Exogenous Shocks and Real Estate Rental Markets: An Event Study of the 9/11 Attacks and Their Impact on the New York Office Market

Abstract

Any attempt to measure the impact of the 9/11 attacks is faced with the difficulty of separating the effects of the attacks from the impact of a wider economic recession and other simultaneous events. This study attempts to isolate the effect on New York office rental and vacancy rates by applying an event study methodology. The results support the hypothesis of significant effects of the September 11 attacks in the New York office market. These effects seem to be limited, however, in terms of their spatial and temporal impact. While the New York office market as a whole has demonstrated remarkable resiliency in the wake of the attack, the downtown market and particularly the World Trade Center submarket have been affected more clearly. Measured three years after the attack, however, cumulative abnormal changes in vacancy rates are moderate in the downtown submarket, indicating a much weaker medium-term impact of the attack than expected in its aftermath.

Keywords: office rental market, real estate, 9/11, terrorist attacks, impact, World Trade Center, New York, event study, abnormal returns, vacancy rates

JEL Classification: R33, G14