The attack on the World Trade Center was designed to wreak economic havoc as well as geopolitical havoc. And at first—in those confusing, hazy hours after the towers fell—there was a widespread belief that Sept. 11 would change the New York and the American economies. But in several instances—for better and worse—the immediate assumptions haven’t panned out.
Assumption No. 1: New York’s status as a financial capital would be threatened.
Just a few blocks from the New York Stock Exchange, the smoldering wreckage at Ground Zero was thought to signal the death of downtown Manhattan as the center of the nation’s securities business. As securities firms hastened to lock up space in New Jersey and Westchester, the federal government suggested that companies consider locating back-up space 200 miles from Manhattan. New York City has lost securities industry jobs—some 28,000 between August 2001 and July 2003, or about 15 percent of the total. But that has had more to do with the bear market and corporate scandals than with the attacks. According to the Securities Industry Association, in fact, financial industry jobs in New York rebounded in the months immediately after the attacks. As of July 2003, New York City still had 20.3 percent of U.S. securities industry jobs, down from 20.7 percent for all of 2001. Over the long term, New York is losing securities jobs: Between 1990 and 2000, the city’s share of securities industry jobs fell from 32.1 percent to 23.9 percent. But that decline has, if anything, slowed since 9/11.
Assumption No 2: New York City apartment prices would crash—and stay low.
The throngs of people streaming over the East River bridges on the afternoon of Sept. 11 were seen as a metaphor. Traumatized by the day’s events and fearful of future attacks, New Yorkers would quit the city. The jobs might stay, but the people would go—to Westchester and New Jersey, to Connecticut and Massachusetts. And this exodus would kill off the raging bull market in New York City apartments. “There was a feeling that we’d be in a dark hole,” said Jonathan Miller, president of appraisal firm Miller Samuel Inc.
But that hasn’t happened. According to a report by Miller, the median sales price for an apartment in Manhattan (below 116th Street on the West Side and below 96th Street on the East Side) in the second quarter of 2003 was $575,000, up 10.6 percent from the $520,000 median price in September 2001. While the market has certainly cooled, it’s still comparatively hot.
Assumption No. 3: New York City office rents would spike—and stay high.
According to Realty Times, the World Trade Center attack knocked out some 24.5 million square feet of Class A office space. At the time, it was believed that only 23.3 million square feet of such space remained available for direct lease in all of Manhattan. Amid fears of a massive squeeze, the overwhelming concern was that tenants fighting for that rare space would be gouged by unscrupulous landlords. Brokers spent the post-attack weeks locking up big chunks of office space for their blue-chip clients.
The reality: Companies large and small had already started to cut back on space after the bull market ended. They were sitting on miles of unused and unwanted space. The lost 24 million feet, massive as it sounds, represents only a small chunk of Manhattan’s vast office market—about 432 million square feet today. In the months since September 2001, several times more space than was destroyed has come onto the market. With employment in the city generally sliding, there has been an orderly decline in the price of prime office space and a rise in the vacancy rate. Today, according to CoStar Group Inc., the average asking rent for Class A Manhattan space is $46.60 per square foot, compared with $59.76 in the second quarter of 2001. For downtown Class A space—the area in which space was thought to be most at a premium post-9/11—the asking rent has fallen from $45.99 in the second quarter of 2001 to $37.34 today. And according to Colliers ABR, the vacancy rate for Class A Manhattan office space rose from 7.6 percent in September 2001 to 10.7 percent in June 2003.
Assumption No. 4: We’d import less oil from the Middle East.
When it was revealed that 15 of the 19 hijackers were Saudis, many Americans questioned our dependence on Saudi oil. Everyone had a plan to reduce it. To bolster our national and economic security, it was necessary to drill in the Arctic National Wildlife Reserve (President Bush) or establish a Manhattan Project to develop fuel cells (Thomas Friedman, again and again). But the past 24 months have brought neither a crash program to develop alternative fuels, nor a sudden sprouting of derricks on the barren tundra of ANWR.
In fact, demand for oil from foreigners (and from Saudi foreigners in particular) has been remarkably steady amid all the tumult. According to the Department of Energy, the average daily U.S. demand for oil in the first seven months of 2003 was 19.828 million barrels, compared with 19.769 million barrels for the first seven months of 2001. In July 2003, according to these figures, the United States imported 12.067 million barrels of oil per day, compared with 11.76 million barrels per day in July 2001. And we’re importing just as much from the Persian Gulf today as we were in 2001. The average for the six months through June 2003 was 2.695 million barrels per day, compared with 2.756 million barrels per day in 2001. And in fact, imports from Saudi Arabia are up, though imports from Iraq have fallen sharply.