June 13, 2013 by Leave a comment

CRecently, GoBankingRates posed the question of how a terrorist attack could impact housing markets in the affected cities. The attack on the World Trade Center in New York City and the bombs that exploded in the recent  Boston Marathon were the two prime examples given.

In the study, Michael Sivy of Time made the following point:  “One of the things that made 9/11 so serious was that it disrupted financial activity in New York City, including the stock market,” said Sivy. “Indeed, the markets were closed for four trading days, the longest shutdown since 1933. A number of other banks and brokerages were brought to a halt as well, which magnified the effects further.”

And while the Boston attack was serious and resulted in multiple serious injuries and even deaths, the financial toll to the city was far less than it was to New York. The study did say Boston draws over 22 million visitors a year, drawing in $8.6 billion in revenue. And the marathon brings in over $140 million.

“This is a difficult situation to assess since we really don’t have a parallel. To impact the economy of the city, the bombing would have to be seen as a recurring problem. To impact housing, it would have to offset all of the benefit of the colleges and universities, and the vibrancy of a great city,” Bruce Taylor, President, ERA Key Realty Services in Whitinsville, Massachusetts told Total Mortgage.

“Although the marathon bombing was a terrible tragedy, it was not on the same scale as 9/11 and I don’t believe it’s having a negative impact on local real estate.  The terrorists responsible were identified quickly; one was killed and the other was captured,” said Dave Kowal, President, Kowal Communications, a Northboro, Massachusetts based public relations firm. “While it has not been determined whether they acted on their own, the bombing is generally perceived as being an isolated incident.  In addition, the city came together quickly with its One Fund efforts, creating a positive impression of Boston.”

“Shutting down Boston during the investigation and manhunt was extreme and it created more panic than the event,” said Taylor.  “Our daughter lives in Brighton and was at the Marathon cheering on friends.  She just found another apartment in Brighton for the next year and she will be running in the Marathon in 2014.  I don’t think the bombing has had an impact that negatively affects the economy or housing in the greater Boston area.”

Said Kowal, “The timing is also such that the incident took place as the housing market was gaining momentum.  Boston currently has the strongest commercial real estate market in the country, with $4 billion in projects underway.  Residential real estate prices have not increased as much as they have in other parts of the country, but that’s because they didn’t fall as much during the housing bust.  So any impact that the marathon bombings had on the Boston economy and its real estate market, I believe, is negligible.”

Summed up Taylor: “An attack of the magnitude of the WTC would impact housing, commercial leasing, the economy in general.  If there were more than one of these, the impact might hit cities all over the country.   Where would people feel safe?  Atlanta, Charleston, Richmond?”

The after-effects of 9/11 are still being felt to some degree in lower Manhattan. The new WTC is having trouble attracting corporate tenants. In addition, the tremendous toll that hurricane Sandy took on the area has firms thinking twice about re-locating to downtown Manhattan; which has many buildings near water. Six months after Sandy, there are still damaged structures.

Another study: Is Terrorism Eroding Agglomeration Economies in Central Business Districts? Lessons from the Office Real Estate Market in Downtown Chicago, economist Alberto Abadie and real estate analyst Sofia Dermisi investigated the economic impact of an increase in the perception of terrorist risk induced by the 9/11 attacks on the office real estate market, using data from downtown Chicago. They found that “Unlike New York City, the city of  Chicago was not directly affected by the destruction of the 9/11 attacks. However, the 9/11 attacks induced a large increase in the perception of terrorist risk in the Chicago Central Business District, which includes the tallest building in the U.S. (Sears Tower) and other landmark buildings.”

for info on the studies:




Steve Viuker is a Brooklyn, New York business journalist. He has covered real estate, small business and banking for numerous national online and print media.

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