Cape Cod CRE 'Took Off Like A Rocketship' After Rough Start To Pandemic
Commercial real estate markets in Massachusetts' Barnstable County, which includes Cape Cod and some of its neighboring islands, have picked up of late after a rocky start caused by the lingering uncertainties in the wake of the coronavirus pandemic.
Investors were worried about a host of potential problems, ranging from shortages of gasoline not seen since the 1970s to grocers being able to keep their shelves adequately stocked, according to John Ciluzzi. He owns a commercial/residential brokerage firm in Centerville.
"For the last eight weeks, there has been a surge in activity," he said. "The commercial real estate market took off like a rocketship, and it has not stopped. We have seen broad interest across all categories of investment in the region where I work."
Ciluzzi put about $8M in properties under agreement in the last 45 days, he said, including two restaurants and a former nursing home.
According to the Cape Cod and Islands Board of Realtors, pending home sales dropped about 50% from March to April when most of the U.S. went into lockdown as the country faced its worst health crisis in a century.
The market has since rebounded: Pending sales rose 46% as of last week, according to Board of Realtors Executive Director Ryan Castle
"A lot of that is pent-up demand from the bad April," Castle said in an interview. "People in the Boston metro market, Connecticut metro market and New York metro markets are saying, 'Since I am not going to be going back to an office for a while, I might as well go ahead and buy my house on the Cape.'"
Data from CoStar presents a mixed picture of the commercial sector in Barnstable County. Prices for multifamily properties, for instance, have gained around 6% over the past few years, though their growth rate has decelerated of late. Retail properties have gained about 1% in value, while office properties have gained about 10% since 2016.
Hospitality property owners have had it especially hard in Barnstable, like in many other communities dependent on tourism.
According to data from the Cape Cod Chamber of Commerce, occupancy rates in Barnstable County plunged to 16.5% in April compared with 35.7% in 2019. Average daily prices plummeted to $73.68, its lowest level since at least 2012. A year earlier, tourism properties earned $134.68 per day from vacationers.
Hotel bookings have increased for short-term stays in June, July and August, Chamber CEO Wendy Northcross said during a recent conference call.
Massachusetts real estate entrepreneur Claudia DiCesare has also seen bookings rise, both for her oceanfront condominium and her home on Edgartown in neighboring Martha's Vineyard. The condo rents for $248 a night and was converted from a motel. She acquired the unit in 1998 soon after graduating college. Friends of hers own other condos in the 17-unit property.
"You can't touch oceanfront property anywhere," DiCesare said. "I would be hard-pressed ever to sell it in the future because I don't know if we would ever get back to a waterfront situation."
DiCesare and her husband, Jason Hartley, rent the Edgartown home for $550 a night. They remain on the lookout for other rental properties in Martha's Vineyard, which is less crowded than the Cape and more attractive as an investment.
"Back in January, we were booking like crazy," she said in an interview. "During the past six weeks, we started receiving cancellations from people from out of state. As those dates canceled, new booking came in from locals."
Most vacationers to Barnstable County come from the Boston area, DiCesare said.
According to the Cape Cod Chamber of Commerce, direct tourism spending was $1.32B in Barnstable County in 2018, the latest time frame for which data was available. Before the pandemic was declared in 2018, the Chamber was forecasting a 2020 spending increase of 7% compared with 2018.
Some Massachusetts residents may want to make the Cape Cod area their permanent home. Gov. Charlie Baker had pushed for tax breaks to encourage more telecommuters last year, and the rise in remote work has spurred at least a temporary exodus from some cities. A school superintendent on the Cape told The Cape Cod Times he thinks the area will see more full-time residents moving forward.
"Lord knows, there are a lot of second-home owners on the Outer Cape,” Michael Gradone, the superintendent of the Truro School District, told the local paper. “There’s certainly the possibility that employers and employees might discover that it’s not only more workable but makes it safer not to have people rubbing elbows at work."