Western US faces bigger wildfires amid drought, high temperatures | Student housing, manufactured homes, industrial outperform other assets | US banks express concerns about commercial property markets
Federal data show a quadrupling in the number of large wildfires in the Western US in recent decades, while the number of homes destroyed by wildfires nearly tripled year over year in 2017. Drought and high temperatures have contributed to this year's wildfires, which have destroyed 2,600 homes and burned 3.3 million acres so far, nearly on pace with 2017's fires that ultimately burned a record 10 million acres.
Student housing, manufactured homes and industrial assets did better than the broader commercial property market over the past 12 months, according to Green Street Advisors. Aside from the top three sectors, values have remained flat for the past year -- a plateau due in part to rising interest rates -- and in retail they have dropped 10%.
The last time the warehouse market was as tight as it is now was in 2000 during the first e-commerce boom, according to a report by CBRE. The market is moving close to an equilibrium, but demand still outpaced supply in the second quarter when industrial real estate availability dropped to an 18-year low of 7.2%, CBRE reported.
So far, tariffs levied by the US on foreign products and the subsequent retaliatory tariffs have not hurt the commercial real estate industry, according to CBRE Capital Markets. However, if tensions continue to escalate, the industrial asset class would be affected, and overall growth could decline.
The National Flood Insurance Program will lapse on July 31 if Congress fails to approve an extension, as bills to reauthorize the program through January have stalled and experts say a shorter renewal could be likely. The NFIP's solvency has been a source of concern, and the program's debt was $20.5 billion as of the first quarter.
As hurricane seasons go, 2017's stands as the most expensive in US history, yet the winds that hit the Florida Keys and Puerto Rico were not unprecedented. Indeed, given the long break since the 2004-05 landfalls of Hurricanes Katrina, Rita and Wilma, there was some sense that Hurricanes Irma and Maria were overdue. The housing and insurance industries largely took them in stride as significant, but expected, wind events. Hurricane Harvey, however, was different. Learn more about the effects of this storm on the flood insurance markets.
Known and unknown risks can prevent a deal from closing quickly and leave buyers without certainty. Aligning a buyer's concerns with a seller's desire for a clean exit can help both parties succeed, and the strategic use of transaction liability insurance can close this gap and improve deal outcomes. Aon experts recently held a discussion around the rapidly growing utilization of transaction liability insurance -- including representations and warranties as well as tax and litigation insurance. View the replay.
Someday you will be old enough to start reading fairy tales again.
C.S. Lewis, writer and academic
About Aon Real Estate
Aon’s Real Estate Practice has unmatched expertise in designing and placing competitively priced insurance solutions and our capabilities include a comprehensive range of solutions, including property, casualty, financial services, environmental, construction and additional areas of real estate related risk management. Our fact-based approach combined with market knowledge has helped us become the leading insurance broker. Aon represents more than 30 percent of the largest real estate owners, managers and developers and places more than $1 billion of real estate premiums annually.
Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.