EVALUATING THE SAFETY OF OLDER BUILDINGS AFTER THE SURFSIDE CONDO COLLAPSE

PROPERTIES ARE UNDER ADDITIONAL SCRUTINY FOR POTENTIAL SAFETY ISSUES, AND MANY BUYERS WERE HESITANT IN THE TRAGEDY’S AFTERMATH

The?sudden collapse of a beachfront condominium ?in the oceanfront town of Surfside, Florida, last June claimed 98 lives and brought immense pain to the community. It also made many residents and potential buyers of older condos and apartments rethink purchases because of safety concerns.

The collapsed building, Champlain Towers South, was constructed in 1982. An engineering firm had started the condo’s 40-year safety recertification and found significant concrete deterioration prior to its collapse, but owners did not perform repairs before disaster struck.

This tragedy has spotlighted older construction in South Florida and throughout the country, and it could bring tighter recertification regulations. It’s also driven a slowdown in purchasing aging condos in Surfside and other parts of South Florida.

Here’s a look at the changes this event could bring to building safety and the?CRE industry .

NEW BUILDINGS ARE PREFERRED

Older condo sales were booming in South Florida before the building collapse, but a report by?NBC News ?suggests an immediate (at least, short-term) decline in that trend. At a minimum, prospective buyers wisely want engineering reports before investing in these properties. But unfortunately, that information isn’t always available and may be expensive to attain.?

The result was a?lagging market subsection as more condos became available because residents felt less safe, and fewer buyers were willing to purchase properties without confidently knowing a building’s safety status. Simultaneously, there has also been a significant increase in the?construction ?of multifamily properties throughout South Florida. There were only 46,000 units built in 2020, but 2021 had?76,000 new builds ?through just the third quarter.?

Buyers simply feel safer in newer buildings, which should contribute to even more new construction throughout the region in the coming years.

THE RECERTIFICATION PROCESS

The 40-year building recertification process is standard throughout the United States, but there could be changes coming to that standard.

A?43-page report ?by a Miami-Dade grand jury tasked with evaluating the Surfside collapse noted that the recertification process should begin much earlier than 40 years into a building’s lifetime—an initial inspection 10 to 15 years after construction was among the jury’s recommendations. These reports would then be updated every 10 years.

The shorter recertification timeline aims to prevent people from living in severely deteriorated buildings like the condos in Surfside. However, it’s worth noting that re-certification is expensive. The process involves hiring structural engineers to inspect the property and puts a significant responsibility on condo boards and state and local governments to execute and enforce the rules.

This traditional tug of war between safety and expense contributed to the tragedy in Surfside, of course.

ARE THERE GOOD, WELL-MAINTAINED BUILDINGS ON THE MARKET?

Not all old buildings are in poor condition, and it’s unlikely that too many of them suffered the fundamental design issues that accumulated decades of additional water damage in Champlain Towers. Many structures throughout South Florida have gone through the recertification process, and engineers have deemed them safe.

However, these properties may see themselves swept up in the understandably negative press aging condos have received—for a time.?

If?thorough due diligence?reveals an older building is safe and structurally sound, buyers may be able to purchase units or buildings at somewhat, relatively discounted rates in a very hot residential real estate market.?

MORE AVAILABLE LAND IF OLDER BUILDINGS FAIL THE SAFETY TEST

Another possibility centers around if an increasing number of oceanfront properties fail their recertification tests and require multi-million dollar repairs to keep them operational. Champlain Towers South fell into this category, as it’s believed the concrete damage to the building would have cost tens of millions of dollars to repair. This is why the process hadn’t started when it collapsed.

In situations where the cost of repairing the buildings is too high, owners may opt to sell to developers, who tear the old structures down and rebuild modern condos, apartments, or?hotels ?in their footprint.

This scenario is worth monitoring because much of South Florida’s oceanfront real estate construction occurred in the 70s and 80s. Building something brand new in those prime, finite areas may be a worthwhile project.

THE FUTURE OF CONDOS—AGING OR NEW: SAFETY FIRST!

Of course, we don’t know how long buyers will be skeptical of older condos in South Florida or how many buildings will fail today’s—or tomorrow’s—recertification process. Tragic events tend to fade from memory, but we fervently hope that the Surfside condo collapse spurs real, practical measures that ensure the safety of residents.?

The collapse shined a light on the problem of deteriorating buildings throughout the region and nation, and it presents an opportunity for significant changes in building assessments and safety.

Morris Southeast Group has its fingers on the pulse of South Florida’s CRE market and offers insights to help our clients make ROI-based investment decisions. Contact Morris Southeast Group at 954.474.1776 today to learn more. You can also speak with Ken Morris directly at 954.240.4400 or?[email protected] .

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