"Obama warns of tough economic times after oil spill" - Wall St. Journal
“Gulf oil spill could be disastrous for Florida economy. Oil disaster could cost Florida economy 39,000 jobs, $2.2 billion” - Palm Beach Post
“Gulf Coast oil spill could wreck region” - Wasington Post
"Scientists fear that the Gulf oil spill will reach South Florida” - Miami Herald
Wow! The headlines this past week have been nothing short of stunning. What's even more disturbing is the fear that many real estate owners and developers are feeling in Florida and the entire Gulf region, and perhaps for good reason.
Despite the desperate, billion dollar efforts of the oil and gas community and the full cooperation of the U.S. national government, the black oil continues to relentlessly flow into the Gulf. Truth is that no one really knows how long it will continue and how much black tar will end up on the shores of America's most beautiful beaches.
According to the brilliant designs of deep water drilling engineers, this was not supposed to happen and if it did, the same minds had a myriad of technological solutions at their disposal. Now the ability of the world’s smartest engineers and perhaps even the cumulative knowledge of the Earth's governments is no match for a deep water drilling disaster. Quite a scary premise given the fact there remains almost 4,000 active, off-shore drilling sites in the Gulf of Mexico alone.
Prospect of Permanent Damage to Florida Markets
Who's to say this will not happen again, especially given the prediction of an increase in high intensity hurricanes and the ever present threat of terrorists who would like nothing better than to see America's most beautiful beaches decimated and devalued. Not too far from their wishes, Moody's is now making noise about the long-term effect and discounts on the valuation and credit of coastal real estate in Florida and along the Gulf. Some areas have already seen values decline as much as 30% since May.
As predicted, the oil spill has already reached the Loop Current and scientist fear it may be only a matter of time before the slick reaches the shores of South Florida, the Keys, Cuba, and traveling with the current up the east coast, invading Miami, Ft. Lauderdale and Palm Beach, some of the most valuable and desired real estate in the world. Just the prospect of this scenario sends chills to the cumulative world of coastal real estate investors and would be property owners. Even if it doesn't materialize this time, who can protect this precious property from the next oil event? Unlike storms, floods, and fires, oil disasters, like nuclear events, last for decades.
What we now know is that no one has the tools or technology to prevent or protect us from such a calamity and this is precisely the problem. Markets fall with fear and are sustained with stability. This new knowledge of the exact vulnerability of some of the world's most valuable real estate could indeed be a game changer.
What developer, real estate investor or home owner wants to expose their entire future to inept oil companies, raging weather, or the madness of terrorists? It certainly stands to reason that if you are buying property in coastal TX, LA, MS, AL or Florida you are doing just that.
Finding Another Florida
Perhaps the only coastal property in the whole region that is not vulnerable to this ever present threat of an oil spill, lies just across the gulf and 350 nautical miles south west of Florida, and is Mexico's Riviera Maya. This is where the Loop Current begins and its powerful stream pushes any pollutants north into the Gulf and away from its pristine shores.
The Riviera Maya runs along the Yucatan Coastline near Playa del Carmen and Cancun for approximately 72 miles all the way down to Tulum. It is located in the state of Quintana Roo in Eastern Mexico and is the only Caribbean coastline in Mexico which means it boasts warm, clear, clean waters year round. Conde Naste Magazine just recently named the Riviera Maya as having the most beautiful beaches in the world. It is the actual location where the Corona Commercials are filmed and it is quickly becoming a secret hideaway for many celebrities such as Angelina Jolie, Brad Pitt, Tom Cruise, Leonardo Dicaprio, Mick Jagger, Drew Barrymore and Fergie.
This area is very much akin to where Florida was in its development some 30 years ago. Just a few miles south of the chaos and massive hotels of Cancun remain unspoiled, tree lined beaches and huge swaths of undeveloped coastal property destined to be the next, and perhaps last, bastion of beach real estate development in the greater Gulf region. And why not, the Mexican economy is surging, up 10% from a year ago, expecting $20 billion in foreign investment this year, and the home of now the richest living human being on the planet, Carlos Slim. If you had invested $10,000 dollars here just 10 years ago you would have witnessed a 232% gain in your portfolio.
Real estate development in Mexico's Riviera Maya is far outpacing growth in Florida, coastal TX, LA, MS, AL and most other countries for that matter. For example, Playa del Carmen, 30 minutes from Cancun, was named the fastest growing area in the world just a few years ago and Tulum, just to the south, is poised to grow even faster in the next 5 years. Mexico's only Caribbean coast is a mere 2.5 hours (a hop, skip and jump) from many U.S. airports making it just as accessible as Florida for many Americans. New foreign-friendly laws and transparent policies are now making it easier and safer than ever before to invest in what many think could be the next Florida.
Given the recent revelations about Gulf oil spills and the U.S. market's vulnerability to long term risk of loss, those who get in on this Caribbean land rush now and ride the wave over the next few years are likely to position themselves far ahead of most Florida and Gulf coast real estate investors. Currently there are hundreds of real estate development companies and thousands of former Gulf coast and Florida investors doing just that, with many more hotly on their heals, heading for what some are saying could be the New Florida.
by Michael Zenn
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