Even months after the wake of Superstorm Sandy, we are still discovering devastation.
Approximately 40,000 people have been left homeless, and countless workers remain jobless in over 130 buildings. Setbacks are plentiful and there is much money needed to be spent in order to get everything operating at full capacity again—including Manhattan real estate.
Some articles claim that as a result of flooding and electrical/heating problems, downtown values will greatly suffer, while others insist that the demand for downtown properties remains strong, as the storm has decreased the already low inventory numbers. Some experts believe that buyers and renters’ experiences with the storm have deterred them from the market, while many agents report demand to be higher than ever.
Mortgage banks are on the fritz when it comes to properties in flood zones, as lenders are requiring costly flood insurance. Re-appraisals and second inspections are required all over the Manhattan for properties in these zones with loans waiting to clear for closing. In some cases, an entire new report has been required, overall delaying further transactions.
What is your professional insight on the real estate market in the aftermath of Hurricane Sandy?
“I think there’s been value erosion downtown,” said Howard Lutnick, chairman and CEO of Cantor Fitzgerald and BGC Partners at a New York University Schack Institute of Real Estate. “It had just started to come back. The concept now of fear of flooding is going to affect values.”
Fitzgerald expressed his anguish, as 500 of his employees are still unable to return to their three floors at 199 Water Street, with hopes of returning back in at least a couple more months. A third of his downtown office was either shut down, powered by generators, or had no heat due to massive flooding.
Fitzgerald’s lease is set to expire in 15 months, and according to him, “the firm has yet to decide if it will renew…they’ll have to offer more value to get them to stay.”
Vice Chairman of CBRE Group, Darcy Stacom, thinks that the destruction, closings and heat and power interruptions will take a toll on values, and investors will inarguably take this into consideration when they look at buildings in hard-hit areas.
Sun after the storm
Another way to perceive the storm’s aftermath is that the storm has actually caused a surge in NYC housing demand. Because of this unfortunate experience, developers have taken Sandy’s capabilities into consideration during the construction of new building layouts. Mechanicals will be removed from basements and brought up to second or higher floors; windows will be resistant to high winds; back-up generators will be installed on site to maintain power in the building, even if the connection to the grid is lost. Future buyers are going to consider how well a building will hold up during the next severe storm, and those that have taken proper precautions will be more worthy of an investment in the long-run.
Hurricane Sandy Recovery Update:
As of last week, Mayor Bloomberg granted the City’s request for over $15 billion in Federal aid for recovery from Hurricane Sandy. Bloomberg also introduced a new $5.5 million matching grant program for businesses impacted by the storm, designed to provide additional financial assistance for local businesses seeking low-interest loans through the City’s existing Emergency Loan Fund.
The total amount of loans, grants and other financial assistance available to businesses affected by the storm is over $45 million.