Hurricane Sandy’s Impact on Multifamily in the Northeast
- Nov 05, 2012
New York—Hurricane Sandy has blown through the North East, leaving a trail of devastation in its wake. According to recent numbers, more than 110 people were killed in the hurricane, with more than 38 deaths in New York City alone. The multi-housing industry was also strongly affected. In Manhattan alone, streets were flooded, public transportation was left at a standstill and many apartment buildings were left without heat and power for a week. Despite the destruction, however, many in the industry are headed back to a feeling of normalcy, and one of hope.
According to Business Week, it is estimated that damage caused by Hurricane Sandy will end up costing $15 billion to $20 billion to repair. However, industry insiders feel that this will not negatively impact the economy for an extended period.
“Hurricanes and poor weather have an impact on the economy normally for short time periods,” Jack Kern, managing director, Kern Investment Research LLC, tells MHN. “Except in instances like New Orleans that suffered devastating damage and actually reshaped the population that affected nearby states with storm refugees, most storms pass with only limited consequences. The New York metropolitan tri-state region will see continued distress and take years to get back to normal, especially in business services, tourism and community development. In fact, in many instances storm damage creates additional employment and demand for repair and restoration, sometimes pumping millions of dollars into the local economy.”
The multifamily industry that was hit by the storm is taking measures to recover. One of its greatest strategies was a strong offense before the storm hit. For example, the Albanese Organization, which manages multifamily properties in Battery Park City in lower Manhattan, prepared its staff before the hurricane by training them with a CERT (community emergency response team).
“The thought behind this was to establish a valuable knowledge base for keeping residents safe during crisis events like a severe storm,” according to a press release from the company. “In addition, extra steps were taken to provide food and other necessities for trained staff who stayed behind after to monitor the buildings.”
Of course, even with advanced preparation, the industry is still reeling from the damage inflicted, which caused a lot more destruction than last year’s Hurricane Irene.
“The housing market could potentially see a number of complicated effects from the super storm,” Kern says. “Construction crews hired to begin restoring storm damaged buildings are not going to be available to work on new homes or other kinds of renovations. Wage rates will probably rise too, as the level of demand for trained crews is going to be very high.”
That said, however, the multifamily industry has already started making strides to move forward, and, more importantly, are looking after their residents and properties who need help after the storm.
One example of this is FirstService Residential, a national property management company, which has established a $10 million hurricane repair fund for its properties.
“Over the next weeks to come—and it may be more than weeks—these communities are going to realize that having the ability to reach out to these funds is going to be very important,” Michael Mendillo, CEO of Wentworth Property Management, a subsidiary of FirstService, tells MHN.
“Within the tri-state area, we have about 200 communities that probably had some [damage] to great [damage] from Hurricane Sandy,” Mendillo says. “Being in the business for 25 years, you realize that a lot of the vendors that assist us with taking care of the properties are smaller vendors—they’re not public companies, they’re not huge corporations. They’re hard-working small businesses. They’re only going to be able to put out so much money to increase the labor pool they have and rent equipment to clean up or create safety. This [fund] gives us the ability to assist our associations with funds to create more safety for our residents. We want to make sure our communities are safe. There are things that can’t wait until the insurance companies come out. All we’re looking to do is help.”
Though Sandy presented a challenge, those in the industry are optimistic that multifamily prospects in the Northeast will remain strong.
“Renters are a pretty stable bunch and it’s likely that only a small percentage of prospective renters will be scared away from areas that were hardest hit by wind and waves,” Kern says. “Since the conventional wisdom is that these are 100-year storms, renters are going to be leery, but will move back into these areas. Demand for housing in the tri-state region is so high that owners won’t have difficultly re-tenanting their apartments.”