Construction activity can continue after multiple Central Florida counties implement the mandatory stay-at-home orders on Thursday, but it’s far from business as usual for most builders and developers in the region.
The emergency orders deemed construction an essential business, but local builders are grappling with how to adjust to the new reality and challenges brought on by the coronavirus pandemic. Aldo Martin, former president of the Greater Orlando Builders Association and CEO of Bellavista Building Group, said the homebuilding industry see significant disruption.
“The real construction work is going on at the same pace as before, but we’ve been told by some of our subcontractors that things might slow down because they’re trying to have smaller groups on the job sites," Martin said.
And the region’s tourist-driven economy makes it especially vulnerable. “Orlando is probably going to be one of the hardest-hit sections of the U.S. – not so much because of the virus – but because of lack of business," Martin said.
“We are totally driven by travelers overseas, and that’s not happening now, so it’s going to be a while before it gets back to some form of normalcy. And if we ever get back to the big numbers, that is unknown," he said. "So we’re going through some choppy waters right now trying to figure out what Orlando’s going to look like in 6 months, in 12 months, in five years.”
Meanwhile, most builders have put a hard-freeze on land acquisitions. CG Land President Mike Galvin, who supplies lots to builders like Lennar and D.R. Horton, told GrowthSpotter he had 1,000 lots under contract to close. All are on hold.
“If the shutdown ends in April, it will take four or five months to rebound,” Galvin said. “It will be far worse than (2009), in my opinion. The question will be when it come back, whether there are third party buyers. I think this virus is something the world has never seen. It’s affecting every financial sector in the U.S.”
But that uncertainty also creates opportunities for some developers, especially those who specialize in buying distressed real estate. Fort Lauderdale-based BTI Partners has made its mark in the Greater Orlando market by resurrecting projects like the defunct Grove Resort & Water Park and long-dormant Posner City Center in Davenport.
Chief Investment Officer Justin Onorato said the company is poised to act quickly if cash-strapped builders need to divest of their land holdings to relieve debt load or to satisfy stockholders. “We feel that there will be continued demand for residential land, and where the homebuilders can not or will not acquire it today, that will just present more buying opportunity for groups like BTI.”
Galvin said he, too, bought land for pennies on the dollar after the real estate crash a decade ago. He doesn’t expect home builders to start unloading land unless the shutdown lasts for an extended period of time.
“I don’t think anyone’s going to do a fire sale today, or in next 30 days,” he said. “The question is how far does real estate market fall and when does it come back?”
Publicly traded homebuilders, even those with strong cash reserves, are watching their stocks plummet. Onorato said that, too, creates an opportunities for companies like his. “We definitely would be buyers in this environment, and we’ve done so in the past," he said. “These windows of opportunity are always open. We certainly want to take advantage of opportunities that are presented when presented so, no, we’re not on pause. We were actively pursuing tracts across the state, especially in Central Florida.”