A Different World for CRE, 10 Years Later
- Sep 09, 2011
New York and Washington, DC—The world became a different place on Sept. 11, 2001. The broad political and economic changes wrought by the attacks on New York and Washington, as well as the awful human cost of that day, have been well documented, even as they continue to reverberate 10 years later. But there have been other changes, less noticed by the world.
For instance, the attacks changed the commercial real estate industry in a number of ways, both visible and subtle. In the days and weeks after the attacks, ingress and egress to many major buildings in large cities around the country became markedly more difficult—in some cases, such as the former Sears Tower in Chicago, akin to entering an airport. Streetside barricades went up around many buildings, intensifying a trend that began with the Oklahoma City bombing in 1995. Guards started checking IDs methodically. Spending on security systems spiked.
Some of these changes have faded in the decade since the attacks, such as checking of identification upon entering most commercial properties (except maybe in New York). Still, according to a recent survey by CoreNet Global, the association of corporate real estate professionals, about three-quarters of the respondents asserted that companies occupying major commercial properties are still vigilant about security. Also, “distributed work”—not putting all your employees in one place—has become standard risk management for some companies, according to CoreNet.
Boyd R. Zoccola, executive vice president, Hokanson Companies Inc. and chair of BOMA International, is optimistic that property managers have incorporated security-consciousness into managing commercial structures. “As an industry, we continue to assess and strengthen our preparedness to ensure we have the systems, plans and people in place to keep building occupants safe,” he said recently, commenting on the anniversary of the attacks.
One change since the attacks that building occupants never see—but which concerned building owners and managers greatly in the aftermath of Sept. 11, 2001—was the status of insurance to cover terrorist attacks. Once upon a time, standard commercial property insurance included coverage for acts of terrorism almost routinely, so remote was the risk considered. The attacks on New York and Washington, however, caused in excess of $30 billion in insured losses, so it was no wonder that insurance companies dropped such terrorism coverage as soon as they could.
For a time, the lack of terrorism insurance posed a serious problem for commercial real estate owners and developers. Ultimately, the Congress dealt with the issue through the Terrorism Risk Insurance Act of 2002, which was extended in 2007 to be effective until 2014. Under the terms of the law, insurers were required to cover acts of terrorism once more, while the federal government would act as a re-insurer under certain conditions.
Another change in commercial real estate wrought by the September 11 attacks is a little harder to measure, though probably quite real. Call it the Shrinking Trump Syndrome, or why the world’s tallest building will not be in the United States in our time. In 2001, Donald Trump, always one for superlatives, promised that the new Trump Chicago was going to be the tallest building in the world. The Trump Organization and its architects were meeting about plans for the structure even as word broke of the attacks. Soon the plans were scaled back. Trump ended up building a tall mixed-use tower in Chicago, but not conspicuously the tallest in the world.