Ballooning home insurance costs and the perennial threat of violent storms hit Tampa Bay housing market hard
4 min
ST. PETERSBURG, Fla.—Kellen Driscoll bought his home here in 2019, settling in the coastal enclave of Shore Acres. It flooded for the first time four years ago after tropical storm Eta dumped more than 3 feet of water.
Hoping it was a fluke, Driscoll tore out the affected drywall and started fresh. After all, the four-bedroom home built in 1960 had no flood history.
But then it happened again, and again. Like many others in the community, he put his home up for sale in the spring of this year. After seeing little interest, he cut the asking price.
On Friday, Hurricane Helene deposited more than 6 feet of storm surge in the neighbourhood. The rushing waters ripped the “For Sale” sign off his front lawn, and etched a waterline that reached halfway up his front door, just underneath the doorbell. He reduced the asking price for a fifth time.
“We flooded here four times in the last four years,” said Driscoll, as he threw his television sets, furniture, appliances and other belongings to the curb. “I’m just hoping I can sell the house. It’s a good neighbourhood for sure, but dealing with the floods is horrible.”
In the Tampa Bay metropolitan area, which includes St. Petersburg, a real-estate boom nearly doubled median home values from 2018 to June of this year, according to Redfin data. Young people flocked to the region, looking for a coastal lifestyle at a relatively affordable price.
The Tampa Bay metro area was the fifth most popular relocation destination in the country, according to an analysis by Redfin last year. The population has soared to more than three million.
But as Shore Acres’s young residents sorted through the storm’s wreckage, only one thing was on their minds: selling.
Ballooning home insurance costs and the perennial threat of violent storms are starting to undermine housing markets throughout much of the state. But in few places has the turnaround been more dramatic than in low-lying communities up and down the coast of Florida that frequently flood.
The Tampa Bay housing market had been softening even before Helene struck. While prices have been flat, the area experienced a 58% increase in supply in August compared with a year ago, and a 10% decrease in demand, according to Parcl Labs, a real-estate data and analytics firm.
About half the homes listed for sale in Tampa experienced price reductions as of Sept. 9, the third highest share of all U.S. major metropolitan areas.
“Tampa was already heading in this direction before the hurricane hit,” said Jason Lewris, co-founder of Parcl Labs. “This hurricane may compound the market dynamics that have been occurring there over the last few months.”
While Tampa escaped a direct hit from the eye of the hurricane, it was the worst storm to hit the area in a century. The hurricane also plowed into landlocked towns well north, causing heavy damage in the Carolinas where people were just beginning to absorb the scope of ruin.
Bradley Tennant’s home flooded last year. But to avoid all the competition, he was waiting a year to put it up for sale.
“We saw the glut of homes for sale in the spring and thought, ‘What are the chances it’ll hit again the next year?’” said Tennant, as he cleared out the soaked contents of his waterfront home. “We went 50 years without a storm that flooded the house. So we thought, let’s roll the dice.”
While he paid around $350,000 for the house about seven years ago, Tennant says he received offers as high as $800,000 during the height of the market—before last year’s storm hit. Now he’s hoping to sell as soon as he’s able to renovate.
The area’s affordability, once a large part of its appeal, is also waning as insurance premiums soar. Jacob McFadden was paying $880 a year to insure his home when he bought it in 2020. That amount has since almost quadrupled, to $3,300.
Premiums will likely increase again now. Property damage from last week’s Category 4 storm could be as high as $26 billion, according to estimates from Moody’s Analytics.
“I don’t know how much longer I’m going to do this waterfront living,” McFadden said, standing in front of his home with a wheelbarrow and his home’s contents scattered around the front yard. “This may be the end.”
Dustin Pentz bought his home 10 years ago, and was one of the lucky few to avoid flooding. That is until Hurricane Helene. When police blocked his car from entering the neighbourhood, he paddleboarded his way home to assess the damage.
His fridge was knocked over, and the water reached up as high as his mattress. Unfortunately, his flood insurance doesn’t cover the contents of his home. A tree in his backyard fell over and hit the corner of his roof, but he was unsure that the damage would hit his $8,500 wind deductible.
“This neighbourhood’s amazing, great schools. But no one wants to deal with this all the time,” said Pentz. “It sucks because no one wants to live here anymore. There are so many houses for sale and no one’s buying.”
Down the street, Domonique Tomlinson and her husband, Leon Tomlinson, filed a claim for items they lost in last year’s flood. They didn’t want to go through the headache of filing another claim for the contents of their home this year, with a separate $5,000 deductible.
Two days before Hurricane Helene hit, they rented a moving van to haul many of their belongings to a storage unit. She bought her home four years ago for around $199,000. Because property values have increased so much in her area, she hopes to break even. But now she says she’s not so sure.
Tomlinson, who is a teacher, and her husband, who works as a manager at a grocery store, worry that people like them will be priced out of the area because they can’t afford the preventive measures and insurance.
“Basically the only people that are going to be able to live back here are rich people who can build up,” she said.
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New amenities, from a gym to a movie theatre, and a good commuter location filled this suburban office tower
3 min
Manhattan’s office-vacancy rate climbed to more than 15% this year, a record high. About 80 miles away in Philadelphia, occupancy also is at historically low levels. But a 24-storey office tower located between the two cities has more than doubled its occupancy over the past five years.
Developer American Equity Partners bought the New Jersey office tower, known as 1 Tower Center, for $38 million in 2019. At the time, the 40-year-old building felt dated. It had no gym, tenant lounge or car-charging stations. The low price enabled the firm to spend more than $20 million overhauling and luring tenants to the 435,000-square-foot property.
Now, the suburban building is nearly fully leased at competitive rents, mopping up tenants from other buildings after the owner added a new lobby, movie theatre, golf simulator, fitness centre and a tenant lounge featuring arcade games and ping-pong tables.
“Our tenants told us what they needed in order to fill up their offices,” said David Elkouby , a co-founder of American Equity, which owns about 4 million square feet of New Jersey office space.
The new owner also liked the location at the 14-acre hotel and conference-centre complex, off the New Jersey Turnpike’s Exit 9 in East Brunswick. The site is a relatively short commute for millions of workers in central New Jersey and is passed by 160,000 vehicles daily.
The property’s turnaround shows how office buildings can thrive even during dismal times for most of the U.S. office market, where vacancies remain much higher than pre pandemic.
Success often requires an ideal location—one that shortens the commute time of employees used to working at home—and the sort of upgrades and amenities companies say are necessary to lure employees back to the workspace.
One Vanderbilt, a deluxe office tower with a Michelin-star chef’s restaurant and plenty of outdoor space in Midtown Manhattan, is fully leased while charging some of the highest rents in the country.
The 11-story Entrada office building, in Culver City, Calif., is making the same formula work on the other coast. It opened two years ago with a sky deck, concierge services and recessed balconies. A restaurant is in the works. The owner said this month that it has signed three of the largest leases in the Los Angeles area this year.
1 Tower Center shows how the strategy can be effective even in less glamorous suburban locations. The tower is prospering while neighbouring buildings that are harder to reach with outdated facilities and poor food options struggle to fill desks even at reduced rents.
The recent interest-rate cut and reports that some big companies such as Amazon .com are re-instituting a five-day office workweek have raised hopes that the office market might be getting closer to turning.
But with more than 900 million square feet of vacant space nationwide and remote work still weighing on office demand, more creditors are seizing properties that are in default on debt payments.
Rates are still much higher than they were when tens of billions of dollars of office loans were made, and much of that debt is now maturing. The recent interest-rate cut doesn’t mean “office-sector woes are now over,” said Ermengarde Jabir, director of economic research for Moody’s commercial real-estate division.
Lenders are dumping distressed properties at steep discounts to what the buildings were worth before the pandemic. Some buyers are trying to compete simply by cutting their rents.
“Most owners don’t have the wherewithal to do what is required,” said Jamie Drummond, the Newmark senior managing director who is 1 Tower Center’s leasing agent. “Owners positioned to highly amenitise their buildings are the ones who are successful.”
HCLTech, a global technology company, illustrates the appeal. It greatly expanded its presence in New Jersey by moving this year to a 40,000-square-foot space designed for its East Coast headquarters at 1 Tower Center.
The India-based company said it was drawn to the building’s amenities and design. That made possible a variety of workspaces for employees, from quiet nooks to an artificial-intelligence lab. “You can’t just open an office and expect [employees] to be there,” said Meenakshi Benjwal , HCLTech’s head of Americas marketing.
HCLTech also liked the location near the homes of its employees and clients in the pharmaceutical, financial-services and other businesses.
Finally, it didn’t hurt that the building is a short drive from nearby MetLife Stadium. The company has a 75-person suite on the 50 yard line where it entertains clients at concerts and National Football League games.
“All of our clients love to fly from distant locations to experience the suite and stadium,” Benjwal said.
