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COVID-19 has created a situation where consumers spend less time in brick and mortar retail shops. Not only does fear of getting sick accompany shopping in stores, but social distancing rules are increasing wait times at some retailers, making the process inconvenient.
This trend is boosting e-commerce, as consumers don’t want to deal with the risk and inconvenience of shopping at a store. Online shopping is becoming more popular in nearly every industry, even for essential goods like groceries.
From a commercial real estate standpoint, prolonged or permanent reliance on online shopping increases the demand for warehouses and fulfillment centers. Here’s a look at what the future could hold for e-commerce and the distribution spaces that make it possible:
First things first: online shopping isn’t going anywhere. While the early post-pandemic days could lead to an influx of consumers heading back to the stores that they couldn’t visit for some time, these same people are learning the convenience of buying remotely.
In the early days of COVID, less than 30% of consumers were buying online, according to a survey by e-commerce website PYMNTS. By as early as May 23, that number increased to over 35%.
This 5% increase is significant because most brick and mortar shops were closed at the beginning of the pandemic, but many had reopened by May 23. Despite having the option of heading out to buy their goods, more people were still shopping online.
This shift to e-commerce had been happening for some time, but COVID has accelerated the process. And it’s likely that consumers—including and notably less tech-savvy seniors—will continue shopping online because they’ve become more comfortable with the process.
Seniors are often considered slower to adopt technological advancements. However, COVID made it impossible for older members of society to continue living their lives the same way, leading to an increased reliance on smartphones and the internet.
Pew Research Center reports that about two-thirds of seniors aged 65 and older now use the internet, and about 42% of these individuals own a smartphone. Digging into the numbers further, 82% of people between the ages of 65 and 69 use the internet, and 59% of them have smartphones.
These stats show that younger seniors are adopting technology at extremely high rates, which could further the popularity of online shopping. About ten million seniors are now buying on the internet.
The increase in online shopping rates is good news for many retailers, but it doesn’t stop there. As e-commerce becomes even more popular, additional stores will have to join the trend or risk losing their businesses. And both new and established e-commerce companies need warehouse space and distribution centers to meet the growing demand.
As a result, such spaces—already experiencing a boom—will likely remain a solid investment moving forward as more organizations look for these building types. Additionally, there could be an opportunity to repurpose empty spaces into warehouses. Many retail and office buildings are sitting empty, so converting them into fulfillment centers could turn a challenging situation into a beneficial one for investors.
As with any investment, there’s a risk involved when assuming that warehouse space will be a smart play. And much of the inherent value of a distribution center relies on the current and potential make-up of the space and where it is positioned, including access to highways.
It’s worth getting expert advice as the situation unfolds, including a partner who will conduct intense due diligence on a candidate property. Speaking with a professional can help ensure your space is what these retailers and their partners are looking for in distribution centers.
Morris Southeast Group is here to help as you make the most of your current and possible commercial real estate investments. We will assist as you develop an investment plan for the post-COVID world and the economic shift it brings.
Give us a call at 954.474.1776 to learn more. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.
There’s no doubt many businesses are feeling COVID-related economic struggles because of issues like high unemployment, social distancing rules, the changing workforce, and limited population mobility.
The economy will recover from this, but we don’t know how long it will take or its long-term effect on all sectors. Much of the rebound will depend on the vaccine roll-out and how quickly life returns to normal once the pandemic is over.
Here’s a look at how the recovery could play out and the influence the pandemic may continue to have on the commercial real estate industry.
We don’t have a full picture because economic growth will depend on the vaccine roll-out’s speed, the spread of new variants of the virus, and potential government interventions. Recovery could also vary by industry—hard-hit sectors like hospitality businesses are probably in for a longer haul than specific retail companies.
A visualization of the overall economic recovery can take on many different shapes:
The Z-shaped economic recovery is when a temporary boom follows a quick downturn as people are allowed to get back out. After that, there’s a return to “normal” pre-pandemic levels.
A V-shaped recovery occurs when there’s a downturn, followed by a quick return to pre-pandemic levels. It’s like a Z, but the temporary boom isn’t all that temporary.
With a U-shaped recovery, the recession lasts longer than with a V-shape before a gradual upturn occurs. A “swoosh-shaped” recovery is similar, except the economy bottoms out for a bit longer before slowly returning to norms.
Perhaps the most volatile recovery is a W-shaped one, which would see the country start to recover, only to have the bottom fall out again. It would then inch toward pre-pandemic levels long-term.
The worst-case scenario is an L-shaped recovery, where we stay in a lengthy recession with no recovery in sight.
Finally, there’s what we believe may happen, particularly for commercial real estate. In a K-shaped recovery, some sectors recover quickly and enter a boom period, while others struggle for the foreseeable future.
Opinions on where we’re headed vary, although a K-shaped recovery is occurring, to some extent. A V- or U-shaped recovery could also be in our future, but that’s likely dependent on a swift vaccine roll-out for the entire country.
Of course, the country’s economic recovery is dependent on many different elements. After all, the virus remains part of our everyday lives for the time being, limiting activities in every sector.
One significant risk factor is virus mutation. With new strains and variants emerging from places like the UK, Brazil, and South Africa, COVID cases could increase substantially before a widespread vaccine roll-out. The existing vaccines might not be as effective against these new variants either, slowing down economic recovery even further. COVID variants becoming a significant issue could drive a W-shaped curve.
Rolling out a vaccine to 330 million people was always a logistical challenge, and that has not changed. It will take some time to get enough individuals vaccinated to defeat the virus, and there could be supply chain problems like we’ve seen in Europe and Canada, too. Delays to the roll-out could slow recovery in the coming months. A lengthy delay could bring about a U-shaped economy, with a worst-case scenario turning it into a W or L.
In addition, there’s uncertainty surrounding how lenders and the government will handle foreclosures and debt service. From a commercial real estate standpoint, there are many empty retail and office buildings and many more tenants who have taken on significant debt to stay in their facilities.
Lenders will want to avoid mass foreclosures, but that might not be possible without government money coming in to support them. And widespread foreclosures and bankruptcies could cause a W-shaped recovery.
Much like everywhere else, there’s a lot of uncertainty surrounding commercial real estate. Big banks are currently holding over $2 trillion in commercial real estate loans, and the losses they absorb from those who default could hinder the entire economy.
Office space drives much of the commercial real estate sector, and it is experiencing rising vacancies and falling rents overall. If these results hold, office property values—specifically in specific configurations and areas—could decline significantly, with hotels and various retail buildings falling even further.
There’s hope that a swift vaccine roll-out will convince consumers and businesses to return to their previous habits, like dining out, buying at stores, and working in downtown offices. But there’s no guarantee.
That said, one of the hallmarks of a K-shaped recovery is that certain sectors will thrive—and are thriving. Warehouse space that underlies e-commerce, big-box retail that sells essential goods, and even office space in certain areas (like the suburbs) either may do well or are already seeing great returns. By carefully choosing investments, there are paths to navigate the COVID CRE economy successfully.
Since CRE and the economy remain uncertain—and the trend could continue for some time, it remains crucial to evaluate each potential investment and property carefully.
Morris Southeast Group can assist as you assess the best course to take during changing conditions. For investment or commercial property advice, give us a call at 954.474.1776. Ken Morris is also available directly at 954.240.4400 or kenmorris@morrissegroup.com.
There’s a non-trivial chance that we’re heading toward a lengthy period of high inflation because of the Federal Reserve slashing interest rates and government debt reaching unprecedented levels. The result would be money being worth less, lowering the value of stocks and other long-term investments.
While this trend seems like bad news for all investments, tangible goods, or hard assets, tend to increase in or maintain value to counteract the forces of inflation. Therefore, these vehicles are worth considering when interest rates fall precipitously, debt expands, and inflation may rise.
Periods of high inflation cause issues in many segments of the economy, albeit in different ways.
For investors, they can erode the value of stocks and reduce corporate earnings. The average consumer will also have less purchasing power. At the same time, inflation favors those who borrow before its onset because the borrower will make repayments in lower-value dollars.
Investors should have a firm grasp on how to prepare for periods of high inflation to ensure they protect their money and capitalize on this shift in the value of a dollar.
Investing in hard assets like gold and oil is one commonly recommended strategy during a period of high inflation. The reason is that these assets have tangible utility and theoretically stable value.
For example, if the US dollar tanks, it’s argued that gold will retain more value because it’s a useful commodity. The same goes for oil, as some analysts believe the overall demand for petroleum products isn’t going anywhere, no matter what happens elsewhere in the economy. Putting money into these assets is considered protectionary against other economic downturns. Even if stocks and bonds stop producing, hard assets will still hold onto their value.
Commercial real estate is also on this list of hard assets—and it’s specifically worth considering for various reasons.
One element that makes commercial real estate a desirable hard asset is its income-generating potential.
Unlike an asset like gold that the investor will have to sell to turn a profit, real estate can generate monthly income to further protect against inflation. Additionally, the amount tenants are willing to pay can increase exponentially during an inflationary period, reducing the risk associated with the property’s resale value.
Assessing risk is a crucial factor when making any investment. And a hard asset that generates monthly income has particular value because it significantly reduces this risk. Rather than holding onto the investment and weathering losses during an economic downturn, owners can continue collecting rent and profit.
Another reason to consider commercial real estate investments during an inflationary period is the lower interest rates. Taking advantage of these rates reduces the real risk of purchasing the property. That said, cheap money does not always mean easy money. For example, while interest rates moved to historic lows after COVID hit, lenders also started closely scrutinizing borrowers to ensure they would recoup their investment.
Another consideration is that commercial properties require time and energy to achieve an ROI. How much time and energy depends on the property, its location, and the tenants it attracts. Finding a long-term, low-maintenance tenant takes effort, but achieving this makes a property incredibly rewarding in any economy.
We’re still sorting out the long-term effects of the COVID-19 pandemic, and portions of the economic recovery will take years. However, interest rates are extremely low, making it a good time to borrow if an investor has a well-researched opportunity backed by requisite credit-worthiness and resources. We also know that government debt is at an all-time high, which could drive an inflationary period.
Commercial real estate investments in specific business sectors may become an increasingly valuable option if inflation soars, by providing immediate returns through rental income while holding value long term. And given that CRE can be an excellent investment in almost any economic conditions, diversifying a portfolio into income-generating real estate as a hedge against inflation may provide additional benefits.
For more information on current CRE trends and the ever-changing market, call Morris Southeast Group at 954.474.1776. Ken Morris is also available directly at 954.240.4400 or by email at kenmorris@morrissegroup.com.
Sunrise, FL; December 16, 2020 – Morris Southeast Group President Ken Morris, SIOR, RPA, announced 100,000 square feet of recently completed South Florida lease and sale transactions, plus a new listing in Plantation, FL.
Ken Morris, SIOR & Adriana Lilly represented Keratin Complex in a seven-year lease for 55,134 square feet at the Hillsboro Technology Center from Bristol Development and Butters Development. Keratin Complex is a leading maker of shampoos, conditioners, and related hair-care products. The company revolutionized the beauty industry in 2007 when a group of industry innovators discovered a new way to care for hair by merging proven keratin science with cutting-edge technology. They created Natural Keratin Smoothing Treatment, a first-of-its-kind smoothing treatment that pioneered the way to healthy, smooth, frizz-free hair. Keratin’s products are favored by salon professionals.
Ken Morris, SIOR, also represented Buena Vista Terminal, LLC in the sale of a property located at 123 NW 51st Street in Miami, FL. The property consisted of a 21,450 square feet building currently used for storage in the Buena Vista neighborhood of Miami and sold for $1,875,000. The Buena Vista Bus Terminal Building was originally constructed in 1939 and was a major transportation hub in South Florida. Used for decades as warehouse space, the property is ripe for conversion to multifamily housing, office suites, art storage, an art gallery, and several other options.
In addition, Ken Morris represented Polenghi USA Inc. in their 36-month lease renewal of 24,047 square feet of industrial space located at 720 Powerline Road in Deerfield Beach, FL. The Milan, Italy subsidiary of Polenghi Group converted a vacant warehouse building into a lemon juice bottling plant. These lemon specialists import about 25,000 liters of lemon juice weekly from Italy and then bottle it for distribution in the U.S. Morris originally put Polenghi in this space in July 2015, when the Italian company opened its U.S. operations.
Earlier this quarter, Morris completed a lease transaction on behalf of a longtime client, The Legacy Companies, for 78,585 square feet at 2555 Kuser Road in Hamilton, New Jersey. It was the third distribution center transaction Morris has completed for Legacy in 2020. Earlier this year, Morris represented The Legacy Companies in a 110,000-square-foot industrial property
lease in Reno, NV (also owned by Scannell Properties). The firm also executed a renewal of 61,137 square feet plus 8,700 square feet of expansion space at a Weston, FL property on behalf of Legacy in a building owned by a U.S. subsidiary of UBS.
In addition to the closed transactions, Morris has been hired by BHT Partners to lease the Medical Services Building located at 4101 NW 4th Street in Plantation, FL 33317 that consists of a total of 48,560 square feet. The building is a medical office building located on the campus of Plantation General Hospital.
For more than 35 years, Morris Southeast Group has been recognized as one of South Florida’s leading providers of commercial real estate services. Located in Sunrise, FL, Morris SE is a full-service firm specializing in owner and tenant representation, multi-market services, and investment sales in the office, industrial, and retail sectors throughout Miami-Dade, Broward, and Palm Beach Counties. Further, the firm serves corporations, private investors, and entrepreneurs in various U.S. markets through its membership in the Society of Industrial and Office Realtors® and other professional real estate relationships developed over years of industry networking. For more information, contact President Ken Morris at (954) 474-1776 or visit www.morrissegroup.com.
2555 Kuser Road in Hamilton, New Jersey
Sunrise, FL; November 30, 2020 – Following a record third quarter in leasing and sales activity for his firm, President Ken Morris, SIOR, RPA, of Morris Southeast Group announced a recently completed lease transaction on behalf of his longtime client—The Legacy Companies—for 78,585 square feet at 2555 Kuser Road in Hamilton, New Jersey.
The owner of the Hamilton property is Scannell Properties. Terms of the lease were not disclosed. Mike Witco, a principal with Chilmark Real Estate Services LLC based in Morristown, NJ, provided local market knowledge and participated in the lease with Morris in representing The Legacy Companies.
This was the third distribution center transaction Morris SE has completed for Legacy in 2020. Earlier this year, Morris represented The Legacy Companies in a 110,000-square-foot industrial property lease in Reno, NV (also owned by Scannell Properties). The firm also executed a renewal of 61,137 square feet plus 8,700 square feet of expansion space at a Weston, FL property on behalf of Legacy in a building owned by a U.S. subsidiary of UBS.
Based in Weston, FL, The Legacy Companies is a leading foodservice manufacturer and consumer appliance company that sells a host of brands and products, including refrigerators, freezers, ranges, microwave ovens, wine refrigerators, ice makers, water dispensers, laundry appliances, and much more.
Learn more at https://www.thelegacycompanies.com/.
For more than 35 years, Morris Southeast Group has been recognized as one of South Florida’s leading providers of commercial real estate services. Located in Sunrise, FL, Morris Southeast Group is a full-service firm specializing in owner and tenant representation, multi-market services, and investment sales in the office, industrial, and retail sectors throughout Miami-Dade, Broward, and Palm Beach Counties. Further, the firm serves corporations, private investors, and entrepreneurs in various U.S. markets through its membership in the Society of Industrial and Office Realtors® and other professional real estate relationships developed over years of industry networking. For more information, contact President Ken Morris at (954) 474-1776 or visit www.morrissegroup.com.
Sunrise, FL; October 26, 2020 – In the teeth of the pandemic, President Ken Morris, SIOR, RPA, of Morris Southeast Group announced one of the best quarters in history for his South Florida commercial real estate services business. In the 3rd quarter this year, the firm completed 151,753 square feet in leases and was awarded new leasing and management assignments totaling an additional 220,000 square feet.
“To say it has been an unbelievable year would be an understatement; however, business goes on. The companies and people we were grateful to serve in recent months represent a mix of essential services and professional services that companies, corporations, and individuals need. It is a strange time to report a record quarter for our practice, yet we are certainly pleased with the results,” said Ken Morris, SIOR.
Recently closed transactions include:
The firm has been hired to manage and lease the Airport Executive Towers located at the
Southwest edge of Miami International Airport, comprised of two office buildings consisting of approximately 170,000 square feet. The Morris team is already hard at work replacing the entire HVAC system in Tower I and repositioning the properties for the new market conditions.
The firm has been hired by BHT Partners to lease the Medical Services Building located at 4101 NW 4th Street in Plantation that consists of 48,560 square feet. The building is located on the campus of Plantation General Hospital.
In addition to the firm’s deal-making successes during the quarter, Adriana Lilly was promoted to Vice President of Morris Southeast Group, Maria Alicia Wild has joined Morris SE as the Tenant Services Coordinator in Miami at the Airport Executive Towers, and Daphne Sullivan has joined the team as Marketing Coordinator.
Ms. Lilly joined the firm in July 2016, shortly after securing her license to sell and lease real estate, after years of working in the hospitality, health, and fitness industries in South Florida. She has been instrumental in growing Morris Southeast Group by sourcing, serving, and closing real estate transactions on behalf of tenants and landlords in Broward and Miami-Dade counties.
For more than 35 years, Morris Southeast Group has been recognized as one of South Florida’s leading providers of commercial real estate services. Located in Sunrise, FL, Morris Southeast Group is a full-service firm specializing in owner and tenant representation, multi-market services, and investment sales in the office, industrial, and retail sectors throughout Miami-Dade, Broward, and Palm Beach Counties.
Further, the firm serves corporations, private investors, and entrepreneurs in various U.S. markets through its membership in the Society of Industrial and Office Realtors® and other professional real estate relationships developed over years of industry networking. For more information, contact President Ken Morris at (954) 474-1776 or visit www.morrissegroup.com.
At the height of lockdowns and quarantines, it quickly became apparent that what was considered essential expanded far beyond first responders and hospital staff. Truck drivers working long shifts to get goods to supermarkets, and the employees stocking shelves with those products quickly rose to the top.
Another business that quietly made the essential list was medical marijuana dispensaries. In many states where medical marijuana is legal, including Florida, the dispensaries were allowed to remain open through the shutdown.
In fact, many dispensaries expanded their operations to get products to regular and new clients, many of whom were diagnosed with PTSD and anxiety linked to the stay-at-home orders, via delivery services and drive-thru windows.
Getting to that point, though, was no easy task, primarily because the cannabis business operates in a grey zone. Although some states have legalized medical marijuana, the substance remains a controlled one on the federal level—and how stringent the feds follow that law depends greatly on who happens to be inhabiting the White House and who is Attorney General.
While there are indications in many regions around the country that the medical marijuana business is steering property values upward, there’s a fair share of risks and considerations for landlords looking to lease space to dispensaries and growers.
For a CRE owner to get involved in the marijuana business, it’s imperative to make sure that all T’s are crossed, and I’s are dotted.
One of the first issues is if the owner is carrying a mortgage. If so, it’s imperative to review if there is a clause in the terms of the loan that stipulates that the borrower, the property, and its use will comply with “all applicable laws, rules, and regulations.”
Because there is a disparity between how marijuana is viewed at the federal and state levels, and because federal law technically preempts state law, many banks are less likely to allow a borrower to lease to any party involved in the marijuana business. The cannabis-related leasing deal may be dead before it is even on the table.
Similarly, the property owner may have to seek alternative funding sources for the property as long as the lease with the marijuana business exists.
Even without a mortgage, there are some additional issues, outlined by the American Bar Association, that the landlord should consider:
If a property owner is interested in leasing to a marijuana-related business, there are a few clauses to consider within the lease terms. While many of these may seem obvious, putting them in writing indicates the owner has taken steps to ensure the lease is following the law and eliminating any grey areas or misinterpretations of the landlord’s position.
Although the road to legalized medical marijuana in Florida has been a long and rocky one, its presence is seen as a boom for the commercial real estate market. Still, there are key areas of concern that all parties must examine before entering any leasing agreement. The pros at Morris Southeast Group can help both landlords and tenants negotiate the legal twists and turns.
To learn more about what Morris Southeast Group can do for you now and in the future, call us at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.
Downtown Miami has one of the planet’s most spectacular coastlines, featuring buildings that seemingly jet from the ocean as you approach from the air or water.
This beautiful location comes with challenges, however. Namely, the impacts of climate change, which may be causing more frequent and severe hurricanes and leading to rising sea levels, are paramount.
The U.S. Army Corps of Engineers has a $4.6 billion plan to build a 10 to 13-foot-high wall along Biscayne Boulevard to reduce storm damage. In theory, these walls could save the city about $2 billion in damage every year—but there’s more to the discussion than protecting the city.
In short, yes, walls could be an effective way of reducing storm damage in downtown Miami. However, there is some dispute over where the Army should build the walls and whether some neighborhoods would still find themselves underwater.
The current plan calls for constructing moveable storm surge barriers on the Biscayne Canal, Little River, Miami River, and in the Edgewater neighborhood. These barriers would have gates that close as a hurricane approaches, preventing surges from overflowing the rivers and flooding low-lying communities.
The walls would extend north and south of these barriers, providing even more protection for the surrounding neighborhoods. Some buildings would remain outside of the walls, though, leaving them in a tough spot during an incoming storm.
It’s also worth noting that these measures wouldn’t protect the city from rising sea levels. That’s because Miami is built on porous rocks that would let water seep through, even with the walls in place.
To address rising sea-level concerns, Miami intends to elevate roughly 10,000 properties and flood-proof 7,000 more. While this is a good start, that investment would still leave thousands of buildings exposed.
Investors and developers will want to keep a steady eye on this situation. If this proposal ends up going ahead, properties with wall protection will likely retain more value than the buildings that sit outside the walls and remain exposed to storm surges.
Property owners around Miami aren’t unanimously in favor of the wall-building strategy because of how it would change the Magic City.
First, there are the aesthetics of the change. Ten-foot walls in the downtown area would eliminate ocean views for some buildings, potentially hurting their value. And from a functional standpoint, the walls would cut off boat traffic from sections of downtown Miami and could make the Baywalk obsolete.
These factors are definitely worth considering, of course. But if Miami ends up underwater, the issues will be moot.
Once the official proposal is released, investors will have the opportunity to see the re-imagined downtown Miami, which will provide a clearer view of what the future holds.
For that reason, the Downtown Development Authority is asking Miami-Dade to consider nature-based solutions to the storm surge problem, such as restoring nearshore coral reef, building artificial islands, and growing more living shorelines.
Environmental groups, including the Everglades Coalition and Miami Waterkeeper, have seconded that idea. And other groups would like to see the Army Corps of Engineers include flood protection in more impoverished neighborhoods, rather than focusing exclusively on downtown.
There’s still a lot to be decided on this project, as the Army will work with Miami-Dade to develop a locally preferred plan. From there, the project is brought before Congress before funding is approved.
Much work remains on potential protections for the Miami shoreline. But it’s only a matter of time before we get something to stop the influx of storm surges in the downtown area.
Morris Southeast Group knows that climate change affects not only the environment but also creates significant economic issues for Miami and other coastal areas in South Florida.
Developers need to know that their investments are safe and that they’ll provide value moving forward, which becomes challenging when hurricanes and flooding are a persistent worry. Simultaneously, a massive wall along the coast could take away from Miami’s beauty, walkability, and appeal.
Coming up with a solution that’s effective and balances the concerns of various stakeholders will be vital.
For information on potential CRE impacts, or to learn about Morris Southeast Group’s commercial real estate investment or property management services, give us a call at 954.474.1776. You can also reach Ken Morris directly by phone at 954.240.4400 or through email at kenmorris@morrissegroup.com.
Consider it the essay that was heard ‘round the world. James Altucher, a former hedge-fund manager, author, and comedy club owner, penned his opinion that New York City was dead because of the fallout from the COVID-19 pandemic. In the piece, he laments the loss of business opportunities, cultural venues, and restaurants.
Naturally, that propelled a series of opposing opinions—most notably, from Jerry Seinfeld. Many of the rebuttals predicted a rosier future for NYC with a nod toward residents’ grit and determination. But these pieces seem to overlook some real-world economic problems. And many of these have been bubbling under the surface for decades.
Before we engrave the tombstone or send out re-birth announcements for New York, it may be wise to answer a basic question: If it can happen there, can it happen anywhere?
In many ways, COVID-19 decimated NYC. With one of the densest and largest urban populations in the world, the virus spread quickly and efficiently—and it was deadly. There were 19,000+ confirmed deaths, 4,400+ probable deaths, and thousands more in the boroughs and counties surrounding Manhattan.
Shutdown measures were swift and severe, and many—such as a darkened Broadway—have lingered despite lower case counts. Simultaneously, residents, reminiscent of those battling plagues of the past, fled the city to their Hamptons homes or their parent’s suburban tract houses. The rest of the nation followed NYC’s lead—and the longer the shutdown continued, the louder the non-virus-related questions became.
Some of what NYC is experiencing may have been inevitable; COVID just exacerbated some long-simmering crises and accelerated their impacts:
The problem with the current state of city affairs is there’s no rulebook. Because of the pandemic, people are behaving differently—and much of their new behavior does not reflect how they wish to live their lives. As a result, it’s difficult to predict how NYC and other cities can respond.
Until there’s a vaccine, it’s impossible to estimate a timeline of when business will get back to normal—or if it ever will. For example, the virus and remote working have forced office tenants to re-examine just how much space they actually need.
The closest example we have to an experiment in progress is Detroit. Perhaps no other city in the country exemplifies urban failure better than the Motor City. Once the crown jewel of American industry, Detroit has for years suffered under the weight of rampant unemployment, poverty, and enormous debt. In the five years after filing for bankruptcy, millennials moved in, investors took notice, and the downtown area boomed, earning the city a new nickname: “Comeback Capital of Urban America.”
Things, though, didn’t go according to plan. With development came higher rents for residential and office spaces, higher construction costs, and gentrification—all of which steered millennials away from the city while driving impoverished residents into greater despair. Then, COVID arrived. Just as in NYC, the virus capitalized on Detroit’s weaknesses.
Perhaps it has to do with the sunshine and palm trees, but South Florida cities and COVID are an anomaly. Despite being a COVID hotspot for the state since March, new construction and leases in South Florida have continued to move forward. In addition, the region has also seen its share of New Yorkers and other northern urban snow birders relocating to Florida’s warmer climate for the duration of their home states’ lockdowns, as well as millennials flocking to the suburbs.
This doesn’t mean, though, the region is not without its share of problems. Like other large metropolitan areas, South Florida has its own affordable housing crisis. Additionally, in 2017, Miami had the second-lowest median household income in the United States, as well as the second-highest percentage of people living in poverty.
Although these numbers improved slightly in 2018, COVID-related unemployment has undoubtedly made the numbers skyrocket. Complicating this is the Florida economy’s heavy reliance on tourism, which has caused some experts to predict the job market may suffer into late 2021 and beyond.
South Florida businesses and real estate may have been less impacted by the pandemic than NYC, but they share many fundamental challenges. A new way of working and evolving COVID measures and restrictions are changing priorities. Commercial properties such as office high-rises with a large footprint, for example, will have to adapt to the new normal—and some investments may not make it.
While COVID has clearly placed extreme burdens on large metropolitan areas, is it time to ring their death knell? Probably not.
There is a good reason to believe that cities will recover, although it remains unclear just how that recovery will actually look. Most certainly, things will be different. Technology will undoubtedly play a role, as will smaller office footprints.
A recovery for New York (and other major metropolises) will take leadership, vision, and work. At the same time, there is a need to address the underlying economic issues that made so many of our cities and people vulnerable, including wages, population density during a pandemic, and affordability.
For assistance determining how to proceed with an investment or to find the right investment property for your needs, please call Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.
To our friends, clients, and colleagues:
Like you, we are closely watching events unfold surrounding the COVID-19 pandemic and the resulting disruption to the financial markets and our society. This impact will likely continue for several more months as the Coronavirus eventually peaks throughout the United States and the rest of the world.
We remain in regular contact with infectious disease specialists who tell us that the best things you can do right now are wash your hands frequently, avoid touching your face, and try to avoid large groups of people. Elderly individuals and those with preexisting medical conditions such as diabetes and cancer should take extra precautions to avoid crowds. If you can avoid traveling at present, it is the safest course of action.
At Morris Southeast Group, we have been through many shocks to our society and financial systems since our company was formed. These include:
Each of these events was incredibly disruptive—and each caused a lot of fear about the future and our personal and collective ability to survive change. But in every case, we not only recovered, but our society and economy grew and became stronger. Stay safe and take appropriate precautions. But please keep this perspective in mind as the media bombardment of minute-by-minute Coronavirus updates continues. And remember that our team at Morris Southeast Group is here to help support you during this difficult time.
If you have any commercial real estate questions or concerns, get in touch with Morris Southeast Group at 954.474.1776. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.
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