The Impact of Hurricane Matthew on the Commercial Real Estate Market

The Impact of Hurricane Matthew on the Commercial Real Estate Market

CRE owners and investors are aware of the risks of building in areas prone to hurricanes and natural disasters, but Hurricane Matthew makes the concern a reality yet again. In dealing with the aftermath of the storm, construction companies will most likely experience influxes in residential and commercial real estate projects that could cost well into the billions.

How Might Hurricane Matthew Impact CRE Owners/Investors?

A surge in construction and building projects typically occur after such hurricanes in the past and based on CoreLogic stats, approximately 954,000 Florida homes are “at risk from water damage” and costs for reconstruction are estimated to be over $189 billion. Vice President of John Burns Real Estate Consulting LLC, Todd Tomalak shared:

$10 billion to $11 billion is the estimate for residential remodeling spending annually from disasters and relies on three decades of data.  Storm-related losses are actually higher, as data provided in the majority of instances does not include losses that are non-insured.  CRE Owners and investors can expect an opportunity to grab hold of new building projects in the aftermath of the hurricane. Residential and commercial properties have been affected, including Donald Trump’s Mar-a-Lago Club. Those with houses or projects affected may have to wait for insurance to pay out before beginning reconstruction and delays are to be expected.

How Far Will the Financial Effects Be Felt?

It is too early to tell how far reverberations will be felt from the aftermath. Economists say that there may be billions of dollars in economic losses with the substantial mass evacuation. Over 2 million residents had to move from the eastern coast of Florida to South Carolina during the state of emergency.

REITs are becoming wary of natural disasters. A recent BDO RickFactor report said that 97 percent of the top 100 publicly traded REITs are concerned regarding disaster-related business interruptions. Clark Schweers, BDO forensic insurance and recovery practice leader, said:

“Demand is high on the coasts and REITs are meeting that demand. But with that comes increased risk and exposure to natural disasters.”