As Hurricane Dorian hovers over the Bahamas and threatens Florida, there’s no doubt that this is a hard time for many in the region who face destruction and uncertainty. With so much devastation, we at Stessa wish everyone a safe and speedy recovery following this catastrophic event.
As our thoughts are with all those affected, we are watching closely the coverage of the events, with a particular focus on the real estate markets in the region. In the Bahamas, where the loss of life and property has been the most dramatic to-date, Rachel Gutman of The Atlantic reports that up to 13,000 homes have been destroyed, with 5 deaths counted as of Tuesday.
Katherine Kallergis of The Real Deal reported a few days ago that Southern Florida is facing a string of closing delays due to Dorian. Inspections, insurance quotes, and mortgage lending are all tied up until there’s more certainty on the ground.
Ina Cordle also of The Real Deal reports that “across South Florida, developers and builders are securing tower cranes to blow with the wind like a weather vane, putting away debris that could become projectiles and emptying out dumpsters of loose materials as Dorian approaches the Sunshine State.”
Across Florida, Ed Leefeldt of CBS News reports that Hurricane Dorian threatens $150 billion in Florida real estate, including 668,000 homes. According to Leefeldt, a third of threatened homeowners actually have flood insurance policies, and the “Miami area could sustain as much as $85 billion in losses if it takes a hit.”
Senior Realtor.com Economist George Ratiu also reported that “Based on an analysis by realtor.com of the top 5 metro markets in the storm’s path, it is expected to impact over $1.5 trillion in residential real estate, in addition to commercial properties. We expect the economic impact to be broader, depending on the storm’s subsequent path and duration.”
Commercial and retail real estate update
Moving on to the much less consequential news this week, some important commercial and retail real estate reports were released that are of note to investors. Starting with Diana Olick of CNBC reporting on a new study by Real Capital Analytics which finds that international investors became net sellers of commercial real estate this year in the U.S. for the first time since 2012.
In commenting on the same report, Julia Horowitz of CNN Business notes that this is a warning sign for the commercial sector: “Direct acquisitions totaled $21.3 billion in the first half of the year, down by more than 40% compared to the same period last year. Meanwhile, sales reached $21.4 billion.”
Source: Real Capital Analytics
Barbara Murray of the Commercial Property Executive reports on the recently released UBS Asset Management’s Real Estate & Private Markets report, which outlines how the change in the global economy has and will impact commercial real estate around the world. The UBS report notes that “the global growth outlook has weakened as a result of trade hostilities, deteriorating business investment and political uncertainty. And with diminished growth expectations comes diminished demand for real estate.”
For retail, the outlook is perhaps bleaker, with Robert Frank of CNBC reporting that “a sudden pullback in spending among the wealthy could cascade down to the rest of the economy and create a further drag on growth.” Specifically, luxury retailers are struggling while discounters like Walmart and Target thrive.
This comes amidst stories that famed retailer Forever 21 is considering filing for bankruptcy according to Carlie Porterfield of Forbes, and spells bigger trouble for the struggling sector. “American retailers have announced more than 8,000 store closures so far this year, continuing the so-called retail apocalypse.”
Finally, Liz Wolf of The National Real Estate Investor piles on with a new report from Coresight Research which states that with 7,888 store closures already announced, 2019 “could set a record for shuttered retail locations.”
#LocalNews: Seattle, NYC, and San Francisco
Nick Bowman of MyNorthwest reported this week on S&P CoreLogic Case-Schiller home-price index data showing that while home prices nationwide continue to climb, “Seattle stands alone as the only major city in the country to see a year-over-year decline in housing prices.”
Wei Lu and Alexandre Tanzi of Bloomberg had some interesting statistics about outward mobility in NYC, reporting that the city is the largest net loser with 277 residents moving away every day. A year ago, this number was 132 for NYC. To compare, L.A. currently stands at 201 daily losses, and Chicago at 161.
Further, Eddie Small of The Real Deal wrote an interesting article this week titled, New NYC rent law “beginning to shut down investment”. Small reports that “this was an extremely slow July…many brokers and analysts believe the new rent law in New York is the main culprit.” In July 2019, NYC saw $357 million worth of apartment building deals. Last July, this was at $771 million.
Finally, an article worth digesting for all those in the Bay area by Hunter Oatman-Stanford on Fast Company describes with great clarity the effect San Francisco’s Planning Department has had on the city’s physical form, “whose best intentions have been overshadowed by efforts to appease the city’s wealthy, well-connected homeowners.”