Lower Manhattan turned into a 24/7 community after 9/11. Midtown NYC could heed this lesson post-pandemic.

Jay Neveloff recalls sitting in his office on 55th Street and Third Avenue in New York City, the morning of Sept. 11, 2001, as he prepared for a meeting with real estate tycoon Sam Zell to negotiate a deal on a building in Chicago.

The commercial real estate attorney, now chairman of Kramer Levin’s real estate practice, remembers looking out the window shortly before 9 a.m. and seeing a plume of smoke coming out the side of one of the Twin Towers at the World Trade Center. A hijacked plane had rammed into the North Tower at 8:46 a.m. Seventeen minutes later, a second would smash into the South Tower.

The next several hours, the 70-year-old Neveloff recalls, were the most surreal experience of his life, as he scrambled to meet up with his wife and son. He joined the thousands of others running around Manhattan and the surrounding boroughs in search of loved ones. For the next few days, he said, it felt like not just New York City but the entire world had shut down. Nearly 3,000 people were killed that Tuesday.

The implications were sweeping, particularly for Neveloff’s industry.

Nearly 15 million square feet of office space was destroyed in the 9/11 attacks, according to commercial real estate brokerage CBRE. The ensuing chaos disrupted the more than 400,000 public and private employees who commuted into the area daily.

“It was barren,” Neveloff said. “They tried to convert a number of office buildings to residential, but even getting into the central district was barricaded for a while. They were giving away rent. They were just giving away the apartments.”

Many vowed they would never enter a skyscraper, let alone return to lower Manhattan. Some office tenants fled. Businesses closed up shop. But in the past two decades, those fears have diminished. The neighborhood has grown into a 24-7 community from what used to be a 9-to-5 financial hub. Downtown New York City is home to a bigger retail scene, a diverse mix of office tenants including Big Tech, and a residential population roughly double what it was in 2001.

While the Covid-19 pandemic has derailed some of downtown’s momentum, real estate executives say the neighborhood is resilient. They reflect on how the town rebounded post-9/11 to guide their work today. And the lessons can be applied to developments elsewhere, including midtown New York City, which is reeling today from the Covid health crisis.

“When 9/11 happened, I swore to myself I’d never go back downtown again. It was sort of the end,” said Saul Scherl, president of the New York tri-state region at the real estate developer Howard Hughes Corp. “Who would have imagined that I’d be going down there to redevelop and run the Seaport.”

Howard Hughes recently received approval for its latest blueprints to transform the South Street Seaport Historic District, which runs along the East River and sits parallel to the World Trade Center site. In 2010, the Texas-based developer signed a long-term ground lease with the city for a significant portion of the Seaport. It’s in the midst of constructing a community space, office suites and apartments at 250 Water St.

“What we’ve seen since 9/11 is really a reprogramming and a revisioning of all the sites of lower Manhattan and how they came back … all the way from the Oculus, to the way Brookfield has redeveloped, to where we developed some of the parks,” Scherl said. “When you walk around, you see a lot of people living there.”

Many more people, in fact. About 33,000 people resided downtown at the end of 2000, according to Census Bureau data. It’s closer to 64,000 today, according to an estimate from the Alliance for Downtown New York. The nonprofit group said there were 341 residential buildings at the end of the second quarter, compared with 188 before the 2001 attacks.

The growth is, in large part, thanks to a major rezoning push. Developers and political leaders saw an opportunity to turn a surplus of unused office space downtown into residences that would lure families and fuel the local economy.

“If you go back to the early ’90s, lower Manhattan, from a commercial point of view, was really on its heels,” said James Whelan, president of the Real Estate Board of New York. “There was a tremendous amount of vacant space, and folks were very pessimistic about its future as as a commercial hub.”

A 1995 tax abatement program incentivized converting office space into residential units, and that helped the revitalization, Whelan said. Some 19.7 million square feet of space has been converted to residential use since 1995, and 76% of those conversions have transpired since 2001, according to data from CBRE.

“To me, downtown is almost busier than midtown now,” Scherl said. “It feels so great to see it not only survived, but strengthened to some extent.”

Six weeks before the attacks, Silverstein Properties Chairman Larry Silverstein signed a 99-year lease on the 10-million-square-foot World Trade Center in a $3.2 billion deal. The now-90-year-old Silverstein had been planning to retire. But when the Twin Towers collapsed into piles of debris, he put those plans on hold and vowed to rebuild.

Ten days later, Silverstein held a press conference. He said he planned to construct four 50-story towers at the World Trade Center site. The company held its first meeting a few days later with architects to rebuild 7 World Trade Center, which ended up being the first building to reopen, in May 2006.

“Our role in it was the huge commercial piece, and getting people to realize that we had to rebuild and just pounding our fists on the ground,” said Silverstein Properties CEO Marty Burger, who joined Silverstein Properties in 2010 and was named its CEO in January 2014. “As Larry Silverstein would say, ‘You can’t make this a tomb. It’s going to be a memorial, but we have to rebuild this.'”

On 2013, 4 World Trade Center opened, followed a year later by One World Trade Center (also known as the Freedom Tower), and 3 World Trade Center in June 2019. Silverstein expects to finish work on 2 World Trade Center, an office tower, and 5 World Trade Center, a residential building, in coming years.

To date, the public and private sectors have invested roughly $25 billion in reconstruction, according to the Port Authority of New York and New Jersey, which owns the land that Silverstein leases.

Brookfield Properties in 2015 opened Brookfield Place, a 5-million-square-foot complex that formerly was the World Financial Center. When Brookfield acquired the landlord Olympia & York in 1996, it assumed control of the World Financial Center, One Liberty Plaza and other properties downtown. The shopping portion of Brookfield Place is now home to many luxury retailers including Gucci and Louis Vuitton, as well as Peloton.

“At Brookfield Place, we’re constantly looking at what’s working, what’s not working and what the community is looking for,” said Callie Haines, executive vice president and head of the New York and Boston regions for Brookfield Properties. “It’s a constant dance of what the changing needs are and how we can complement them.”

Mall owner Unibail-Rodamco-Westfield had simultaneously won the bid with Silverstein in 2001, whereby it would take over all retail leasing at the World Trade Center site.

After the 9/11 attacks, however, the landlord (then Westfield) backed out of its deal for several years over disagreements about plans for the property. Westfield later entered into another agreement with the Port Authority to run the retail, including at the Fulton Center subway complex.

What is today known as Westfield World Trade Center opened in 2016. The focal point of the subterranean shopping mall is the 160-foot-tall Oculus, designed in a way that’s meant to resemble a dove being released from a child’s hands. Its tenants include Eataly, Apple and H&M.

Brookfield and Westfield have played a huge part in drawing retailers and restaurants to lower Manhattan. CBRE counted 1,272 retail shops downtown prior to the pandemic, compared with the 861 that existed before 9/11.

Mary Ann Tighe, chief executive of the tri-state region of CBRE, led leasing efforts around the World Trade Center buildings for a number of years. She famously represented Conde Nast, owner of Vogue, The New Yorker and GQ, when the media conglomerate agreed in 2011 to lease 1 million square feet of space at One World Trade Center, giving ground zero a corporate anchor and spurring a wave of deals to follow.

As Burger recalled, Silverstein Properties then landed Spotify as an anchor at 4 World Trade Center, with Tighe’s help, signaling to technology companies that “it’s OK to be down here,” he said. “It just fed on itself from there.”

Today, the World Trade Center buildings count the global consulting giant McKinsey & Co., Smirnoff vodka owner Diageo and ride-hailing company Uber as office tenants, among others.

“The underlying narrative around 9/11 was that no one would ever want to live in a skyscraper in New York City,” Tighe said. “But I believe it took 18 months for New Yorkers to forget about being in a skyscraper.”

“Among the lessons we should take away from the post-9/11 recovery downtown is the magic that made it come back,” she added. “The residential community was integrated into the office environment, and suddenly people could walk to work. It was a great thing.”

To be sure, tenants will always come and go. And the pandemic has only accelerated the rate at which businesses are rethinking their commitments to office space. Conde Nast, for example, is reportedly eyeing reducing its space at One Trade Center.

Nearly two decades after 9/11, the Covid pandemic brought new anxieties around entering office spaces and crowded subway trains. Today, real estate executives in New York City draw parallels between the terrorist attacks and the health crisis. Though very different, there is a shared narrative around a recovery that lies ahead.

“We went pretty quickly into what people thought was going to be a depression, essentially, post-9/11,” said Jeff Blau, CEO of Related Companies, which owns and operates luxury New York City apartments and Hudson Yards. “And I would say within a year, you started to see a pretty quick recovery … and probably one of the biggest growth spurts we’ve every had as a city.”

Many expect Manhattan’s recovery from the Covid pandemic will be pegged to people returning to offices. The traffic in and out of areas like midtown and the financial district, Monday to Friday, feeds the retail shops and restaurants nearby. Business lunches and drinks after work are largely still on pause, and the local economy has suffered as a result.

More than 1 in 5 employees (22.3%) in the New York metro area returned to the office the week of Aug. 25, according to a tracking by Kastle, an office security firm. That was up from 21.8% the previous week. But the percentage of key swipes into offices in New York is below a national average of 33.1%, which Kastle’s calculates from weekday activity of more than 2,600 buildings across 10 major metro areas.

According to Peter Riguardi, president of JLL’s New York tri-state region, the slowest market to recover in the city has been midtown — especially its eastern end — thanks to a glut of office towners. Vacant office space in midtown reached a record 47.4 million square feet in the second quarter, or 19% of total space, according to data from Cushman & Wakefield real estate services.

But Riguardi sees an opportunity in the coming years to create more residential space in midtown, just as there was an opportunity to do so downtown, following 9/11. And that’s what could help turn the middle of Manhattan into more of a 24-7 community, rather than an office hub, he said.

“Can we energize midtown East, a little bit like downtown was energized? I think that there’s a high probability that happens in the next five years,” Riguardi said.

The delta variant of the coronavirus threatens to slow progress, at least for another few months. Several businesses have already pushed return-to-office plans into 2022. But for some, it’s just another blip to work through.

“Over the last 30 years, there’s been a lot of bumps in the road,” said Bill Rudin, co-chairman and CEO of Rudin Management. “But at the end of the day — even now we have Covid — and people are still living in lower Manhattan.”

Downtown hasn’t been immune to challenges during the health crisis. Office space leasing totaled just 2.25 million square feet last year, down 70% from 2019. That was worse than after the 2008-09 financial crisis, according to the Alliance for Downtown New York. And more than 160 retail businesses, or 12% of the neighborhood’s total, permanently closed.

But more recently, there have been glimmers of progress. During the second quarter, 519,000 square feet of office space was leased in lower Manhattan, marking the highest quarterly total since the pandemic began, according to CBRE data. Median apartment rents rose 24% from a record low in the prior quarter, to $3,722, returning to pre-pandemic levels, the Douglas Elliman real estate company said.

“People always say the same thing after something bad happens, that no one is ever going to come back to New York,” Silverstein Properties’ Burger said. “They said it after 9/11. They said it after Hurricane Sandy. And we always say the same thing, ‘Never bet against New York.'”