Tragedies foster change in all sorts of ways, and the 20th anniversary of 9/11 has made many in the real estate industry reflect and take note.
After the World Trade Center’s twin towers fell, the Lower Manhattan area where the attacks occurred became virtually deserted, says Andrew Barrocas, CEO of MNS, a New York City–based residential brokerage firm, which focuses on condo and rental markets. At the time, Barrocas had recently graduated from college and was starting his career in real estate.
Francis Greenburger, CEO and chairman of Time Equities Inc., a real estate investment firm that owns and builds properties in New York City and in other states and countries, recalls the Lower Manhattan area being physically locked, accessible only to some residents. He also remembers the exodus, which left enormous vacancies. “We had a building two to three blocks from Ground Zero and we weren’t allowed to go there for six months. It was like a war zone,” he says.
Then, slowly, he noted signs of a return, including the day a bank agreed to give his firm a mortgage for a building in Lower Manhattan—a week after another had turned him down because of the economic uncertainty. “It showed me that the financial institutions, which are risk-averse, were willing to recommit and see a future for the area. That gave me a sense of encouragement that we’d get through this,” he says.
Paul Massey Jr., founding partner and CEO of B6 Real Estate Advisors, a New York City real estate broker and an investment sales expert, also remembers the effect of the tragedy, as many residents asked themselves, “’Do I really want to live in New York anymore?”
But the area hasn’t just come back; it has become better with each passing year, Barrocas says.
Battery Park City is a prime example of a thriving residential area with parks and bicycling paths set along the Hudson River. He attributes the rebirth, in part, to incentives from the city and property owners who enticed renters to return. “If you make it attractive enough, people will come back,” he says.
Massey points to low interest rates as an attraction for condo buyers. “There was an unprecedented rally between 2001 and 2002. Rates dropped and values skyrocketed, with properties appreciating at a rapid rate for six straight years until the Great Recession,” he says. There also was a huge spur in redevelopment led by visionaries who were determined to rebuild the city, he says.
The rebirth also evened out the perception of which areas of the city offered more value and better rents or sales prices. “It’s become as popular to live and work downtown as it is to be in midtown,” Massey says. “People realized living downtown was incredibly great with a lower density and more light and air. The city has become all one big market.”
Greenburger now describes the area as “nothing short of extraordinary” and says it was made possible by private and public interests coming together. “It’s become stronger, better, and more desired in all respects. The area is considered a first-class location rather than anything compromised.”
These observers also say that a similar, yet slightly different, rebirth is now occurring in the Lower Manhattan area and throughout the city as it recovers from the peak of the COVID-19 pandemic. Many residents left for other destinations or have vacated their offices to work from home or elsewhere.
However, this time around, not all aspects of the city have returned equally.
“Each segment is playing out differently. Downtown retail is a weak sister to the office and apartment markets,” Greenburger says.
Residential, for example, experienced an enormous vacancy rate throughout the city in 2020, though the vacancy rate has now dropped. Greenburger also notes a resurgence in office leasing after substantial vacancies. “Some may do some sort of work at home for a day or so, but many functions can’t be replaced online,” he says.
Barrocas notes the strength of the rental market. “One-bedrooms that leased for $4,000 a month pre-pandemic dropped to $2,500, and are now are up to $4,500. Condo sales continue to stay strong,” he says. “Many realize that, at the end of the day, this is where they want to be and come here for opportunities.”
Massey agrees, “The work-from-home trend is wonderful for some but bad for most of the industry in New York. The office segment will bounce back, and it won’t be terribly long for it to do so,” he says.
Meanwhile, industrial tenant markets are rapidly expanding, Massey says, pointing to Amazon and Walmart as examples. He sees retail offering a significant opportunity, and the condo and rental markets are showing signs of demand and recovery. “People want to be here,” he says.
But Massey and the others say the city has work to do to make a full recovery for all. “There’s a massive housing shortage … for middle class and affordable markets,” Massey says. Greenburger says quality-of-life issues, such as homelessness, need to be addressed with a new approach in this new COVID-19 world.