence on the whole world, but the strongest on New York and its economy. This paper concentrates especially on office space market of Manhattan after that event. Due to the tragedy not only the two towers of World Trade Centre were destroyed but, because of the falling wreckage, also the surrounding buildings were damaged and as a result a lot of office space vanished. Those facts definitely affected the supply and demand of the market, but did they cause a significant turn?
Most of the predictions about the situation after the attack, assumed that because approximately 30 million square feet of office space was destroyed or damaged (J.Bram, J.Orr, C.Rappaport, 2002), then, as a result of decrease in supply along with almost none changes in demand, the price would rise. However, that occurred to be wrong.
The short-term affect on supply actually did not influence the market, as it has already been in downturn. Analyzing the period before September 11, we can already observe a decrease in demand. As a source of that we might see a growth of dot-com companies in the second half of 1990s which enabled companies to grow without need for a larger amount of space. Moreover there was a program created by New Jersey and based on refunding portion of state taxes (Business Employee Incentive Program,BEIP) to lure companies to locate in the area, what also caused the demand for Manhattan’s office space to decrease (A.G.Hevesi, 2001) .
The demand did not increase after the attack. Although many companies lost their offices it occurred that most of them also had some other space on Manhattan or in the area adjusted to it and they were reluctant to rent additional space at that time. Furthermore the space in high buildings started to be perceived as risky. The companies became more concerned about security matters and wanted to avoid the damages of possible recurrence of attack. Some of them even moved to the suburbs. Therefore those who lost their offices and still wanted to stay on Manhattan did not have problems with finding space because there was no significant increase in demand and before the attack there was already some excess in supply. That is why, although supply might decrease and the demand did not change (or even slightly decreased as effect of anxiety and safety concerns), the market did not suffer noteworthy.
In conclusion, concerns about companies leaving Manhattan because of lack of office space were poorly justified – the decrease in supply did not affect the companies ’ choice. Decisions about relocation were mostly caused by lower taxes outside New York City and increasing consciousness of security matters. That not only involved companies itself but also caused a lot of employees to move to the suburbs, making it more convenient to locate offices there.
As we can see, a lot of different factors affected the Manhattan office space market due to the attack, but they did not cause a