Residential market, vacancy rates defy post 9/11 predictions.

Plenty of false prophecies were voiced soon alter Sept. 11. One held that the loss of office space would tighten the market. It did--briefly--before a hidden reserve of sublease space flooded it.

Another predicted that New York City's housing market would suffer. The residential market is now doing better than it was on Sept. 10, 2001.

The events of last fall are still so fresh that it may be impossible to gauge their effects. Outside of two or three years, it will become clearer. But the last 12 months have been full of surprises.

"I'm really amazed at how strong the residential market is now. Look at the office leasing market--it's sluggish--and the hotel market is non-existent. But the condo market is the best I've ever seen it, and I've been doing this a long time," says Donald Trump, president and CEO of the Trump Organization.

Trump equates low interest rates and "people still wanting a piece of the apple" as two major factors driving the residential market after Sept. 11.

On the commercial side, another real estate source is surprised at how many firms are "kicking tires" Downtown.

"The number of large firms kicking tires is surprisingly higher than I would have expected," says Ken Rapp, senior vice president at CB Richard Ellis.

He predicts that within the next few months "some big tenants" will sign leases Downtown. Also, the tight Midtown market--which Rapp also finds surprising alter Sept. 11--is giving many firms a reason to look south for good deals on space.

"And there aren't many large blocks of space available in Midtown either," he says.

Most people, according to Rapp, just assumed last fall that few firms would even look Downtown for space.

Another surprising development one year after the attacks is how firms are not shying away from top floor office space, says Rapp. It's a coincidence that there happens to be a lot of high-floor vacancies in Midtown, he believes.

"Firms are still leasing space in tall buildings. It was thought by many that firms would shy away from such leases alter Sept. 11. They aren't," he says.

Rapp draws plenty of optimism from how well the city--and the real estate industry--reacted to this catastrophe. He "has never in his entire life seen people of all walks of life pull together so quickly."

"And if you apply that to real estate, everyone accommodating everyone else, it is a really positive message moving into the future," he says.

Underscoring this optimism, said Rapp, is the number of CEO's who made sure that their firms remain in Manhattan, instead of fleeing the city. He even took issue with another assumption that was held alter the attacks--that the corporate campus model is finished.

"Look at JP Morgan Chase, they are still clustered around their campus on Park Avenue. Credit Suisse is still clustered around lower Madison Avenue. Most of the campuses have not been split up," he said.

Some firms are setting up redundant back-up facilities, he added.

"Who has split up a corporate campus since Sept. 11? Nobody has," he said.

Real estate consultant Peter Pattison noted that the residential market's strength isn't unique to New York City. With interest rates extremely low, Americans are investing in homes at a frantic pace.

On the commercial side, Pattison disagreed with Rapp on the way that top floor leases are received by tenants.

"People are shying away from the top floors of buildings. That explains why so many high floors are vacant," he said.

Pattison took issue with the incentives being offered to many Downtown office tenants. Reports have praised the incentives for keeping many tenants in lower Manhattan at a time when they are needed. But Pattison believes that many of these tenants never had any intention of uprooting themselves after the attacks. "So they took advantage of these finds and tax breaks," he said.