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Wildfires can't cool hot real estate markets

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This story was originally published by High Country News and is reproduced here as part of the Climate Desk collaboration.

More people than ever want to live on the wild edges of Western cities, despite the risk wildfires pose to their homes. A recent study by researchers at the University of Nevada, Las Vegas, found that wildfires drive down real estate prices only in the immediate aftermath of a disaster. Home prices in burned areas typically rebound to pre-fire levels within one to two years.

High-risk zones are defined as having high probability of a wildfire based on the physical attributes of the terrain surrounding each property. Homes in these zones see a drop in price following a fire, but quickly rebound and spike less than three years after the incident. Shawn J. McCoy and Randall P. Walsh. 

The finding illuminates a troubling trend: Some of the West’s most fire-prone areas — densely forested, scenic, mountain landscapes that are conveniently close to cities — are also some of its most desirable. When more people move into these areas, the cost of fighting fires rises because there is more to defend — more lives and property at stake. On top of that, because people unintentionally spark many wildfires, the overall risk increases when the woods become more populated, as does the potential destruction these fires can cause in terms of property damage and loss of life.

Yet developers will continue to build in high-risk areas as long as there’s a demand. Residential growth in forested areas across the United States has exploded in recent years, from an estimated 12.5 million housing units in 2000 to 44 million by 2010. “We should be worried about that,” said University of Nevada, Las Vegas, research economist Shawn McCoy, who led the study. “The societal costs of wildfire will increase, because people continue to develop there. They know that those homes will sell regardless of the risk.”

Many homes are in or border zones with the threat of wildfire. As the price of homes in wildfire zones only drops for a short period of time after a fire, there is still high demand for homes in such areas. Shawn J. McCoy and Randall P. Walsh. 

McCoy and his team analyzed real estate data from nearly 360,000 properties across eight Colorado Front Range counties, which experienced 18 severe wildfires between 2000 and 2012. They compared the prices of similar houses located in high- and low-risk burn zones before and after wildfires. And they considered the relative risk of homes within those zones, their proximity to recent wildfires, and residents’ views of the burns and their aftermath.

The researchers found that the value of homes within sight of burn scars did dip after a fire and was slower to rebound. But even there, homebuyers’ awareness of fire risk didn’t impact their willingness to invest in those properties. Overall, housing values in the high-risk zones dropped in the year following a wildfire, but rebounded to pre-fire prices in one to two years.

The study area — part of the so-called “wildland-urban interface” — is one of the West’s fastest-growing urban areas. In Colorado alone, nearly 7 million acres fall within it. As more people pack into these areas, the federal dollars needed to fight fires will continue to increase. Already, wildfire suppression accounts for 52 percent of the Forest Service’s budget; by 2021, it’s projected to increase to 67 percent. “We have so many homeowners living in fire-prone areas that we have to come to terms with that,” McCoy said. “How do we protect those people?”

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These New York Real Estate Billionaires Stand To Profit From Amazon's HQ2

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From left to right: Tom Elghanayan, Fred Elghanayan and Henry Elghanayan. Chester Higgins Jr/The New York Times/Redux

Amid the news about Amazon’s HQ2 announcement—the e-commerce giant chose New York’s Long Island City and northern Virginia’s Crystal City as the victors of its nationwide search—there’s the question of who in the real estate world is jumping for joy at the new opportunities. That likely includes a pair of low-profile billionaire brothers and real estate titan Jerry Speyer.

The Elghanayan family, which was worth more than $2 billion in 2015 when Forbes last estimated their fortune, traces their wealth back to Nourollah Elghanayan, an Iranian-native who started buying land in Manhattan in the 1950s and 1960s. His three sons, Tom, Fred and Henry, expanded the family business throughout Manhattan and Queens, acquiring and developing iconic buildings such as FBI’s former New York City headquarters and the Carnegie Hall Tower. In 2009, the family split up their holdings amid disagreements over succession plans. Henry reportedly won a coin toss and chose the Rockrose name and a portfolio of development sites and residential buildings; Tom and Fred took the rest, including more than 5,000 apartment units and properties in Long Island City, and rolled them into an entity called TF Cornerstone.

Since then, Tom and Fred Elghanayan have capitalized on New York’s up-and-coming neighborhoods, building gleaming luxury rental apartment towers in Manhattan’s Hell’s Kitchen and in downtown Brooklyn. But it’s their bet in Long Island City that may prove to be the most prescient. In addition to two rental apartment towers the Elghanayans transferred to TF Cornerstone, the brothers have purchased or built four more rental buildings in the past six years, giving them over 3,000 rental units in Long Island City’s waterfront community of Queens West.

In July 2017, TF Cornerstone furthered its move into Long Island City, winning a proposal to redevelop two city-owned sites in Anable Basin, a waterfront district neighboring Queens West. Its winning bid calls for a 1.5 million square feet mixed-use project with 1,000 rental units, commercial, retail and light industrial spaces, and public park areas. Just months later, Plaxall—another family firm that manages over one million square feet of real estate—submitted plans to rezone nearly 15 acres of the Anable Basin into a mixed-use development spanning almost 6 million square feet.

Now the sketches of glass towers and open air parks have been fast tracked to reality as Amazon sets its sights on the Anable Basin. According to the Seattle company’s memorandum of understanding with New York, it has circled the Anable Basin area as its target site for HQ2. TF Cornerstone confirmed that it will partner with Amazon to build out its project. “As a family-owned company founded by Queens natives, TF Cornerstone is proud to welcome Amazon to Long Island City, bringing new jobs to the borough and preserving significant public benefits,” says Jake Elghanayan, a principal at TF Cornerstone and a son of Tom Elghanayan.

With Amazon planning to take up 4 million square feet of office space over the next decade (and bringing on 25,000 workers), the Elghanayans are in prime position to take advantage of the increasing demand for office real estate and new apartments. With excitement already building in Long Island City, Tom and Fred’s fortune looks to be getting a boost in the near future. 

Jerry Speyer, cofounder and chairman of Tishman Speyer.

Jerry Speyer, cofounder and chairman of Tishman Speyer.Getty

Another big winner in Amazon’s decision is real estate firm Tishman Speyer’s billionaire chairman Jerry Speyer. Speyer started the real estate giant, which has developed over 167 million square feet of space from Chicago to Berlin, in 1978 with his father-in-law Robert Tishman. Son Rob Speyer is now CEO and oversees the company’s operations. While famous for redeveloping iconic skyscrapers like Manhattan’s Chrysler building and Rockefeller Center, Tishman Speyer has also become a major player in the transformation of Long Island City. The firm claims to be the area’s most prolific residential and office developer and says it will have completed construction on 3.7 million square feet in the neighborhood by end of next year.

A decade ago, the New York firm broke ground on Two Gotham Center, a 22-story office tower just a 20-minutes stroll from Anable Basin. Tishman Speyer sold the completed building to Canadian firm H&R REIT in 2011 but continued on, partnering with H&R and Qatar’s sovereign wealth fund to develop two office and retail towers named the JACX, and three rental apartment towers named Jackson Park.

With Amazon planning to begin hiring for HQ2 in 2019, the tech behemoth has agreed to lease one million square feet of office space at One Court Square, a 50-floor tower only blocks away from Tishman Speyer’s JACX and Jackson Park. Now the JACX, scheduled to open in 2019 with Macy’s and WeWork taking up 800,000 square feet of its 1.2 million square feet space, may not need to look far for new tenants to fill the rest of the floors. And Jackson Park, with amenities like indoor and outdoor swimming pools and a 1.5 acre private park, could be the new place to be for relocating Amazon executives.

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Suddenly, a pair of quiet real estate markets are white-hot

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WASHINGTON — Amazon has just sparked a real estate frenzy to rival Cyber Monday.

A three-bedroom condo with Manhattan views that had sat on the market for months, priced at $1.7 million, is suddenly drawing would-be buyers now that Amazon has announced plans to build part of its new second headquarters in Long Island City.

Online searches for homes in the Long Island City — long an industrial area in the Queens borough of New York — soared 248 per cent last week, real estate brokerage Redfin said. Searches in the other winner of Amazon’s sweepstakes, Crystal City, Virginia, jumped 84 per cent. Real estate agents say they’re hearing from investors who’d like to become landlords and from sellers who’ve decided to pull their homes off the market and wait for prices to rise.

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Sam Zell Is Selling More Than Property After Real Estate Warning

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  1. Sam Zell Is Selling More Than Property After Real Estate Warning  Bloomberg
  2. Full coverage



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