Post-9/11, Wall Street Goes From Rubble to Renaissance

A city is said to be defined by its highest building, and before Sept. 11, 2001, the Twin Towers of the World Trade Center marked New York's Lower Manhattan as a financial capital, a place to earn a living, the center of commerce.

Yet the destruction of the towers and the surrounding area from the 9/11 terror attacks left lower Manhattan nearly destroyed, and many people wondering if it could ever recover.

Freedom Tower, Ground Zero, New York City
Photo: Jennifer Parker for
Freedom Tower, Ground Zero, New York City

It has, residents and local officials say, in ways never imagined. Though One World Trade Center—the replacement to the Twin Towers—is not expected to be finished until late 2013, Lower Manhattan has not only returned as a financial capital, it is also the fastest-growing neighborhood on the island by population, residential real estate, and commercial activity.

“The whole area came to a standstill [after the attacks]. There was an eerie silence, and a lot of people lost the spring in their step," said Brian Goldstein, director of operations of New York’s division of the Small Business Administration. "But now, when I walk down those same streets, it's all open. They are seeing a resurgence down there. The hotels are all packed, Wall Street is back, and tourism is flourishing.”

This resurgence was a collective effort—heavily subsidized with billions of dollars from federal, state, city, and private sources. While the total amount poured into the southern tip of Manhattan is unknown, we do know that the result is a booming local economy, with a luxury living price tag.

City-State Coordination

The population of Lower Manhattan, which includes the financial district, has grown over 97 percent in the last 10 years, according to 2010 Census data. This phenomenon is, in large part, a result of state subsidies.

Regulation 421A is a post-9/11 tax credit designed to support residential real estate after thousands were dislocated. The NYC Department of Housing Preservation and Development and the Department of Financerequire recipient landowners to refuse corporate lease contracts and take individual residents only. Since then, housing units have doubled and new residents have gone from 24,000 to 56,000, says the state-run Downtown Alliance.

President of New York Economic Development Corp. Seth Pinsky attributes this growth to actions taken by city government.

“The city created the amenities which attracted residential investment—the transportation and the parks," said Pinsky. "Before, it was exclusively a business district. On weekends and after hours, it rolled up the carpets and shut down. Now new residents drive demand for a wide variety of industries—not just financial services.”

Most of the financial-services firms that called Wall Street home have returned in one way or another.
Though the offices of Deutsche Bank, Goldman Sachs, and , now a unit of Bank of America were either damaged or completely destroyed in the attacks, these banks, among others, have rebuilt their headquarters or maintain a large

They returned to a greener, and more accessible place—thanks to the city's Lower Manhattan Development Corp. (LMDC). Created in the aftermath of 9/11 by then-Governor George Pataki and then-Mayor Rudolph Giuliani, one of the LMDC's first actions was to allocate $46 million for city public parks projects.

“I’ve worked in city government for 30 years, and I’d never seen this amount of cooperation between city agencies. We said we’re going to bring back Manhattan bigger and better than ever,” said Adrian Benepe, who as commissioner of the NYC Department of Parks and Recreation, works with the LMDC.

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The new parks of Wall Street, South Street, and Battery Park attract both New Yorkers and tourists to the area, thanks to improvements in public transportation. These include the Fulton Street Transit Center linking nine subway lines, a new PATH trainstation providing access to New Jersey, and a new ferry serviceconnecting Lower Manhattan with waterfronts in Brooklyn and Queens.

Other newcomers to the financial district are luxury hotels—Downtown and 20 Pine—and retail chains Hermès and Tiffany. These developments are not only attracting residents, but also more tourists. According to the city's Downtown Alliance, tourism has increased by nearly 30 percent since 2008.

Disappointment and Acrimony

Amid all this progress, success, and improvement, the fact that One World Trade Center, formerly known as the Freedom Tower, will not be complete 10 years after the attacks remains a sore spot for many New Yorkers and Americans. Disagreements over financing, design, and security held up the project for years, and the first piece of steel was not laid until December 2006.

The Port Authority, a state agency, is coordinating the reconstruction of One World Trade. When finished, the skyscraper will anchor the neighborhood—as did its predecessors—and complement all the other additions.

"It's one of the most complicated engineering projects in the history of New York because there are so many different uses that intersect at that site. An office center, one-million-square-feet of retail, and a memorial will cover several acres. It's also a transportation hub," said Pinsky of the New York Economic Development Corp.

Financier Patisserie in Lower Manhattan
Photo: Jennifer Parker for CNBC
Financier Patisserie in Lower Manhattan

Less symbolic, but even more important to critics of the redevelopment, is the neighborhood's gentrification.

Rental prices welcome high-income residents. According to the Real Estate Board of New York, a one-bedroom apartment in the financial district costs a median $3,500 to $4,000 a month, much higher than the median Manhattan rental price.

Since 2001, home values in the financial district have risen 63 percent from a median $552 per square foot to $900 per square foot in 2011, according to Zillow Real Estate Research. Manhattan values overall are up 68 percent.

Pascal Couti moved into the district in 2009. He pays $3,500 a month for his studio apartment in a new luxury building.

“Every single metro line comes here, good bars, good restaurants, and we have the seaport," said the 39-year-old French citizen.

September 11: Ten Years Later - A CNBC Special Report
September 11: Ten Years Later - A CNBC Special Report

At the same time, existing residents have been priced out of the market.

“They gave us three months notice before my rent went from $1,800 to $2,700 a month. That’s when I moved,” said Howard Lam. A native New Yorker, Lam left his Battery Park one-bedroom in 2006 and relocated north to Manhattan's Stuyvesant town.

Rising prices have prompted city advisor Community Board 1 to action.

“We’re focused on building affordable housing. We engaged in the rezoning of northern TriBeCa last year. Inclusionary zoning means that when a developer is building, they get a bonus if they put in affordable housing. Now we are urging the city to build more affordable housing on other parcels of developable land,” said Julie Menin, Community Board chairperson.

The Community Board cites 11 stalled construction sites in lower Manhattan—which were moving forward until the financial crisis restricted the flow of financing—as prime spots for affordable housing development.

Substantial Stimulus

At this point, it's unclear where the city stands on this.

Federal Funding

Local businesses, however, have received substantial stimulus. From the state came tax credits, worth $4,800 per employee for 2002 and 2003. But city-state efforts weren't acting alone, the federal government also pitched in.

After 9/11, the Small Business Administration—a federal agency—approved 4,761 “Economic Injury Disaster Loans.” Application deadlines extended through 2003, for a grand total of $478 million. Yet the end of the disaster program didn’t mean the end of aid.

District director for New York’s SBA, Pravina Raghavan said, “For the fiscal year 2002, average Lower Manhattan received $20.8 million lent to 131 borrowers. It keeps going up. Now, as a result of the Small Business Jobs Act, which increased limits from $2 million to $5 million, we’ve guaranteed $52 million worth of loans in that area.”

Tom Berton, native New Yorker and owner of “Manhattan By Sail,” a public sail and charter business, said, “I could not have done it without the NYSBA.” With one sailboat docked at the World Financial Center's marina, Berton started business in June 2001. But after 9/11, he was nearly out of business. “They wouldn’t let us back in until June 2002. It was a ghost town, but we kept trying,” he said.

Tom Burton and his family, on board "The Shearwater"
Photo: Manhattan by Sail
Tom Burton and his family, on board "The Shearwater"

Displaced from his apartment in the South Street Seaport and not able to get a loan from a traditional bank, Berton was approved for a $400,000 SBA disaster loan.

Today, Berton’s two-sailboat business is booming. Revenues have doubled (amounts remain undisclosed at his request) and volume shot up from an annual average of 7,000 to 40,000 passengers last year.

But others feel threatened by the rejuvenation of Lower Manhattan. Pauli Morgan, manager of Nelson Blue Bar & Grill at the South Street Seaport, is wondering whether he'll survive the reconstruction of the area called Peck Slip. The task, taken by the New York City Parks Department, is to install two new water mains and a sewer pipe.

“I understand it has to be done, but who’s going to come eat down here with the noise of jackhammers outside, and dust in the air? This is our livelihood. I sank all my money into this place, and if this doesn’t work, I’m done,” said Morgan.

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The construction duration is noncommittal, but the city estimates 4.5 years. During this time, nine other restaurants, bars, and hotels all bordering Peck Slip and will be affected by its reconstruction.

Renaissance Redux

September 11: Ten Years Later - A CNBC Special Report
September 11: Ten Years Later - A CNBC Special Report

Redevelopment plans are far from over. This summer, Mayor Bloomberg unveiled the East River Esplanade—a $160 million investment to beautify the waterfront from Wall Street to Maiden Lane.

And for the grand finale, the southern-most tip of Manhattan will complete “The Battery,” by 2013. With $57 million from the city, the LMDC, and the Federal Department of Transportation, this 23-acre park will be complete with a sea-glass carousel.

“Post 9/11, it will bring together the water, the Staten Island Ferry, the No. 1 subway, the bus loop and the bikeway,” said Warrie Price, the president of the Battery Conservancy.

If the goal was to rejuvenate Lower Manhattan, it has been realized. Though the World Trade Center got off to a very slow start, the surrounding neighborhood is now a vibrant model of economic growth. Affordability, however, is another matter.