Editor’s note: After the initial concerns of rescuing people from natural disasters like Hurricane Katrina, the next big question is over the recovery and rebuilding process, which has already begun in Katrina-ravaged areas. In this three-part series, we look back to the rebuilding process after the Oakland Hills fire in Northern California in 1991, Hurricane Andrew in South Florida in 1992, and the terrorist attacks of Sept. 11, 2001, in downtown Manhattan. We examine the damage in each case, what happened to the local real estate markets in the short-term, and what’s happening today. (See Part 1: Oakland Hills Fire transformed character of hillside homes and Part 2: Real estate rebirth after hurricanes.)
Sixteen acres of downtown Manhattan real estate were leveled in the aftermath of the World Trade Center terrorist attacks on Sept. 11, 2001. Fires at the site burned for three months and 1.5 million tons of debris were removed from the site in the first six months of the cleanup effort.
Some of the city’s major transit hubs were destroyed and access to many of the surrounding streets and neighborhoods was completely shut off. Many downtown residents were forced to move out of the neighborhood temporarily, and a number of them never returned.
In the four years since Sept. 11, downtown Manhattan has undergone some of the largest real estate development projects in all of New York City.
“It’s now considered one of the most prominent areas for development in the city,” said Jonathan Miller, president and co-founder of Miller Samuel, a Manhattan real estate appraisal firm.
Several Mayoral administrations prior to Sept. 11 had encouraged residential development in Lower Manhattan and promoted the idea that the area should evolve into a mixed-use district that includes commercial and residential space.
The terrorist attacks temporarily stopped redevelopment of the district, but not for long. The movement towards a more 24-hour livable neighborhood and less of a part-time 9-to-5 financial district continued in the wake of Sept. 11, and is still taking place today.
Before Sept. 11, there was already a lot of residential development taking place downtown, but it was mostly rental units and Class C office space being converted to rental units, Miller said. The focus on residential real estate development in downtown Manhattan became even stronger after Sept. 11, and more housing units have come on the market to buy in the years since, he said.
“The thought was that with the housing boom here with rising prices and lack of sites that were available, the alternative locations for development were in the northern and southern ends of Manhattan,” Miller said. The southern end of Manhattan, which is where the downtown area is located, made sense because there was a lot of commercial space available for condo conversions, he added.
The terrorist attacks of Sept. 11, 2001, initially devastated the area, but eventually jumpstarted a wave of residential development in downtown Manhattan. Federal funding flooded the city after the disaster and a portion went toward the newly created Lower Manhattan Development Corp. to set up a residential grant program.
The residential grant program, which officially ended in May 2003, was designed to keep residents in downtown Manhattan and attract new residents by giving grants that ranged from $1,000 to $14,500, depending on the building zone and housing costs, according to a Colliers ABR report. One portion of the grant program specifically targeted families with children under age 18.
The Lower Manhattan Development Corp. continues to study redevelopment opportunities in the downtown area. The group’s activities and programs are federally funded and administered by the U.S. Department of Housing and Urban Development as part of its Community Development Block Grant Program. After Sept. 11, the government earmarked nearly $3.5 billion dedicated to fund the rebuilding and revitalization efforts undertaken by LMDC and its parent, the Empire State Development Corp.
Miller and others say residential real estate sales experienced a total freeze in the few months just after Sept. 11, but bounced back right away.
The number of downtown condo sales dipped in 2001 to 1,168 from 1,380 in 2000, according to a report released by Miller Samuel and Prudential Douglas Elliman. In 2002, downtown condo sales bounced back up to 1,380. “Downtown” as defined in the report is the area within these borders: West 34th St. and East 42nd St. to the north, Battery Park to the south, the East River on the east, and the Hudson River on the west.
The number of co-op sales in downtown Manhattan initially dipped to 1,224 in 2001 from 1,439 in 2000, according to the report. Co-op sales then climbed to 1,794 in 2002.
“The timing (of Sept. 11) was interesting because the economy was already slipping into a recession and housing started to cool off before 9/11,” Miller said. “This actually jump-started the real estate boom,” he said, “because shortly after the Fed started dropping interest rates, which brought in new buyers.”
Rob Gross, senior vice president in Prudential Douglas Elliman’s downtown Manhattan office, agreed. He noted the initial shock to the real estate market when there was no activity in the first few months, and then a fervor and energy for buying that was unseen before.
“No one could quite understand it, but things just sold and sold and the market continued to rise – so it didn’t seem to put a dent into people’s confidence about buying real estate,” Gross said.
He said there are many more places to live in downtown Manhattan today than in the years prior to Sept. 11, and the new development in the district is driving a lot of real estate sales activity.
While the future of the World Trade Center site is still being decided, the surrounding area continues to add new businesses and residents. Miller believes the uncertainty of the site’s future has become a sort of lynchpin for other development activity downtown and that once construction starts for the site it will spark even more development projects in the district.
One of the things the downtown area is weak on is residential support services such as banks, grocery stores and other retail shops, Miller said. Prior to Sept. 11, one of the largest residential service centers in the district was the mall at the base of the World Trade Center, which hasn’t been replaced since the buildings collapsed.
“It’s kind of the cart before the horse,” Miller said. “You’ve really got to have those services in place to draw people into the neighborhood to live.”
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