Cities’ Appeal Will Outlast Virus, Top California Developer Says
(Bloomberg) -- U.S. city dwellers aren’t about to flee to bucolic suburbs because of the coronavirus, as some brokers predict, said Emile Haddad, founder of California’s largest masterplanned community developer.
Haddad’s Five Point Holdings LLC would stand to benefit if such a trend did come to pass. It’s building suburban projects around Los Angeles, Orange County and San Francisco with 40,000 residences and 23 million square feet of commercial space. But Haddad said cities will continue to thrive as centers of innovation and economic growth and people will return to the bars, restaurants and other amenities that make urban living attractive.
“I am absolutely convinced that this is not the rebirth of suburbia,” Haddad, chief executive officer of Five Point, said in an interview. “I really don’t think you’re going to see a major change in anything in the character of the city.”
Real estate stocks have been pummeled amid fears that the virus will gut retail, office and multifamily property values as more people shop and work from home, creating demand for more spacious dwellings.
The pandemic is likely to have a short-term effect on behavior similar to the shock of the Sept. 11 terrorist attacks rather than the long-term recovery following the 2008 Great Financial Crisis, according to Haddad. He founded Five Point in 2009 as a spinoff from homebuilder Lennar Corp., devoting most of the last decade to getting plans and permits approved for his sprawling projects.
The most likely change in public and private spaces will be an increase in temperature-measuring sensors and other technology to track the health of people, according to Haddad
Home prices in his communities won’t decrease much, Haddad said, because there’s a long-term inventory shortage, but interest rates are likely to fall further, which will make housing more affordable.
Despite the halt in construction during the outbreak, builders have continued to close deals on lots in his Southern California communities, the Great Park in Orange County and Valencia north of Los Angeles. Home sales are likely to quickly resume soon after people emerge from confinement.
“Our buyers are not the buyers that are losing their jobs,” he said. “Our average price of a home is over $1 million, so obviously those are not people who are working in restaurants or hotels.”
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