آیا تروریسم در حال فرسایش تراکم اقتصادها در نواحی مرکزی کسب و کار است؟ درس هایی از دفتر بازار املاک و مستغلات در مرکز شهر شیکاگو

The attacks of September 11, 2001, and more recently the Madrid and London downtown train bombings, have raised concerns over both the safety of downtowns and the continuous efforts by terrorists to attack areas of such high density and significance. This article employs building-level data on vacancy rates to investigate the impact of an increased perception of terrorist risk after 9/11 on the office real estate market in downtown Chicago. Chicago provides the perfect laboratory to investigate the effects of an increase in the perceived level of terrorist risk in a major financial district. Unlike in New York, the 9/11 attacks did not restrict directly the available office space in downtown Chicago. 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 US (the Sears Tower) and other landmark buildings which are potential targets of large-scale terrorist attacks. We show that, following the 9/11 attacks, vacancy rates experienced a much more pronounced increase in the three most distinctive Chicago landmark buildings (the Sears Tower, the Aon Center and the Hancock Center) and their vicinities than in other areas of the city of Chicago. Our results suggest that economic activity in Central Business Districts can be greatly affected by changes in the perceived level of terrorism.

In the wake of the 9/11 attacks, economists are devoting much effort to evaluating the impact of terrorism on economic outcomes and understanding the channels through which the enhanced risk of large-scale terrorism induced by the 9/11 attacks may affect economic activity. A partial list of scholarly works in this rapidly growing literature is Abadie and Gardeazabal (2003, 2008), Becker and Murphy (2001), Becker and Rubinstein (2004), Berrebi and Klor (2006), Chen and Siems (2004), Enders and Sandler (1991, 1996), Enders et al. (1992), Frey (2004), Frey et al. (2007), Glaeser and Shapiro (2002), Pshisva and Suarez (2004), and Zussman et al. (2008). The increase in the perceived level of terrorist risk induced by the 9/11 attacks has placed particularly large pressures on major Central Business Districts, such as New York, London, and Chicago, which are considered to be preferred targets of terrorist attacks because of their high population density, economic significance, and because they contain symbolic targets such as landmark buildings or government facilities. The susceptibility of Central Business Districts to large-scale terrorist attacks (as well as their vulnerability, as demonstrated by recent events) is particularly unsettling given the crucial role that Central Business Districts play in economic activity. Quite surprisingly, however, there is very little work available on the effects of terrorism on Central Business Districts. This article aims to fill that void. For this purpose, we use building-level data from downtown Chicago, one of the most significant Central Business Districts in the US, to investigate the economic impact of an increase in the perception of risk after 9/11. There are two main channels through which terrorism affects economic outcomes. First, terrorist attacks have a direct effect on the economy because they destroy productive capital (physical and human). Because the destruction caused by terrorist attacks represents only a small fraction of the total stock of productive capital, Becker and Murphy (2001) have argued that the relative importance of this effect is small in practice. Second, terrorism increases the level of fear and uncertainty, which may have large effects on the behavior of economic agents (see Abadie and Gardeazabal, 2008, and especially Becker and Rubinstein, 2004). The Central Business District (CBD) of Chicago provides the perfect laboratory to investigate the effects of an increase in the perceived risk of terrorism on a major financial center. 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 US (Sears Tower) and other landmark buildings. The case of Chicago is, therefore, of particular interest, because it allows us to separate the direct impact of terrorist attacks on available office space (absent in Chicago following the 9/11 events) from the impact caused by an increased perception of terrorism threat in Central Business Districts after 9/11. A distinctive characteristic of this study is that it uses data disaggregated at the building level on a quarterly basis for a panel of Class A and Class B office buildings (as defined by CoStar Group, see below) in the downtown area of Chicago. To our knowledge, data analysis of the impact of terrorism on real estate markets has never been done at this breadth and scale. To detect the impact of an increase in the perception of terrorist risk in Chicago as a result of 9/11, we compare the evolution of vacancy rates at the three main landmark buildings of Chicago (the Sears Tower, the Aon Center, and the Hancock Center) and other nearby office buildings within a “shadow” area of 0.3-mile around each landmark building to the evolution of vacancy rates of office buildings located outside the shadow areas of the three landmark buildings. We use panel data fixed-effects estimators to control for the presence of unmeasured characteristics of each individual building in our sample. Our dataset includes quarterly data for Class A and Class B office buildings in downtown Chicago during the period of 1996–2006.1 We selected the Sears Tower, the Aon Center, and the Hancock Center as “anchor” buildings because of their landmark stature, which makes them preferred targets of terrorist attacks. We based our choice of a 0.3-mile radius for the shadow areas on the spread of the massive debris in New York City after the 9/11 attacks (Dermisi, 2006). The vacancy rate is not the only real estate variable possibly affected by the 9/11 attacks. In fact, in the absence of a mechanism that induces downward rigidity in rents, vacancies created by a demand downturn could be eliminated by adjustments in rents.2 Our analysis of the effects of the 9/11 attacks on the office real estate market in downtown Chicago focuses on vacancy rates, as opposed to rents, for a variety of reasons. First, office real estate markets are characterized by substantial inertia, which induces long vacancy cycles in response to demand shocks (Wheaton and Torto, 1988; Grenadier, 1995). During periods of slack demand, rents do not adjust all the way to eliminate vacancies in excess of the structural vacancy rate. This creates a situation in which real estate downturns are characterized by prolonged periods of abnormally high vacancy rates (Grenadier, 1995).3 Second, while vacancy rates in office real estate markets are measured routinely in commercial real estate databases, data on rents are scarce and typically include only information on asking rents.4 Even if information on contrac-tual rents was available, office leases often include complicated sets of undisclosed provisions (e.g., owner-paid improvements, free-rents periods), which may substantially affect the effective rents accrued to the property owner (see Wheaton and Torto, 1994, Webb and Fisher, 1996). Moreover, Webb and Fisher (1996) provide evidence that during real estate downturns effective rents are adjusted through concessions to the tenants that often are not reflected on contractual rents. Our final reason for analyzing vacancy rates is that vacancies are directly informative about the degree of spatial agglomeration. Our results show that office vacancy rates increased in downtown Chicago in the wake of the 9/11 attacks. Most importantly, office properties in the three main Chicago landmark buildings and the surrounding areas experienced more severe increases in vacancy rates than office properties not located in the vicinities of landmark buildings. These results suggest that the higher perceived level of terrorist risk in Chicago after 9/11 induced centrifugal forces powerful enough to counteract the effects of agglomeration economies. This is particularly disturbing given the crucial role of Central Business Districts in exploiting agglomeration economies and knowledge spillovers (Glaeser et al., 1992).5 We interpret our results as evidence that the 9/11 attacks influenced the location decisions of office tenants in downtown Chicago. Alternatively, our results could be explained by differences in how the various office real estate market segments in Chicago were affected by the recessionary events of 2001. Using a variety of robustness checks, we show that this alternative explanation is not supported by the data. The rest of the article is organized as follows. Section 2 reviews the literature on the impact of terrorism in cities. Section 3 describes in detail our dataset and methodology. Section 4 presents and discusses our empirical results. Section 5 concludes.

The results of this study suggest that the 9/11 attacks created centrifugal forces that influenced the location decision of high-end office tenants in downtown Chicago. We use the panel data structure of our data set to eliminate the potential confounding effects that unmeasured building characteristics and common shocks to the Chicago office real estate market may have had in our analysis. We show that vacancy rates increased in Class A and B office buildings in Chicago after the 9/11 attacks. Moreover, we show that these increases were more severe for office properties located in or nearby landmark buildings that are considered preferred targets for terrorist attacks. In addition, we demonstrate that our results are remarkably robust to an extensive set of alternative specifications. The results of this article are particularly unsettling, given the critical role that the economic literature assigns to agglomeration economies in cities as a motor of economic growth. On the bright side, our analysis focuses on a period during which the perceived threat of terrorism in Central Business Districts has been particularly elevated. The results in Davis and Weinstein (2002), Glaeser and Shapiro (2002), Brakman et al. (2004) and Miguel and Roland (2006) suggest that if the perception of terrorist risk in cities were to return to the pre-9/11 levels, the long-run growth of cities would not be affected by the 9/11 attacks.