WASHINGTON — According to a panel of real estateand economic experts, the deepening U.S. economic slowdown and emerging property and casualty insurance issues are key threats to the nation's $20 trillion real estate sector in the aftermath of the Sept. 11 terrorist attacks.
"Real estate is very much on the front lines of the crisis affecting New York and rippling throughout the broader U.S. economy," said Owen D. Thomas, managing director at New York-based Morgan Stanley and member of The Real Estate Roundtable. The Real Estate Roundtable is an organization in which public and privately held real estate owners, developers and lenders work with majorreal estate trade associations to address key national policy issues relating to real estate and the overall economy. Participating trade associations represent more than 1 million people involved in virtually every aspect of the real estate business.
Thomas spoke on behalf of The Real Estate Roundtable at a briefing hosted by the Congressional Real Estate Caucus on Capitol Hill Oct. 4. "The worsening macroeconomic and business environment, exacerbated by the events of Sept. 11, will have a material impact on overall real estate," he said. Thomas expressed concern about the effects of the economic slowdown on the lodging industry, where an estimated 500,000 employees may be laid off in the next three months and financing for new projects has all but dried up.
Another serious concern is property owners’ ability to obtain adequate insurance coverage in the wake of the terrorist attacks. Before Sept. 11, property and casualty and general liability insurance policies typically covered damages resulting from acts of terrorism, excluding only damages relating to acts of war. Future policies are now expected to exclude both types of losses — a change that would severely impair property owners' ability to conduct routine real estate transactions.
"Without adequate insurance, it would be difficult, if not impossible, for real estate owners to operate or acquire properties or refinance loans," said Real Estate Roundtable President and COO Jeffrey D. DeBoer. "We urge policymakers to recognize this as a major threat to the economy and to address this issue expeditiously."
U.S. Rep. Phil English, R-Pa., who moderated the session, said the real estate industry depends on a robust, growing economy. "We have arrived at a pivotal economic moment," he said. "The tragic events of Sept. 11 are reverberating not only through our hearts as we as a nation work to return to our lives, but through the economy as more and more often the word 'recession' is being tossed about when talking about the economic slowdown. This was a valuable opportunity to bring those in the real estate business together with policymakers and have an open discussion on where our nation's economy is heading."
English co-chairs the 93-member Congressional Real Estate Caucus with U.S. Rep. Richard E. Neal, D-Mass. According to Neal, the aggregate value of the nation's real estate stock is about $20 trillion and the industry generates over $290 billion annually in federal, state and local taxes. There are approximately 11 billion square feet of office space in America, providing space for 28 million workers.
Courtesy of Real Estate Roundtable