The 9-11 terrorist attack on the World Trade Center complex completely destroyed or damaged 21 buildings with 31.2 million square feet of Manhattan office space - accounting for nearly 10% of the city's entire inventory. Just prior to the attack, the Manhattan office vacancy rate throughout the entire island was 8% and the average asking price for rent was $52.50 per square foot.
1) Based on what you have read so far, as an economist what would you conclude about rents and vacancies in Manhattan after 9/11? Why?
2) Immediately after 9-11 the vacancy rate throughout the entire island increased to 9.3% and the rental price fell to $50.75 --- not just in the neighborhood of the World Trade Center. As an economicst, why was this surprising? What is the explanation?