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Miami CRE On What Condo Collapse Means For The Market

People in South Florida commercial real estate are saddened, confused and concerned about the collapse of Champlain Tower South in Surfside.

“Our community, and the entire nation, is in shock and grieving over the collapse," said Mike Pappas, president and CEO of The Keyes Co./Illustrated Properties.

They are also thinking ahead to how the collapse is likely to affect the market in myriad ways. Prefacing their comments with sympathy for those affected by the tragedy, some shared their thoughts with Bisnow.

The collapsed Champlain Towers South in Surfside, Florida

In the short term, fear is likely to have some effect, CRE professionals agreed. 

Peter Dyga, president and CEO of Associated Builders and Contractors Florida East Coast chapter, said even though the collapse appears to be an extremely exceptional case with signs that pointed to problems, it will be natural for people to be worried about other buildings.

"This could soften the condo market, especially in Surfside and South Florida where this tragedy has hit closer to home," Dyga said. 

Rennert Vogel Mandler & Rodriguez partner Howard Vogel, who specializes in condominium law, predicted that the tragedy will prompt owners at older coastal condos to sell their units to developers, who will pursue terminations of those structures, demolish them and build brand-new buildings.

Developers looking for redevelopment opportunities often target older coastal buildings that are nearing the 40-year recertification stage, Vogel said.

Pappas predicted that the market would be robust over the longer term because of long-term trends driving demand. However, there will undoubtedly be an increase in buyers doing more investigation before moving forward with purchases. 

"Florida law requires all buyers to receive condominium documents and provides for a three-day recission period for the buyers after receiving the documents," Pappas said. "All condominium owners can request financial records and meeting minutes at any time.”

Dyga predicted that governments would feel pressure to enact stricter regulations and that condo ownership would get "significantly more expensive."

"Overreaction by government and public policymakers is typical, so let’s hope for a deliberate, thoughtful response that takes facts into consideration," Dyga said.  

He encouraged condo owners to be involved in their associations, stay informed, properly maintain their buildings and take prompt action when safety, structural or maintenance issues come to light, without waiting on a government agency to mandate it. 

Dyga said he didn't think the insurance market would be impacted much. The industry is structured to withstand isolated claims against the HOA building policy, umbrella policy, owners' policies, and directors and officers policies, he said.

"It’s regional, more widespread events that the market has a harder time responding to," he said. 

Brian Wolf, a partner and construction attorney at Smith, Currie & Hancock in Fort Lauderdale, cautioned that the collapse was rare and said he felt that until the cause is pinpointed, it is too soon to tell whether or how it will affect insurance or impact safety codes and inspections.

“More often than not, a tragedy is caused by a series of events that were avoidable,” Wolf said.