A little over two weeks after Hurricane Irma made landfall in Florida, it’s business as usual for commercial real estate brokers on the ground.
“We had downed trees and inconvenient electrical outages, but other than some roof damage, it turned out to be pretty much a non-event on the commercial side,” says John Dunphy, senior vice president in the Tampa office of real estate services firm JLL. “We escaped the worst of it, but the farther you get into Polk County and in Orlando and Jacksonville the story may be different.”
Downtown Jacksonville experienced major flooding, according to Tripp Guilliford, managing director in the Jacksonville office of real estate services firm CBRE—the likes of which hasn’t been seen since 1846. Winds blew water up the St. John’s River, causing a storm surge. The river narrows in downtown, so the water got choked up and flooded the area, Guilliford notes. The high watermark in downtown reportedly reached up to 60 inches.
“Still, most businesses reopened within a couple days,” notes Bob Selton of CEO in the Jacksonville office. “However, the Wells Fargo office tower sustained significant damage from rising waters that prolonged its closure. All of the tower’s building systems were located below grade in the parking garage, which flooded, causing damage to the electrical component.”
Single-family houses bore the brunt of Hurricane Irma’s fury. The Florida Office of Insurance Regulation, which is tracking insurance claim data, reported 514,840 claims for residential property damage and 25,214 claims from commercial property owners, with estimated insured losses as of Sept. 27, at nearly $3.9 billion. Florida Legislature estimated overall initial damage at $25 billion to $40 billion.
Office buildings proved fairly resilient against the storm. CBRE reported that about one-third of the 240 office buildings it manages throughout the state were affected by electrical outages, but the buildings reopened when power was restored. Less than 5 percent of the properties sustained water and wind damage. Most of the damage involved fallen trees, landscaping issues and minor leaks from roofs and around windows.
No major damage was reported in the industrial sector. A CBRE assessment and survey conducted by several publicly-traded REITs found no major storm damage to industrial portfolios, including those of Prologis (173 buildings), DCT Industrial (34) and EastGroup Properties (23).
Meanwhile, Spencer Levy, CBRE head of research for the Americas says “Demand for apartments and industrial space is expected to increase as the recovery effort progresses.”
In the second quarter, Florida’s overall industrial market had an average vacancy of 5.0 percent, but the rate is expected to drop lower in the short term due to post-storm demand by disaster relief agencies and building supply companies.
Most hotels in major tourist markets, except the Florida Keys, have reopened, and occupancy is expected to get an average 15 percent boost, as displaced residents, aid workers and construction workers seek lodging accommodations.
Florida enacted stringent building standards in 1992, following Hurricane Andrew. Designed to withstand a Category 5 hurricane with winds of 175 mph, the Florida building code is the accepted benchmark for hurricane protection nationally.
“Florida significantly strengthened its defenses after hits from past major hurricanes, and those improvements were instrumental in helping the state weather this potentially devastating storm,” Levy notes. “As a result, damage to Florida commercial real estate is relatively minor outside of the Keys.”
When Irma hit Miami’s Brickell Central Business District (CBD), for example, a high tide exacerbated the storm surge, but upgraded building standards ensured complete drainage by the next day. Businesses in the area reopened within three days.