Just days after Hurricane Irma lashed downtown Miami and the neighboring Brickell financial district with vicious winds and flooded major streets, industry players told The Real Deal that the storm largely spared the city’s urban core and coastal communities from catastrophic damage. But estimates of property damage, and buyers’ fear of future natural disasters, could pose long-term problems for the market.
Most real estate players — such as architect Kobi Karp, developer Gil Dezer, and Miami-based Related Group Chairman and CEO Jorge Pérez — heeded mandatory evacuations and waited the storm out in New York. (Before the hurricane hit, Dezer offered up his luxury condo tower to protect a slew of pricey cars, including a Ferrari and Lamborghinis worth $5 million and more, for the Prestige Imports auto dealership in North Miami Beach.)
Miami is estimated to have sustained between $64 billion and $92 billion in property damage and immediate lost economic output, according to a report that Moody’s Analytics released on Sept. 13. The Florida Keys were battered, with the federal government estimating 90 percent of buildings sustained damage.
Additionally, $38.94 billion in securitized commercial mortgages is potentially at risk in Florida, according to an analysis from Morningstar Credit Ratings, which looked into 16 Florida counties where it found 1,840 properties backing 1,471 securitized loans. The counties were declared by the Federal Emergency Management Agency to be disaster areas eligible for individual assistance. There is an estimated $6.41 billion of exposure in Miami-Dade, $4.32 billion in Fort Lauderdale and $3.9 billion in West Palm Beach. In the Keys, where FEMA found Hurricane Irma destroyed about 25 percent of homes, there is roughly $291.4 million in CMBS exposure.
Morningstar said it does not expect a wave of loan defaults, reasoning that business-interruption insurance could cover any gaps in service.
But a pair of projects will have to contend with damage caused by falling cranes. Irma took out the boom from a crane tower at Property Markets Group’s 300 Biscayne Boulevard development in downtown Miami, and another crane collapsed at the Related Group’s Gran Paraiso condo tower.
Despite the damage, some industry leaders don’t think the hurricane will have a lasting effect on Miami’s residential market. Andres Asion, founder of Miami Real Estate Group, noted there was no major damage to newer buildings and that everywhere on the East and Gulf coasts has some risk of being hit by hurricanes.
Irma will cause short-term disruptions on deals, especially those that were scheduled to close last month. “I had two deals scheduled that we pushed back one week,” said Danny Hertzberg, an agent with Coldwell Banker’s the Jills team. Hertzberg said he also expects some delays as a result of lenders requiring reinspection of properties under contract.
However, one analyst offered a more sobering take. Jack McCabe, CEO and managing partner at McCabe Research and Consulting, said images and videos of the widespread destruction Irma caused will make buyers think twice about investing in properties close to the water.
“Over the next 10 years, living where you can walk out your front door to the beach won’t be as valuable as it has been,” McCabe said. “Some people will really think hard about putting all their nest egg into a property that could get washed away, wiped out or where they could be without electricity for weeks.”