Hurricane Helene could cost CRE billions.

While the perilous storm was still hurtling towards the Florida panhandle on Thursday, Moody’s estimated that 161,849 commercial buildings — with an estimated value of $426B — were in the bullseye of Helene’s path.

“Helene has the potential to be the most severe storm in an otherwise quiet hurricane season, surpassing the economic impact of Francine, Beryl and Debby.” Chris Lafakis, a climate economist for Moody’s, told Bisnow.

Helene strengthened into a Category 4 before it hit the Big Bend region of Florida’s Gulf Coast late Thursday night.

At this hour, the storm, now significantly weakened, is continuing to whip an enormous portion of the United States — Atlanta is facing its first-ever emergency flash flood; fears of landslides in the region’s Appalachian mountains abound; 4 million are without power in Florida, Georgia, South Carolina and North Carolina; tornadoes are wreaking havoc hundreds of miles away from the Gulf Coast and the Midwest, Mid-Atlantic and Northeast are bracing for Helene’s deluge all weekend.

At least four people have been killed so far, and that number is likely to grow over the next few days as first responders begin to survey the aftermath.

In the lead-up to Helene’s landfall, there were concerns that the storm could also profoundly impact an ever-fragile commercial property insurance market in Florida — a market that’s been hammered with skyrocketing costs that have doubled for CRE owners and operators in recent years.

While South Florida developers recently told Bisnow that rates had begun to stabilize, they also said they feared a major storm like Hurricane Helene could be the first domino tumble that could eventually break the national property insurance industry market. It’s a dynamic that the Urban Land Institute said has already put rates at "crisis levels."

Rising insurance costs have already halted some CRE deals, Bisnow reported earlier this year, and now further increases have the potential to wipe out the benefits from the Federal Reserve’s rate cuts.

We sincerely hope everyone in Helene’s path stays safe. Please let us know what you are seeing out there and how you and yours are faring. Write to us at firstdraft@bisnow.com.

— Mark F. Bonner, Jay Rickey, Kayla Carmicheal and Catie Dixon

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On Our Radar

• U.S. inflation moved closer to the Fed’s ultimate target. Inflation moved closer to the Fed's 2% target in August, with personal consumption expenditures rising 0.1% month-over-month and 2.2% year-over-year. Core PCE, which excludes food and energy, increased 0.1% in August and 2.7% annually. Personal spending and income grew slower than expected at 0.2%. Despite the slowdown, housing costs rose 0.5%, the highest since January. The bottom line: overall, the data further eases the path for future rate cuts.

• Southern Europe is surging — and CRE is (mostly) following suit. Spain recently boosted its growth forecast for the next two years and anticipates lower unemployment rates. Portugal and Greece have joined Spain in outperforming the eurozone average since early 2023, thanks to austerity measures that slashed debt-to-GDP ratios. CRE reflects this momentum — investment volumes in Spain rose 15% in 2023, while Greece saw a 12% increase in prime office rents. Conversely, Germany’s CRE market has struggled with a 10% drop in office demand and softening yields.

• WTF happened in NYC this week — and what does it have to do with real estate? NYC Mayor Eric Adams was indicted on charges of wire fraud, bribery and receiving illegal campaign contributions from a foreign national. The indictment alleges that Adams took over $100K in illegal benefits and favors from Turkish officials in exchange for political influence. One instance involved pushing the fire department to allow a 36-story, $300M skyscraper to open without a fire inspection. If convicted, Adams faces up to 45 years in prison. He has denied all charges. Here’s the Bisnow overview of the mess.

• Will CRE Be In Good Hands When Disaster Strikes? Ask New Orleans. In May, Mark wrote about how insurance companies, and the federal government, failed to protect property owners in the aftermath of Hurricane Katrina in 2005. With nearly 100 million Americans now living in high-risk coastal areas, and a potential $10.8T in property reconstruction costs at stake throughout this year’s hurricane season, insurance markets are now at risk of collapsing — especially in South Florida, where Helene’s damage is just now starting to come into focus. Join Mark on X to discuss the situation.

• Best bets this weekend from Jay Rickey: I nailed the Auburn-Arkansas game last week, so I'm going back in. Give me both teams as dogs this week: Auburn +2.5 at home vs Oklahoma and Arkansas +5.5 on the road against Texas A&M. I'm also not afraid of laying the 17 and taking Miami over Virginia Tech. On Sunday I'm taking a couple of unders, both at 42.5. The Saints D has been good, so I'll take the under in their matchup against the Falcons. Same with the Eagles game in Tampa. Lastly, the Bears haven't put it together yet, so I'm taking the Rams +3 in Chicago.

This Morning's News

LIFE SCIENCES — Nearly A Third Of U.S. Lab Space Is Available (Bisnow): U.S. life sciences space is 30% vacant and is expected to increase as a wave of deliveries continues for the next year. Rents are down 9%, and it could take years to work through the oversupply. Learn more about it.

LEGAL — Senate Holds Steward CEO In Criminal Contempt (WaPo): The Senate voted to hold Steward Health Care CEO Ralph de la Torre in criminal contempt for his refusal to testify, the first time since 1971 that the Senate has asked the Justice Department to pursue criminal contempt charges against an individual. Read more here.

HOTEL — U.S. Hotel Performance Bounces Back (CoStar): U.S. hotels are seeing a significant uptick in performance driven by a robust convention schedule. Occupancy rates are climbing, and average daily rates are on the rise. Group demand is at its highest level since 2016.

HOTEL — A $200 Hotel Room Feels Like A Bargain Nowadays (WSJ): With rising inflation and demand, what used to be considered a high hotel price now feels relatively affordable. Leisure travelers are starting to take note.

REITs — Lodging REITs See Strongest Growth From Corporate Customers (REIT): Lodging REITs are experiencing robust demand growth, mainly driven by business and corporate travelers. The segment is outpacing leisure travel. Read more here.

MULTIFAMILY — Multifamily Completions Reach 50-Year High (RealPage): Multifamily housing completions in the U.S. have reached their highest level in five decades. This surge in new units is helping to alleviate some of the pressure in the rental market even as occupancy rates remain high. Dig into the details.

REITs — REITs Terreno, Lineage Poised To Gain From Port Strikes (Seeking Alpha): Industrial REITs Terreno Realty and Lineage Logistics could benefit if East and Gulf Coast port strikes cause supply chain disruptions. Discover how.

ECONOMY — Traders Bet On Another 50 BPS Fed Cut (Reuters): Futures markets are pricing in a second consecutive 50-basis-point cut in November after Friday’s PCE report. Catch up on the latest data.

RETAIL — 7-Property Multifamily Portfolio Heads To Servicing (Multifamily Dive): A loan on seven multifamily properties is being transferred to special servicing due to rising insurance costs. The properties have been grappling with affordability as flood insurance premiums surged, creating cash flow issues. The properties span Illinois, Georgia and Arizona.

RETAIL — Holiday Budgets Up, Mall Visits To Rise (Chain Store Age): JLL projects higher holiday budgets this year and expects increased foot traffic at malls. Get into the numbers.

RETAIL  — Salt Life Retail Stores To Close In Bankruptcy (Retail Dive): All Salt Life retail stores will close following the brand’s bankruptcy filing. The company will focus on its e-commerce and wholesale channels. The brand will start to liquidate its 28 stores.

HOTELS — World’s First 3D-Printed Hotel Takes Shape (Reuters): The world’s first 3D-printed hotel is under construction in Marfa, Texas. Partners behind the project say it can include architectural features that are too expensive to replicate on a large scale with traditional construction. Get the specs about the hotel.

RETAIL — FBI Warns Of Land Sale Scam (ABC News): The FBI is alerting the public about scammers impersonating landowners to sell properties without the owners' knowledge. The FBI says there has been a 500% increase in vacant land fraud over the last four years. Learn how the land scams are happening.

REITs — Postal Realty Trust Signs USPS To 162 Leases (Postal Realty Trust): REIT Postal Realty Trust secured 162 new leases with the United States Postal Service. The leases cover new rents on all expired 2023 leases and the majority of the expired and scheduled-to-expire leases in 2024. Read more here.

DATA CENTERS — Google To Invest Billions In South Carolina (Seeking Alpha): Google is spending $3.3B to expand its cloud infrastructure and data center facilities north of Charleston. Google plans to build two new facilities in the state.

M&A — Ares Management To Acquire Walton Street Mexico (Ares Management): Ares Management Corporation said it will acquire Walton Street’s Mexico business to bolster its presence in Latin American real estate. Here's what you need to know about the acquisition.

SUSTAINABILITY — Zillow Adds Climate Risk Data To Listings (GeekWire): Zillow now includes climate risk data in its real estate listings to inform buyers of potential environmental hazards. Learn more about the new update.

SUSTAINABILITY — GEOX Secures $19M To Boost Climate Risk Analysis (Fintech Global): GEOX has raised $19M in a Series A round to improve its climate risk assessment tools for real estate. The company has raised $23M in funding since its inception

ENTERTAINMENT — 76ers Expand Arena Plans (CBS News and Philadelphia Business Journal): The Philadelphia 76ers have updated their arena development blueprint to include 1,115 residential units and increased retail space, aiming to create a vibrant, mixed-use community. Read up on the new details and learn more about the development.

ENTERTAINMENT — Sacramento State Unveils Plans For Football Stadium (Sacramento State and Heartland College Sports): Sacramento State is planning a new football stadium, looking to elevate its profile and possibly position itself for a Pac-12 conference invitation. Learn more about the plans and get more background about Pac-12.

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The First Draft is produced by Director of Newsletters Jay Rickey, Managing Editor Catie Dixon, Editor-in-Chief Mark F. Bonner and Deputy Newsletter Editor Kayla Carmicheal, with an assist from ChatGPT. We’d love your feedback! Email us at firstdraft@bisnow.com.