The direct losses attributable to real estate alone following the attack on the World Trade Centre could range up to $10 billion (€12.7bn), including total damage to surrounding buildings in the World Trade Centre/World Financial Centre sub-market, according to John Mulcahy, managing director of international agency Jones Lang LaSalle.
In Manhattan, the immediate reduction of commercial office space is approximately 25 million sq ft, with the net loss over the next 12 months expected to be more than 20 million sq ft, representing approximately 18.5 per cent of the downtown office market.
New York real estate impacts:
The total immediate loss is roughly 15 million sq ft of property in lower Manhattan - approximately 11.5 million sq ft, or 10.6 per cent, was destroyed.
Another 3.5 million sq ft has been damaged or declared structurally unsound as a result of fires, falling debris and building collapses.
More than 10.7 million sq ft of property sustained damage, including five million sq ft that will be taken out of the market for at least one year to complete extensive repairs and reconstruction.
5.7 million sq ft should be ready for occupancy in less than 12 months.
Prior to September 11, Manhattan had approximately 26 million sq ft, or 7.5 per cent of vacant space for lease or sub-lease.
The firm expects that nearly all of the sub-let space and a significant amount of the direct space will be filled in the weeks ahead in order to accommodate office space needs of dislocated firms.
The World Trade Centre/World Financial Centre sub-market totalled 40 million sq ft before the incident and has been reduced by half for at least the next year. In the months and years ahead, the firm expects rebuilding and renovation work to restore the lost inventory.
To put these figures into context, the total Manhattan real estate market now stands at 328 million sq ft, still the second largest office market in the world after Tokyo, following the September 11th loss. It accounts for 59 per cent of the metropolitan New York market. The total lower Manhattan sub-market is now 89 million sq ft following the loss of 20 million sq ft.
Potential short-term global impacts for occupiers/users:
In the face of uncertainty, corporations may delay real estate decisions.
Companies will be more likely to renew leases than move as they shepherd capital.
Premiums paid for the most prestigious buildings and the highest floors may decline.
International firms considering downsizing are likely to take this action faster now.
Potential long-term global impacts for occupiers/users:
Major firms may adopt a multi-premises strategy (facilitated by technology) and favour decentralisation.
Some global firms may consider a greater regional or even international dispersal of headquarters activities to avoid damage.
Potential short-term global impacts for investors and developers:
Demand will accelerate for tele-conference facilities and broadband connections as a substitute for business travel.
Building management costs will increase due to enhanced security measures and higher insurance premiums.
Some projects under development may be reviewed in terms of building specification, volume and configuration.
Potential long-term global impacts for investors and developers:
The firm does not foresee a flight of occupiers and capital from central business districts, however new demand will be stronger in suburban markets.
Security will become a differentiating factor for prime versus sub-prime space.
The firm expects US buildings to follow the extensive security practices currently in place in major European and Asian cities.
Some cities might review building codes, complicating application processes and increasing construction costs. Stand-alone high-rise buildings will be more difficult to finance and there will be stricter zoning requirements.
